Power X Powers Down
Switch fabric vendor Power X Networks Ltd. ran out of money today. And with no potential buyers or investors in sight, the company has been put on life support.
Nearly all Power X's 122 staff were given their marching orders this morning, according to several sources. Only five or six engineers are still on the payroll, their job being to take care of the company's intellectual property in the hope that a buyer can still be found for it.
Power X's story doesn't appear to be one of a company starting out with overinflated, overoptimistic ideas -- far from it. Founded in 1996 by a group of executives from ICL, a subsidiary of Fujitsu Ltd. (KLS: FUJI.KL), Power X was one of the first vendors to develop off-the-shelf chips that support packet processing. Its product, which started shipping in volume last year, was an intelligent switch fabric (see Power X Intros Chip Suite).
Power X was also one of the founders of the Common Switch Interface (CSIX) consortium, now the Network Processing Forum (NPF).
Estimated figures from RHK Inc. put Power X's revenues at around $350,000 in the first half of last year, and it's likely that its revenues were greater in the second half of the year, after general availability of its product was announced (see RHK Reports Packet Silicon Revenues). But it takes more than that to reach profitability, so Power X was trying -- unsuccessfully, it seems -- to raise a third round of funding.
This goes to show that meeting milestones and shipping product are not necessarily enough to satisfy investors anymore. And that's a worrying thought for a lot of startups.
Power X's announcements this week -- of its next-generation switch fabric architecture and of support for Intel's new IXP network processors -- also didn't sound like the kind of thing to come out of a dying company (see Power X Shows Off Next-Gen Architecture). But reportedly, those press releases were finalized just days before the administrators were called in.
Backruptcy advisors BDO Stoy Hayward were called in on February 1 to try to sort things out (see Power X Restructuring). BDO didn't return our call, and one ex-employee says that the administrators kept everyone in the company in the dark. It was reported in the trade press that BDO had talked to potential buyers but that there were no really hot prospects.
Despite BDO's stated intention that it would try and keep the company together as a unit, it now looks too late for that. "I think the IP will find a home, but the company won't," says one U.K. analyst familiar with Power X's situation. However, he does wonder if there are buyers waiting in the wings, hoping to get the company at a knockdown price.
Power X was funded by Intel Capital.
— Pauline Rigby, Senior Editor, Light Reading