Aug. 20--NextIO Inc., an Austin startup that developed networking technology for data centers, has closed its doors after 10 years in business.
NextIO's CEO K.C. Murphy said the company was funding its operations through a loan, and the bank that held the loan asked for repayment, forcing the company's shutdown.
The company had attracted $70 million in investment over the years and had drawn interest from major tech companies including IBM Corp. and Dell Inc., but its sales collapsed late last year. It attempted to attract a buyer this year, but could not get a sale closed despite extensive negotiations with Dell Inc. and Samsung Electronics, Murphy said. The company had 70 employees at its peak last year, and was at about 35 employees when it ceased operations.
Dell Inc. had no comment on NextIO. Samsung did not return a phone call seeking comment.
NextIO started as a networking chip company and then shifted toward a systems company that developed technology to simplify big computer networks inside data centers.
Murphy said the company succeeded in developing products that could cut costs and improve efficiency in data networks, but it had a hard time winning acceptance from U.S.-based companies, who he said take a risk-averse approach toward the equipment it uses in data centers. The company had better luck in Europe, where customers were willing to try its technology out and buy some.
"North America is incredibly risk-averse," Murphy said. "U.S. companies are unwilling to to commit to anything" that isn't guaranteed by Cisco Systems, the sales leader in networking equipment.
Analyst Patrick Moorhead with Moor Insights & Strategy said NextIO brought promising technology to a changing market where buyers were looking for cost-savings.
"You have to have the right timing and the technology has to be unique enough so that it can't be copied," Moorhead said. NextIO attracted some interest from big players in information technology, the analyst said, "but it didn't connect (with partners) as strongly as they needed to get out of the earth's atmosphere."
Murphy said he expects the company will file for a Chapter 7 liquidation bankruptcy in which the main asset will be its intellectual property.
He expects to assist with the liquidation process.
"Then I will start looking for another job," Murphy said. "NextIO was a great ride but a bad ending."
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