Lost little X-IO lays off ~75 staff in Colorado as it shutters factory

X-IO sent a formal letter on April 29 to the Colorado Department of Labor and Employment, saying it intended to close its Colorado Springs manufacturing operation, and warning that up to 107 people could lose their jobs.

In the event 70-80 employees were laid off, with some 50 employees remaining. Potential job rescue, IP licensing and engineering services supply talks with Pivot3 failed.

The company had been looking for additional funding, up until April 22, either as capital or bank loans to enable the business to continue without layoffs and operational shutdown, at least for a while. That implies that Oak Investment Partners, which as a board seat, declined to put in any more cash.

This implies that the revenue from ISE and iglu product sales was insufficient and not growing fast enough to persuade VCs, private equity houses or banks to supply cash to X-IO. The company was getting less than $50m a year from its 1,200 customers.

More than $400m has been invested in X-IO since it started. CEO and chairman Bill Miller wrote in the letter: "The data storage market has peaked and is starting to shrink because more people and companies are using data storage in the cloud. There are about 40 companies competing for a shrinking market that is hyper-competitive, and for us to effectively compete in that market would have taken another $25m to $35m."

Miller became CEO 16 months ago, having joined the board when his PV Ventures LLC vehicle invested in X-IO.

In a Colorado Springs Gazette report X-IO Bill Miller said; "This isn't the end of the line at all."

Customer support and service functions were minimally affected.

X-IO will take its Axellio technology to market through OEMs and cloud service providers, and provide Big Data analytics and cybersecurity, Miller said.

The company may change its owners and management depending on the outcome of talks with potential strategic alliance partners. That implies that Oak Investment Partners wants to exit from its X-IO involvement.

Comment

More than $400m has been invested in X-IO since it started and this looks to be the end of the line for X-IO as a data storage company. Overall it has been a prolonged struggle to grow a business with promising technology but products that were simply not popular enough.

That technology began with clever Seagate disk drive software enabling partial or full recovery of failing disk drives and continued operation of the disk shelf or enclosure. X-IO called this an Integrated Storage Element (ISE) or brick, and said it could run for five years without performance loss or breakage in the field. The company positioned it as that, a storage element, rather than as a full storage array with two controllers and data services.

This positioning and lack of data services stunted its market. X-IO went through a string of organisational, ownership and CEO changes as it struggled to find a viable business identity.

X-IO was started up as Xiotech in Minneapolis in 1995, selling Magnitude storage arrays. In 2000 it was acquired by Seagate for $360m in stock. Later, Seagate sold it to Oak Investment Partners, after losing cash, in a private equity-like deal.

Xiotech bought Seagate's Advanced Storage Architecture (ASA) group, using $40m invested in it by Seagate's chairman Steve Luczo and others. This brought in the ISE technology and ISE products took over from Magnitude arrays as Xiotech's focus.

The owners, via the board, made numerous CEO changes as they tried and tried again to get X-IO to becone a sustainable business. The CEO list is impressive:

1. Co-founder Phil Soran from July 1995. He went on to co-found Compellent and sell it to Dell.
2. Larry Perlman in August 2001.
3. Kathy Snouffer in February 2002.
4. Ken Hendrickson from March 2003.
5. Alan Andreoli in December 2003.
6. Casey Powell in February 2005.
7. Alan Atkinson in October 2009.
8. John Beletic in November 2011.
9. Brian Owen in May 2014.
10. Bill Miller in July 2015.

With $400m invested the Xiotech/X-IO venture can be seen as a failure by Oak Capital. X-IO is now struggling to get the Axellio technology to market through OEMs and ODMs.

Looking back, basically the original all-disk, sealed ISE container didn't appeal to enough people, with the lack of full storage array data services contributing to this. X-IO made hybrid flash+disk ISE products and then full flash ones as SSDs began replacing performance disk drives, but they didn't unleash growth either.

Then the iglu data services head product was added. Like Violin Memory, X-IO came late to data services, such as dedupe, for its all-flash ISE product and paid the price for that. The mainstream storage incumbents and Pure Storage are walking away with the all-flash array market, leaving small players like Kaminario, Violin Memory and X-IO that old 3-way choice; get big, get niche, or get out.

It looks like much of the $400m invested in X-IO over the years could be lost.

Will the NVMe over fabrics Axellio technology finally enable X-IO to come good? Watch this space. It ain't over yet. ®