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StorageNetworks Sinks into Liquidation

After failing to secure a buyer for its assets, StorageNetworks Thursday said its board of directors has signed off on a liquidation plan and laid off all but a handful of the remaining workers at the company.

The Waltham, Mass.-based storage management service provider, which said it would seek shareholder approval for the actions in a proxy filing with the Securities and Exchange Commission, said a skeleton crew will oversee the wind down of the business. CEO and President Paul Flanagan is leaving the company immediately.

The somber news is the latest in a series of adjustments the company has made in the last several months, including large layoffs and the sale of its managed services business last month.

That action resulted in a paring of the staff of 35 percent to 60 employees. Though executed on schedule, it wasn't enough. Prior to that action, the company had laid off half of its staff in January, whittling down to 110 workers.

Liquidation was the final option for the company, according to Flanagan, who said the company board has been evaluating the possibilities of selling the company or acquiring other businesses or technologies to remain viable.

"Interest in acquiring the company was limited, and the only interest that was expressed was at price points below what we estimated as our liquidation value," Flanagan said in a public statement.

Failing that, he said the outfit looked at acquiring technologies or companies, but decided the state of the storage market and StorageNetworks' cash position would not allow this.

StorageNetworks also considered transforming into an independent software vendor intent on building products for the storage resource management (SRM) space, he said. This, too, bore no fruit.

"Even if we were to emerge successfully from the crowded field of competitors, which includes all of the major storage technology companies, the realization of a meaningful return on this investment is uncertain and could take years," said Flanagan.

If the stockholders approve the liquidation, the company will file a dissolution certificate, liquidate its remaining assets, take care of its obligations and delist from NASDAQ. The company anticipates making an initial distribution to stockholders within approximately 20 days following the filing for dissolution.

The vendor announced second quarter earnings concurrently with the liquidation plan. Revenues from the company's software and services segment totaled $327,000 and $688,000 for the three and six months ended June 30, compared with $1.3 million and $2.3 million for the same periods last year. Loss from continuing operations was $3.8 million and $6.6 million.

Revenues from discontinued operations were $15.2 million and $31.1, compared with revenues of $22.4 million and $53.1 million in the same periods in the prior year.