BlueArc Pulls In $15M More

BlueArc Corp. made it official today: Its VCs have kicked in another $15 million in funding, raising its total to $175 million as it chases profitability.

As reported in Byte and Switch last week, the round came from existing investors (see BlueArc Branches Out). Meritech Capital Partners and Crosslink Capital led the way and all nine of the NAS vendors previous VCs participated.

The funding was no surprise, but the question remains: When will BlueArc turn a profit? Why does a company that's been generating revenue for nearly four years, growing steadily, and grabbing $160 million in funding since 1998 need $15 million more?

According to CEO Mike Gustafson, the problem isn't lack of sales. He claims BlueArc doubled revenue last year and increased its customer roster by 60 percent. “BlueArc’s had a great year,” he says. “We’re going to have a record quarter this quarter. We are well funded. [Ed. note: No kidding!] I know there are a lot of rumors out in the market place, and questions about what it’s going to take for us to be profitable.”

Those rumors say BlueArc needs the extra funding to stay around long enough to turn a profit so the VCs can sell the company and get a return on investment.Gustafson has clearly mulled the exit strategy question. “With the success we’ve had, it makes BlueArc extremely interesting,” he says. “There are a lot of ways to go: We can partner, be acquired, there are lots of choices. We want to continue to execute our success, and there will be multiple options for the company.”

Gustafson talks about making more deals, such as the company's partnership with Storage Technology Corp. (StorageTek) (NYSE: STK), which sells BlueArc through an OEM deal in Canada and a reseller deal in the rest of the world (see StorageTek Canada Signs With BlueArc and BlueArc Joins StorageTek Alliance). Of course, after Thursday’s news of Sun Microsystems Inc. (Nasdaq: SUNW) gobbling up StorageTek for $4.1 billion, it's unclear whether that deal still exists (see Sun to Acquire StorageTek for $4.1B).

Gustafson says he thinks Sun will sustain BlueArc’s arrangement with StorageTek. Like StorageTek and Sun, BlueArc has an agreement in place to use Engenio Information Technologies Inc. controllers so it won't have to go through qualification again if Sun wants to sell BlueArc’s NAS (see BlueArc, Engenio Announce OEM). But Sun now has its own NAS product (see Sun Pushes Into NAS ).

Gustafson's ever upbeat: “We think the Sun-StorageTek deal is a tremendous opportunity. We’re complementary to StorageTek’s and Sun's business. It’s a matter of connecting those dots.”

— Dave Raffo, Senior Editor, Byte and Switch0