Crossroads Picks Up Teracruz

Aptly named Crossroads Systems Inc. (Nasdaq: CRDS) is picking up the pieces of Teracruz, which makes performance monitoring appliances.

Crossroads -- truly at the crossroads following growing losses -- has shifted its focus from storage routers to iSCSI devices and intelligent software. The Teracruz deal is in line with that: Teracruz appliances provide performance monitoring and application acceleration for databases.

Crossroads did not say specifically how it would use the acquired assets, but CEO Rob Sims has been extending the companys product line. In September, he talked about building iSCSI gear and introducing a Near Edge software suite that would allow users to monitor performance of tape libraries (see Crossroads at the Crossroads).

“The acquisition of Teracruz's technology represents a key component to Crossroads' continued execution of bringing focused, purpose-driven solutions for intelligent management of IT resources," Sims said in a statement.

The point is to move away from storage routers. “They realize the technology they have is a commodity, and they’re reinventing themselves,” says financial analyst Steve Berg of Punk Ziegel & Co. “He’s moving aggressively, and if he knows what he’s doing it will pay off. If not, he’ll crash and burn.”Sims is apparently calling the shots more than ever. The man he replaced as CEO 13 months ago, founder Brian Smith, resigned from the board of directors last week along with another longtime board member, William Wood (see Crossroads Conscripts CEO and Crossroads Board Members Resign).

Crossroads has lost money every quarter since 1996, but made progress under Sims. Revenue crept from $5.6 million when he took over to $7.4 million in the second quarter this year. Then it fell to $4.9 million last quarter due to a sharp decline in router sales. Crossroads is scheduled to report earnings for the quarter that ended in October on November 29.

At least the Teracruz deal won’t cost Crossroads much -- relatively speaking, anyway. It paid $304,000 in cash up front, with the cancellation of debt, and it will make quarterly payments over the next three years based on sales of Teracruz products and technology. The maximum Crossroads will pay over three years will be $1.39 million.

Austin, Texas-based Crossroads has also assumed the lease on Teracruz’s facility in Huntsville, Ala., and hired five Teracruz employees.

This isn't Crossroad's first attempt to invest in alternatives for itself. Last December, the company pledged up to $2.5 million in funding to NexQL Corp. (see Crossroads Trades Cash for Tech). The NexQL venture calls for joint development of database access products. Crossroads expects NexQL product next year.— Dave Raffo, Senior Editor, Byte and Switch