CentrePath's Fate May Be Sealed

CentrePath, a provider of storage networking services, has been acquired by the company now headed by Tom Hudson, former CEO of CNT (now McData). And the move could separate CentrePath forever from the storage world. (See Capital Buys CentrePath.)

CentrePath, a company that morphed from its beginnings as GiantLoop, has been a services integrator, designing and helping set up storage and optical networks for data replication. It claimed 150 customers early in 2006, including the Bank of New York, Children's Hospital of Philadelphia, the City of Boston, the City of Chicago, Comcast, Merrill Lynch, Turner Broadcasting, and Wal-Mart. Bookings were said to be up 75 percent to $14 million in 2005.

CentrePath did not have its own facilities, but resold broadband network services from carriers like AT&T, adding its own configuration and branding. It marketed a management system called Magellan along with its services, which provided the basis for an event correlation and monitoring service that CentrePath claimed rivaled EMC Smarts. Magellan supposedly could tell network operators exactly when and where a SAN was failing more quickly than an SRM system could.

Magellan was said to factor in helping CentrePath get its latest funding, an infusion of $10 million in April 2006, which brought the company's total to $19 million. (See Another Round for CentrePath.)

But in late November, CentrePath was sold to Capital Growth Systems Inc. (OTCBB: CGSY) for about $6.75 million. And CentrePath's Magellan may be sold or incorporated into another product within the next 90 days, a CGSY spokesman says."We're evaluating our options with [CentrePath's] software. It has not worked well. We may sell it or commingle it with NexVU," says Skip Behm of CGSY. (More on NexVU momentarily.)

CentrePath's CEO and CFO are also set to walk the plank, although both will stay on for an unspecified short while. Other CentrePath employees will remain, though their future in the world of storage is also up in the air. While CentrePath will continue to design networks, Behm says it's not clear those services will have anything to do with storage.

Instead, CGSY is apparently building up into a virtual network operator (VNO), a kind of integrator that rebrands and augments services from facilities providers like AT&T.

CentrePath, along with NexVU, Frontrunner Networks, and Magenta NetLogic, is among several companies that have been purchased by CGSY for a total of about $44 million over the last two years. CGSY, which operates under the name of Connectivity Solutions International, is a telecom integrator for large corporate clients. CGSY is also in the process of closing the purchase of Global Capacity Group, a provider of network operations support services.

Table 1:

Behm said that deal should close today.

CGSY has been run since June 2006 by Thomas G. Hudson, the former CEO of CNT who gained $3 million in the sale of CNT to McData in 2005 before his departure. (See CNT CEO Eyes $3M Payout.) Since June 2005, Hudson had been working at 20/20 Technologies, a holding company that was included in the $13 million acquisition of Magenta netLogic by CGSY in June 2006.

Now, Hudson is in charge of a company that looks to be interested in VNO services under the name of Connectivity Solutions International. What's more, Hudson may have had his fill of all things having to do with SAN extension -- including storage services. If so, CentrePath's path may have been diverted once again.

Mary Jander, Site Editor, Byte and Switch