Clock Ticks on Maranti

It looks like the end is near for yet another intelligent switch startup -- Maranti Networks Inc.

Industry sources say the San Jose, Calif., company is about a week away from closing its doors. One of these, who is close to the company and asked not to be named, says executives are making a last-ditch effort to find a buyer. It’s definitely down to the wire,” says the source. “This is a very important week for those guys.”

Maranti executives did not return calls for comment.

There are no obvious candidates to acquire Maranti, which has had little success selling its switches. Now that the market has narrowed even more than before, it might get squeezed out.

A turning point in the intelligent switch market has been the arrival of the Invista virtualization appliance from EMC Corp. (NYSE: EMC), which works with intelligence in specific vendors' switches (see EMC Unveils Invista). Brocade Communications Systems Inc. (Nasdaq: BRCD) and Cisco Systems Inc. (Nasdaq: CSCO) have released intelligent switches to work with Invista, and McData Corp. (Nasdaq: MCDTA) says it will have one by the end of 2005. The rise of these options has made it tough for startups to stake a claim.Besides competition from established switch vendors, Maranti has another disadvantage. Switches are sold through OEM deals with major storage vendors like EMC, Dell Inc. (Nasdaq: DELL), Hewlett-Packard Co. (NYSE: HPQ), Hitachi Data Systems (HDS), and IBM Corp. (NYSE: IBM). Maranti has no major OEM deals.

If Maranti melts down, it will follow switch startups Candera and Sandial Systems Inc., which went belly up last year (see Candera's Closed and Sandial's Out). Still standing will be Troika Networks Inc. and MaXXan Systems Inc.

Those two startups have managed to gain a foothold. Troika has alliances with companies such as Engenio Information Technologies Inc., Storage Technology Corp. (StorageTek) (NYSE: STK), and StoreAge Networking Technologies Ltd. (see Engenio Certifies Troika, StoreAge , Troika, StoreAge Join StorageTek Alliance, and Spaid Breaks Ground). MaXXan, which can't claim a big OEM, nevertheless isn’t risking it all on intelligent switches. It also sells a virtual tape system and NAS gateway (see MaXXan Seeks CEO – and Sales). MaXXan also grabbed $29 million in funding in December (see MaXXan Scores $29M).

There have been signs of trouble at Maranti for a while. Although its Website lists a case study with an unidentified California medical center using its CoreStor switch, the startup hasn't named a paying customer despite launching its product in December 2003 (see Maranti Makes It to Market). Its founders Kuldeep Sandhu, Santosh Lolayekar, and Harish Nayak left the company last year. Debbie Miller also left in December after only 10 months as CEO and president, and former engineering VP James Kuenzel took over as president (see Maranti's Minus a CEO).

Maranti gathered $57 million in funding over three rounds, but was unsuccessful in an attempt at a fourth round.— Dave Raffo, Senior Editor, Byte and Switch