StorageNetworks Hacks Self in Half

StorageNetworks Inc. (Nasdaq: STOR) today announced it will eliminate about half its work force -- or 110 employees -- continuing the storage software-and-services company's plutonium-like decay (see StorageNetworks Lays Off 50%).

Also today, Peter Bell, StorageNetworks' tenacious president and CEO, publicly called it quits. According to a company statement, he has resigned "in order to pursue other personal and business interests." Bell, who will continue to serve as chairman, will be replaced as CEO by Paul Flanagan, previously the company's COO.

"After four years, I feel that it is time for me to step back from the day-to-day management of StorageNetworks," Bell said in a statement. "As co-founder of the company, this is a particularly difficult decision for me personally. However, having someone as qualified and as committed as Paul to take over as CEO and president certainly makes this decision easier."

Meanwhile, Scott Dussault, previously VP of finance at StorageNetworks, has been appointed as CFO to succeed Flanagan.

In the end, Bell failed to effectively convert StorageNetworks from a storage service provider (SSP), a segment that's all but dead now, into a storage software company. To be fair, the industry in the last two years has been damaged by a horrific IT spending drought -- not the best of conditions to try to reinvent a technology company (see StorageNetworks Cuts SSP Roots and StorageNetworks Softens Up).StorageNetworks has fallen far -- and fast. The latest round of layoffs, which will leave the Waltham, Mass.-based company with 110 employees, is part of a dramatic vanishing act over the last 18 months. At its peak, in mid-2001, StorageNetworks had a headcount of around 670 (see StorageNetworks Continues to Shrivel).

As a result of the layoffs, StorageNetworks says it will scrap its storage resource management (SRM) software and concentrate on its partnership with Electronic Data Systems Corp. (EDS), which is using StorageNetworks' SAN management platform to manage its internal data center operations (see EDS Selects StorageNetworks).

"Because of the current economic climate and the immaturity of the storage resource management (SRM) software market, we have decided to focus our energies on the excellent opportunity we have to work with our partner EDS in further enhancing our storage management software products," Flanagan said in a company statement.

StorageNetworks will cut back its sales and marketing organizations, as well as its "non-EDS and non-SRM product development efforts."

After all this, StorageNetworks still has the chutzpah to refer to itself as "a leading provider of storage management software and services." True? We'll see what's left of the company in another few months.Shares of StorageNetworks tumbled 18.6 percent to $1.09 in afternoon trading, amid a mixed day on the markets. Rumors that the company might be up for sale have been doing the rounds for months. With an ever-decreasing market capitalization, currently at $109.8 million, this remains a distinct possibility.

Separately, InfiniBand startup InfiniSwitch Corp. has cut 20 percent of its workforce, or 14 employees, to conserve its cash amid the flagging InfiniBand market. Its remaining headcount is about 55 employees.

InfiniSwitch expects to ship its dual 12-port IB switch in the first quarter this year and is still negotiating with Agilent Technologies Inc. (NYSE: A) and Mellanox Technologies Ltd. to supply silicon for its next-generation product. InfiniSwitch was left high and dry by IBM Corp. (NYSE: IBM), which late last year ditched its InfiniBand chip development (see IBM Kills InfiniBand Chip