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StoneFly Fights for Survival

While a few iSCSI startups are seeing positive results, one of them needed a cash influx to survive. And the survival might be in name only.

StoneFly Networks, which hasn't been able to generate any funding since June 2003 -- and lags behind rivals EqualLogic, LeftHand Networks, and Intransa in sales -- received money to keep it going but maybe not for long. The money comes from an unlikely place: small storage startup Dynamic Network Factory (DNF).

It remains to be seen how much of StoneFly will remain, if anything. StoneFly notified shareholders that DNF plans to pay $205,000 for StoneFly's assets and liqiuidate the company. But the CEO of DNF, Mo Tahmasebi, says DNF is only investing in StoneFly and StoneFly will continue to operate as an independent company. Both StoneFly and DNF will sell StoneFly's OptiSAN and ValueSAN iSCSI products, Tahmasebi says. DNF already sells iSCSI systems as well as Fibre Channel SANs and NAS.

"StoneFly is still an independent company," Tahmasebi explains. “Basically, it's a strategic partnership. We've made some investment in the company.” He wouldn't divulge any specific dollar amount.

The letter to shareholders from StoneFly said the startup has been looking for buyers since July, and received offers from DNF and another private company in northern California. Some say it's just a matter of time until DNF pulls StoneFly under its banner.

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