Xiotech Snaps Up Daticon

SAN systems vendor Xiotech Corp. has swooped in to acquire troubled document management vendor Daticon Inc. in an attempt to bolster its compliance story.

Daticon, which converts electronic and paper documents into a single electronic database, filed for Chapter 11 bankruptcy protection earlier today, capping a turbulent few years for the Norwich, Conn., firm.

Last October, Daniel L. Gordon, former chairman of the Daticon board and one-time Merrill Lynch exec, was sentenced to 42 months in prison for defrauding Merrill Lynch out of $43 million. Gordon used some of these ill-gotten gains to purchase a 70 percent share in Daticon, sowing the seeds of financial turmoil.

But Xiotech CEO Casey Powell tells Byte and Switch that Daticons woes were no impediment to an acquisition. “We remain convinced that these guys have a pretty significant business underneath them,” he explains. Powell added that converting documents into an electronic format enables IT managers to retrieve critical data much more easily.

Users are currently under siege from a barrage of different data regulations, from Sarbanes-Oxley to a slew of new privacy laws, prompting many CTOs to rethink their data storage strategies. (See Users Splash Cash on SOX and NY Data Law Takes Effect.)Xiotech is not the only storage vendor looking to beef up its compliance message. EMC, for example, recently confirmed that it has its eye on acquisitions in this space. (See EMC Buys Windows Expertise.)

Powell, however, was unable to put a value on the Daticon deal. “It’s not determined yet,” he explains. “There’s a process that we have to go through, and we don’t find out how much it will be until the end of that process.”

Nonetheless, Powell expects the acquisition, which is subject to the approval of a U.S. Bankruptcy Court, expected to be complete within 35 to 40 days.

Powell also promised that the jobs of Daticon’s 170 employees will remain secure. “They will continue to operate as an independent company,” he says. “They will stay in Norwich.”

Xiotech plans to offer Daticon’s technology alongside its own SAN offerings, although Powell told Byte and Switch there are no plans to merge the two product lines. “It’s an opportunity for us to expand beyond storage and extend further into another business."The storage vendor is also getting its paws on a potentially lucrative customer base. Daticon’s clients encompass a range of law firms, corporations, and government agencies. These include the Securities and Exchange Commission, the Federal Trade Commission, the Department of Defense, and the Department of Justice.

Xiotech, of course, underwent a major restructuring of its own last year, which involved layoffs and the closure of the firm’s development center in Rochester, Minn. (See Xiotech Regroups and Xiotech: 'We're Out of the Red'.) Mike Stolz, Xiotech’s VP of marketing, says the storage vendor has put all this upheaval behind it. “We’re growing revenues and we’re profitable,” he explains.

But Powell adds that it could be some time before Xiotech makes any more acquisitions: “We don’t have any current plans for M&A, but you never know."

— James Rogers, Senior Editor, Byte and Switch

Organizations mentioned in this article: