Candera Cuts Again

SATA appliance startup Candera Inc. recently had its second round of layoffs in a year, raising questions about its long-term viability.

Last November, Candera laid off one third of its staff, reducing its total to 50 (see Candera Cans SAN Hands). Candera then launched a new product in January and secured a $12 million funding round in June 2004 to bring its total to $59 million (see Candera Back for Seconds and Candera Closes $12M Round).

But Steve Terlizzi, Candera VP of business development, confirmed the Milpitas, Calif.-based startup recently had layoffs again, and that founder Nilesh Shah quietly left about a month ago. He declined to say how many Candera employees were cut.

We did recently restructure our workforce,” Terlizzi says. “We wanted to make strategic changes to our business approach. I cannot disclose the details at this moment, but will be able to discuss it when appropriate.”

Terlizzi says Shah left Candera last month “to pursue new opportunities outside the storage industry. As a serial entrepreneur, he has a passion for building new things and new companies. Candera has reached a stage in its life where, as a founder and visionary, he felt his work had been done.”Shah, who founded the company as Confluence Networks in 2000, served as Candera’s CTO since August 2003. One source familiar with the company says Shah and CEO Sundi Sundaresh did not see eye to eye, a situation that had been going on "for a year or more.”

The layoffs and Shah’s departure throw Candera's future into the spotlight. Although its controller and appliance products have won high marks for their virtualization technology, there isn’t much evidence of sales traction (see Notes From Underground). Candera claimed four customers last January when it brought out its SATA appliance, and has since announced one more -- advertising agency TBWAChiatDay.

In June, Candera beefed up its channel sales program, adding resellers and distributors, and committing to a completely indirect sales model (see Candera Dials Into Channel).

So what's the problem? One financial analyst, who requested anonymity, says Candera will find it tough going as a startup unless it aligns itself with a major storage player.

“It doesn’t surprise me,” the analyst says of Candera’s restructuring. “Their go-to-market strategy is challenging. They need to have an OEM, basically. It doesn’t matter how good the product is; it’s tough for an unknown to make it alone.”Technology analyst Arun Taneja of Taneja Group says Candera’s insistence on supplying all of its own applications -- for virtualization, mirroring, replication, and so on -- makes it harder to attract partners than its rivals such as Maranti Networks Inc. and Troika Networks Inc.

“They have a fine architecture, but if you say, ‘I’m really a platform for my own appliance,’ then everybody views you as a competitor,” Taneja says. “You should always create an environment where you’re considered a friend.”

— Dave Raffo, Senior Editor, Byte and Switch