SANZ Pulls the Plug

Storage integrator SAN Holdings Inc. yesterday filed for bankruptcy, according to an SEC filing, after essentially shuttering itself last Friday.

In an 8-K report dated November 27, SANZ said it filed for Chapter 7 relief with the U.S. Bankruptcy Court for the District of Colorado.

SANZ CEO Todd Oseth broadcasted this email to employees last week:

"We were not successful in negotiating with our current creditors and we were not able to find new funding after Sun Capital stopped their line of credit with the company. Unfortunately, that means that on the close of business on Friday, November 23, 2007 all employees are terminated. The company does not have sufficient funds to be operational. The company will be in contact with you so you can receive your last check and the return of corporate assets. We will try to keep the email system operational for as long as possible."

The CEO resigned effective November 26, as did CFO David I. Rosenthal and directors Kent J. Lund, George Rea, and Daryl Hollis, according to yesterday's SEC filing. Calls to SANZ's offices in Englewood, Colo., were not returned."There were problems, they knew about them and hoped to overcome them. But that was not the case, alas," said Adam Friedman, principal of Adam Friedman Associates, which handled investor relations for SANZ. What will happen to the agreements or contracts is "unclear," he said. "Chapter 7 is a sad situation... The 8-K speaks for itself. There's nothing to be said beyond that."

Sometimes referred to as liquidation bankruptcy, Chapter 7 cancels debts and allows the bankruptcy court to sell property to pay creditors. Unlike Chapter 13 bankruptcy, it doesn't require the company to file a repayment plan.

Sun Capital was one of the major investors in SANZ; almost a year ago, the integrator said it was retaining Investor Advantage LLC to attract additional funds.

SANZ has struggled for a couple years to stem losses, and its most recent earnings report underscored its challenges. For its second quarter ending June 30, 2007, SANZ reported a loss of $4.6 million; a little less than two thirds of that ($2.8 million) it attributed to the sale of EarthWhere, a business unit that marketed geospatial data.

The company made other changes to arrest its slide. In June, SANZ unveiled a 1-for-25 reverse stock split as "part of a plan to improve its capital structure."More recently, SANZ appointed EMC veteran Rick Hoffman as VP of nationwide sales in July. SANZ rolled out virtualization and email backup products in October. Just a few weeks ago, the company was touting an alliance with SGI at the Supercomputing '07 tradeshow.

SANZ was a storage integrator for commercial and government clients; it boasted partnerships with Cisco, Data Domain, EMC, HP, Hitachi Data Systems, Kazeon, Network Appliance, and Qualstar.

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