History 2003: StorageNetworks Liquidated, One of Most Spectacular Disasters in History of Storage Industry

It was one of the most spectacular disasters in the history of the storage industry.

Everyone, including the most credible and reticent industry analysts, was enthusiastic about the birth of StorageNetworks in 1998 and its novel idea: offer to take on and manage all of their customers’ storage needs from start to finish.

After raising several hundred million dollars, the very first SSP concluded an enviable IPO, raising $260 million and reaching a market capitalization of $8.5 billion. Share prices rose as high as $154.

Reality, however, caught up with the firm and confirmed that its business model wasn’t as sound as initially believed, since the idea of outsourcing never took off with users.

The firm did a fair job of changing course, or at least postponing the inevitable, by venturing into SRM (compared to other stillborn copycat SSPs that sank faster than the Titanic) until that too proved unfruitful. The stock fell to under a dollar. For its quarter ended last June, it posted a mere $327,000 in sales.

Only 60 employees remained at the end, down from a peak of 700.

Unable to find a buyer, the company announced in August that it would liquidate its operations, firing nearly all of its employees and replacing CEO Paul Flanagan with general counsel Dean Breda.

This article is an abstract of news published on issue 188 on September 2003 from the former paper version of Computer Data Storage Newsletter.