Try, try again — then liquidate

Born from the ashes of a burned-out company, agami Systems may well have landed back in an ash heap. Several reports have indicated the NAS storage specialist wound down operations recently. (We were unable to raise anyone in several calls to their Sunnyvale, California, headquarters.) Just before agami emerged from stealth three years ago, we noted that the company’s core IP – along with a pair of primary VCs and handful of employees – came from NAS startup Zambeel. That company flamed out in 2003, after burning through some $72m in funding. (For its part, agami incinerated about $85m, which included $45m raised earlier this year.)

If indeed agami has gone the way of Zambeel, we highly doubt the sale of agami assets (if that comes) will go the way of Zambeel’s assets. Having lost now on both go-rounds with this technology, Kleiner Perkins Caufield & Byers and New Enterprise Associates probably aren’t interested in stepping in for a third time.

Still, there’s undoubtedly some interesting technology at agami, particularly for block-level vendors that have ambitions for their own NAS products. For instance, Dell, which recently made a significant push into storage, might want to look at agami’s IP. The same is probably true for Compellent Technologies, which has a heap of money from its IPO last year, and for fast-growing LeftHand Networks, a privately held company with some 3,300 customers.

Meanwhile, NetApp, which agami sought to undercut on price, might want to do a ‘buy & bury’ to knock out any future threat. (Keep in mind that NetApp has done graveside deals for NAS technology in the past, buying the patent portfolio of Auspex five years ago during a bankruptcy auction.) In any case, whoever picks up the bits of agami that come up for sale is likely to get a bargain. In fact, we’d be surprised if agami garnered even one-tenth of the $85m that went into it over the past three years.

Selected NAS deals

Date Acquirer Target Price
Sept. 2007 Sun Microsystems Cluster File Systems undisclosed
August 2007 F5 Networks Acopia $210m
Nov. 2003 NetApp Spinnaker $300m
June 2003 NetApp Auspex (patents) $9m

Source: The 451 M&A KnowledgeBase