iReady to Go

Is that a "For Sale" or a "Going Out of Business" sign in iReady Corp.'s window?

The Santa Clara, Calif.-based TCP offload engine (TOE) company is on the verge of being bought or folded, Byte and Switch has learned. Sources say iReady executives are negotiating with suitors looking to pick up the assets. One source close to the company says several offers are on the table,” while other industry insiders wonder if iReady is worth the trouble.

One thing is clear: iReady cannot survive as it stands. The company lost more than $11.2 million for the fiscal year ended September 2003, and it lost more than $21 million the previous year. At the end of September, iReady had $870,867 cash on hand, total assets of $1.72 million, and nearly $12 million in liabilities.

The firm's financials were made public in an SEC report filed last month by National Semiconductor Corp. (NYSE: NSM), which owns 16 percent of the company and is a technology partner. Other investors include Canaan Partners, Crescendo Ventures, Crown Advisors, Goldman Sachs & Co., and Jafco Ventures (see IReady Is on Its TOEs and IReady Gets $19M, Names COO). National Semiconductor’s Ethernet MAC and PHY chips are used in iReady’s EthernetMax platform of semiconductors that support IPSec and iSCSI.

The SEC report made it clear that iReady needed to raise more funding to survive. In the same vein, company officials told Byte and Switch last May they were looking for an additional $15 million in the fall (see Is iReady?). The funding never came, and iReady secured a $3.6 million bridge loan from National Semiconductor in December 2003.Last October, iReady unveiled its target software suite that it said would allow OEMs to bring Fibre-Channel-to-iSCSI adapters to market sooner, but it seems the product had little success (see Can iReady Hit Its Targets?).

An iReady spokeswoman said CEO Ryo Koyama would not comment for this story, and National Semiconductor did not return calls for comment by press time.

What companies may be interested in picking up what’s left? According to at least one source, National Semiconductor is an unlikely buyer because it has already paid for the technology. Further, iReady’s value to National Semiconductor is diminished because its design center in Hawaii would be expensive to maintain, and key engineers have already left.

Several sources says LSI Logic Corp. (NYSE: LSI) is the most likely candidate, because it already has ties to iReady. LSI Logic licenses iReady’s TOE engine in its accelerator chip. “LSI has a strong relationship to iReady” one analyst says. Another insider agrees LSI Logic would likely get the first shot at buying iReady’s assets.

"We don’t comment on rumors or speculation,” LSI Logic spokesman Kevin Brett says.Emulex Corp. (NYSE: ELX) is another candidate because the host bus adapter (HBA) vendor has not been a player in the iSCSI space and probably will have to get its hand in eventually. Some observers, though, expect Emulex to make its move for more proven technology than iReady’s.

IReady's tight spot typifies ongoing difficulties in the iSCSI chip space. Although Astute Networks Inc. picked up $15 million in funding last month, startups have faced rough going against established vendors like QLogic Corp. (Nasdaq: QLGC) and Adaptec Inc. (Nasdaq: ADPT). Trebia Networks, for instance, folded last August after burning through at least $50 million {see {doclink 39212}).

Analysts have long forecast a consolidation in the segment, which also includes Alacritech Inc.,Silverback Systems Inc., iVivity Inc., and iStor Networks Inc.

— Dave Raffo, Senior Editor, Byte and Switch