TECHNOLOGY

Calxeda shuts down operations

Austin startup lacks funding; most of 120 workers losing jobs.

By Brian Gaar BGAAR@STATESMAN.COM

Austin chip startup Calxeda Inc., which had raised more than $100 million for its low-power server technology, essentially shut down its operations Thursday after company officials said they failed to secure additional funding.

The company’s 120 Austin employees were told around noon that the vast majority were losing their jobs immediately, said Karl Freund, the company’s vice president of marketing. A small staff will stay on to continue some operations, he said.

“It’s almost a shutdown,” Freund said. “We still have some operations we need to maintain to meet customer commitments, there are some active projects using our current products. However, those projects aren’t producing enough revenue to maintain the company as it’s currently structured.”

The 5-year-old Austin company was an early mover in developing server technology derived from basic designs created by ARM Holdings, the leading designer of chips for smartphones and other mobile products. Calxeda was started by Barry Evans, a former executive at Intel and Marvell Technology Group in Austin.

Calxeda raised a total of $103 million — including $1 million from the Texas Emerging Technology Fund in 2009

— and thought it had a deal in the works for more, but it fell through, Freund said.

“We’ve got two good products and they’re starting to see some traction, but they’re simply not generating revenue fast enough to cover the cost of our operations,” he said. “Which was fine, that was always the plan, but we had planned to infuse additional venture capital and financing into the company

to continue our operations.”

Lucy Nashed, a spokeswoman for Texas Gov. Rick Perry, said the governor’s office became aware of the situation this week.

“Calxeda has provided us regular compliance reports as required, and has completed all of its contractual milestones with the (Emerging Technology Fund),” she wrote in an email. “We are working with the company and will determine the appropriate steps moving forward.”

Nashed declined to comment on whether the state might try to recoup any of the $1 million Calxeda received from the tech fund.

Other investors in Calxeda included Austin Ventures and Vulcan Capital, an investment company started by Microsoft Corp. co-founder Paul Allen. Earlier investors included ARM Holdings, Advanced Technology Investment Co., Battery Ventures, Flybridge Capital Partners and Highland Capital Partners.

Calxeda was considered a trailblazer for its low-power servers, the kind desired by companies such as Facebook who want more efficient ways to run big data centers.

Analyst Patrick Moor-head of Moor Insights & Strategy called Calxeda’s collapse “shocking.”

“These guys were considered players in this market with very good technology,” he said. “They just ran out of runway.”

The company won a number of accolades, but Moorhead said many potential customers were waiting for next-generation 64-bit server technology to make big investments in upgrades. As a result, Calxeda wasn’t able to sell as many of its current products to keep operations going.

“They helped create a market, but they essentially ran out of funding to be able to capitalize on it,” Moorhead said.

It’s too early to say whether or not Calxeda will continue to exist as a company after the restructuring, Freund said.

“We’ll continue some operations, but significantly scaled back and then we’re entering the restructuring process with our creditors to understand what the best path forward is,” he said. “We don’t know what that looks like yet.”

CONTACT BRIAN GAAR AT 512-912-5932.