Zultys Technologies Files for Bankruptcy as Future Called into Question
By Robert Liu
TMCnet Executive Editor
Following the tumultuous summer that Zultys Technologies (News - Alert) customers, partners and employees had to endure, how much more can they take?
In a detailed, three-page letter sent earlier this week to channel partners, company founder Iain Milnes finally disclosed that Zultys Technolgies filed for Chapter 11 protection under the U.S. Bankruptcy Code in San Jose Federal Court on Friday, September 8. A copy of the letter has been obtained by TMCnet and can be read by clicking here.
At a time when Milnes is hoping to create more transparency and trust between the company and its key stakeholders, the timing of the letter – issued ten days after the bankruptcy filing – ironically does little to reassure partners and customers. But, Milnes told TMCnet that he isn’t trying to be secretive with the Chapter 11 filing nor was he trying to hide behind the guise that privately held companies are often afforded compared with their publicly traded counterparts.
“A lot of channel partners asked me to send it [the letter],” Milnes said in a telephone interview. “It wasn't hidden or buried from our channel partners.”
A bankruptcy court judge has now scheduled an auction for Wednesday, October 11, to conduct a sale of the company’s assets, Milnes told TMCnet frankly. He is currently trying to assemble a management-led buyout team and is still in the process of securing financing. But the judge won’t consider the merits of management’s past experience or knowledge of the company into the sale of the assets. The company will simply be sold to the highest bidder.
If Milnes and his team are successful, the management-led buyout would enable Zultys to go forward free of the debts that led to the bankruptcy filing. However, Milnes also knows that several other companies already in the PBX (News - Alert) space are also interested in acquiring the company. And if one hostile bidder in particular is successful, it could finally spell the end of the road for Zultys.
In the meantime, partners have a sufficient backlog of hardware in inventory and continue to sell the Zultys lines. Milnes said July and August averaged about half of the sales volume of the June period and for the time being his team continues to support its products with software updates, bug fixes and new features.
The company’s future was first called into question all of the sudden in July when it shuttered its doors and laid off over 200 employees. Even then, Milnes realized the importance of assuring the company’s channel partners not to throw in the towel. But competitors eventually seized on Zultys’ misfortunes and began dismantling its channel program.
Group Editor-in-Chief Rich Tehrani contributed to this article.
Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu's columnist page.