History 2002: Old Start-Up Neartek

It’s no ordinary story, nor a simple one for that matter.

Initially, there were 2 French companies, 3001 Informatic and Newlab International, both created in 1992, and later acquired in 1995 by Partex International, a holding company started in 1994.

It was 3001, with its team of former Bull executives, that came up with the idea for an HBS (Heterogeneous Backup Server), at the time a highly original idea. Later, this idea became known as virtualization of magnetic tape cartridges on hard disk drives.

The notion of frontal disk cache on tape drives or libraries, furthermore, was later adopted by Grau, IBM and StorageTek, with great success for everyone but Partex.

In 1995, Partex was worth a mere $4 million and had sold no more than 20 or so HBS storage systems, mostly for Bull mainframes. And yet the projections in the first business plan were rosy: $17 million in 1998.

The two-headed management team was lead by Emilio Daile and Jean-Noel Leroux.

Partex wanted to acquire the assets of another French firm, a subsidiary of EMC, Copernique, specialized in database machines. It also set its sights on 2 other French companies, Quadratec in storage software, which later became Atempo, and RAID specialist Quavis, in the hopes of creating an extensive European storage group, but once again, nothing came of this.

In 1997, the firm experienced its first glitch: Bull launched a rival product, apparently very close to 3001’s HBS, causing the latter to sue the French computer giant.

Management was sailing without a compass. In 1999, Partex International was renamed Near Technologie, then simply Neartek.

The following year, it acquired Tram Informatique, a real-time software development firm, then, in 2001, hoping to expand operations over the Atlantic, it picked up US integrator More Solutions, Inc. (MSI), an SSP, that would operate under the Neartek name.

Based on its potential presence in USA, the company raised $26 million in round B of financing.

Then everything changed again later that year, with a new US management team, headed by new CEO and president Peter Smith, the former CEO of software firm Ansys, who replaced Daniel Franchi, originally with Partex, in October, along with a new COO, Bruce Morgan and CFO, George Chamberlain, all Americans. There are only two French executives remaining, CTO Clement de la Jonquiere and European COO Francois Gauthier, the former president of 2AI, a Bull storage subsidiary.

The headquarters of the company were transfered to Lakeville, MA, near Boston.

Once again, there was another sudden change in strategy. Neartek decided to become a company involved in “managing the process of tape format.” Basically, this mean the company kept only its software business, the last version of which was called EVS2 (Virtual Storage Engine 2), a solution that ran from $200,000 to $300,000 in cost. It can be installed on a PC under Windows, and is capable of supporting LTO, DLT 3590 and STK 9840 tape drives, as well as libraries from Adic, Exabyte, Quantum/ATL, IBM and StorageTek. It’s no longer a matter of selling complete turnkey systems with an EMC Symmetrix as a disk cache subsystem.

What’s more, the integrator activity was acquired by French firm OMP for an undisclosed amount, although the latter could return under the Neartek label if there was a successful IPO. Another result of this latest shift: 42 people were laid off in France. A total of 120 remain, with 90 in the Paris region, including 50 engineers.

Somehow, in the midst of all this, Neartek successfully concluded a 3rd round of financing, led by Benchmark Capital, that allowed it to raise an additional $27 million.

In the end, this was a company that had a great idea 7 years ago, backed up by 7 patent filings, that allowed it to raise a total of $55 million. But the company only cleared $10 million in revenues in 2001, a year in which it still posted losses, with only 50 customers throughout the world since it was launched, and finally hoping to make a profit this year.

The problem with Neartek today is that while it’s tape virtualization idea may have been revolutionary in 1995, it’s no longer even novel, and the competition has taken advantage of this fact.

What’s more, the market for backup on magnetic tape has been challenged more and more by disk-to-disk backup. It’s towards this new market – in which it has considerable expertise that the old start-up should begin heading, if it doesn’t want to remain a start-up forever.

This article is an abstract of news published on issue 175 on August 2002 from the former paper version of Computer Data Storage Newsletter.