Verari Founder Outlines Strategy After High-Speed Wipeout and Rebirth
The demise of San Diego’s Verari Systems and its resurrection as Verari Technologies happened so fast you might not have realized what happened unless you were paying close attention over the holidays.
The longtime local company, which specializes in making high-performance servers, server racks, and energy-efficient data storage centers, laid off 223 employees and ceased operations just two weeks before Christmas. It was hard to make out what was happening at the time, chiefly because Verari denied media reports that it had shut down—saying instead that its doors were open and it was merely “restructuring” its business.
But a few weeks later, a notice on Verari’s website said the high-performance computer company was in fact soliciting buyers in a public auction. All Verari assets were later sold through a liquidation known as an “assignment for the benefit of creditors.” Such liquidations, sometimes known as “friendly foreclosures,” are not that unusual—especially these days, according to Bruce Bennett, a Los Angeles bankruptcy lawyer. Bennett told me that in these scenarios, a senior secured creditor, usually a bank that provided a business loan, forces the issue, but ultimately with the company’s cooperation. “It’s just an inherently simpler and less expensive way of liquidating the assets instead of going through bankruptcy,” Bennett says. In most cases, no new company emerges from such liquidations.
But Bennett says it’s not that unusual for a key figure from a distressed company to step back in and acquire all the assets—which is what happened at Verari. Dave Driggers, who founded the San Diego company in 1991 and was working as Verari’s chief technology officer, led an investment group that bought all of the old Verari’s assets. Driggers also stepped in as CEO to reboot the San Diego computer company, which is now known as Verari Technologies. Less than 40 percent of the old Verari’s 223 employees are expected to get their jobs back.
Verari reopened for business last week, capping a lightning-fast salvage that took less than six weeks to carry out. But it tortures common sense to describe what happened as a restructuring.
In a recent interview, Driggers told me that all of Verari’s previous investors were wiped out—after raising $59 million in three rounds—and that they were not part of the group that bought Verari’s assets. “You never heard me announce a restructuring,” Driggers said. “I chose not to say anything during the process—from the day we shut down until after the acquisition.”
During our conversation, Driggers explained why he’s optimistic about the future of Verari Technologies—which he says is moving forward with the same technology and a better business model. He also explained why the old Verari failed.
With a mixture of exasperation and pride, Driggers said that Verari “had incurred a huge amount of debt” while its technology and products were … Next Page »