Storage Soup

Jul 3 2013   11:21AM GMT

Struggling FalconStor shuffles CEOs again

Dave Raffo Dave Raffo Profile: Dave Raffo

FalconStor has been looking for a buyer for seven months. Now it may be looking for a CEO, too.

Jim McNiel suddenly resigned as CEO and president Monday and gave up his seat on the board. FalconStor named Gary Quinn interim CEO. The company did not say if it is conducting a search for a permanent CEO.

FalconStor may not need to find a full-time replacement. It could give the job to Quinn eventually or it may not need one at all. The storage software vendor last November revealed it hired investment banker Wells Fargo to pursue strategic options, which could be a sale or funding. Quinn could merely be a caretaker until there is a sale. Then again, McNiel’s resignation could be a sign that there are no serious bidders for FalconStor.

McNiel replaced FalconStor founder ReiJane Huai as CEO in 2010 after Huai’s role in a customer bribery scandal came to light. Huai committed suicide a year later. FalconStor agreed to pay $5.8 million in June 2012 to settle criminal and civil charges that it bribed JP Morgan Chase to buy its software.

The bribery scandal came with FalconStor already reeling following the loss of OEM partners for its virtual tape library (VTL) software. Most of the major storage players used FalconStor software before developing or acquiring their own data deduplication software for backup.

FalconStor lost $3.4 million in the first quarter of 2013 and its $15.3 million in revenue was down 21% from the same quarter last year. With $28.2 million in operating cash, the vendor cannot sustain those kinds of losses for long without getting acquired or finding funding.

But in some ways, FalconStor is operating as it will be around long-term. It hired Rob Zecha as chief product officer in April, putting him in charge of product management, quality assurance, software development, engineering and research and development. And last month, FalconStor signed an OEM deal to sell its VTL software on IBM hardware.

Quinn joined FalconStor in April 2012 as vice president of North America sales and marketing and was promoted to executive vice president and COO in April 2013. He previously held executive positions at software vendor CA Technologies and Suffolk County, NY.

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