Xperinet Closes Media Server Business

Xperinet has gone out of business. The maker of movie servers informed dealers today that the company's board of directors "has voted to discontinue operations effective immediately, pending filing of bankruptcy proceedings." (Read the entire letter.)

Company CEO John Cox had warned reps on August 1 that Xperinet "is presently undertaking a significant restructuring due to weakness in the US economy. Slow US sales have placed considerable pressure on the company, and we are having to retrench, and focus on engineering before we can resume sales and marketing efforts. …" (Read the entire letter.)

Just today, Xperinet announced it was shuttering operations for good "unless the company is able to secure a further investment of $400,000 or find a buyer in the next few days…."

According to Cox's letter to dealers:

This decision was driven largely by certain economic factors resulting from the downturn in the US housing market. Reduced investment in housing resulted in a marked reduction in revenues for Xperinet, as with many CEDIA manufacturers. Secondly, the soft market caused numerous dealers to default on their credit terms, dramatically increasing our bad debt experience. These events came on the heels of a major development effort that drained the company of cash.

What Went Wrong?

Xperinet was one of the earlier providers of movie servers, starting in 2005.

Its Linux-based MIRV servers start with an enterprise-class RAID drive with hot-swap drive bays and 1.2 TB to 4.5 TB of storage (expandable).

Client devices distribute the content to remote locations throughout the home.

The thing that seems to have hampered Xperinet is the software. One of the company's most promising new extender products, Tarpon, failed to ship because the software never was completed.

"We have about 100 Tarpons on the shelf," says Marc Wishnow, VP of Future Information Technology (FIT) Inc., which has manufactured Xperinet product since fall of 2006. "Xperinet also has about 100 Tarpons."

He says that Tarpon was "about half the size of a piece of paper, and maybe one-inch high. Everything was integrated on one board. It was a great concept but it never came to fruition. Here we are eight months later and it still has no software."

Xperinet also never got its Blu-ray product to work properly. The company announced support of the format in August, 2007.

According to Hugh Hart of mid-Atlantic rep firm AVR Marketing, Xperinet initially tried to incorporate Blu-ray into its Linux servers. Unfortunately, he says, "it took incredibly long to verify the code, so they decided to get out of Linux and moved to the Windows platform just for the Blu-ray burner."

As a stop-gap measure, Xperinet started offering in April 2008 servers pre-loaded with Blu-ray content.

The idea was nice, says Hart, "but our dealers said, 'What if you want to put your own Blu-rays on it?'"

What Next?

"I'll be looking for a new server line," says Hart.

He says he has been approached by Fuze, which makes media servers based on Windows Media Center. "They seem to take a little bit of Vista out of Vista," he says.

Throughout the years, though, Hart says he "stood by Xperinet."

Business with the product was "mediocre at best," he says. But in all fairness, he adds, "My primary line is Universal Remote Control. I live and breathe URC."

Competitive server manufacturers are pouncing. After Xperinet's Aug. 1 announcement, Fusion Research apparently sent notices to Xperinet reps, offering a $200 bounty for any dealer they could convert to Fusion's server products.

Other server manufacturers that could grab the Xperinet business include Axonix (reportedly shipping a Blu-ray product), Kaleidescape (which also has announced but has yet to ship Blu-ray products), AMX (MAX), Escient (when it starts shipping Vision), ReQuest (DVD controller only, no DVD ripping), Codex Novus, and a slew of products based on Windows Media Center.

Fire Sale on Xperinet Products

Wishnow of contract manufacturer FIT says, "We have a whole bunch of machines that we want to liquidate – like 70 clients and 30 servers."

He says that his company is offering a "major price reduction" on the products, more than 50% off.

Does that make you nervous? Wishnow and his partner have 15 years of computer manufacturing experience. "Everything goes through a 48-hour burn-in," he says. "Everything we sell has a one-year warranty."

Wishnow says that FIT has "tried to take the high road," concerning products that are in for repair -- This despite the fact that Xperinet owes FIT roughly $220,000 (about $150,000 of that in product), according to Winslow.

He says that the working product that is still in inventory was never shipped to Xperinet because of long-overdue payments.

Looking for a bargain? Contact Wishnow at .(JavaScript must be enabled to view this email address).

On a personal note, we hate to see such a promising company close its doors. We wish the principals the best of luck.

Emails from Xperinet follow.

Xperinet broke the sad news to dealers and reps in a series of emails beginning Aug. 1

Date: August 1, 2008

Subject: Xperinet Restructuring

Dear Xperinet Manufacturer's Reps,

Xperinet is presently undertaking a significant restructuring due to weakness in the US economy. Slow US sales have placed considerable pressure on the company, and we are having to retrench, and focus on engineering before we can resume sales and marketing efforts in the US. For this reason, we had to let go several employees this week, including Glenn Arentzoff, who has done a great job for Xperinet despite the slow US market and continued product delays. If we can turn things turn soon, we will certainly want him back, but I know he's not going to last on the job market very long.

Please join me in wishing him the best in his future endeavors. The Xperinet office will be closed on Friday, August 01 and Monday, August 4 as we move to a new facility. Only emergency tech support issues will be responded to on these two days, and our phones will be down for some period during the switch-over.

Sincerely, John T. Cox
Xperinet, Inc.
1805-A Virginia Street
Annapolis, MD 21401
.(JavaScript must be enabled to view this email address)

---

August 7, 2008

Subject: Xperinet News

Dear Xperinet Dealers,

I regret to inform you the Xperinet Board of Directors has voted to discontinue operations effective immediately, pending filing of bankruptcy proceedings. Economic factors in the US market have left the company insolvent, and made it difficult for the company to find additional sources of capital. Unless the company is able to secure a further investment of $400,000 or find a buyer in the next few days, it intends to file for bankruptcy. If you know of any interested parties, please have them contact me.

This decision was driven largely by certain economic factors resulting from the downturn in the US housing market. Reduced investment in housing resulted in a marked reduction in revenues for Xperinet, as with many CEDIA manufacturers. Secondly, the soft market caused numerous dealers to default on their credit terms, dramatically increasing our bad debt experience. These events came on the heels of a major development effort that drained the company of cash. Finally, uncertainty about the US economy and the CEDIA market dried up all our sources of capital. The convergence of these four factors proved insurmountable for the company.

I know this event will create many difficulties for you and your customers, as you seek to support the installed base of product. All product manufactured during the last two years was built by our contract manufacturer, FutureIT. FutureIT provided a 3-year guarantee on the performance of the hardware, and also has sufficient expertise in supporting the software that they may be able to assist you with minor issues. They also are in possession of all MIRV units that have been returned for repair. Following is contact information for FutureIT.

Marc R. Wishnow/ Vice President
Future Information Technology, Inc.
5901-G Ammendale Road
Beltsville, MD 20705
.(JavaScript must be enabled to view this email address)
Ph: 240-264-1266 ext. 243
Fax: 240-264-1261

On the software side, one of our engineering contractors is working to offer a support program for Xperinet products. We will forward details of the program and their contact information hopefully by Monday.

It has been our honor and pleasure to serve you these past six years, and we deeply regret that we could not continue to pursue our vision with you.

Sincerely,

Xperinet, Inc.
John T. Cox