Asset Liquidation Signals End of San Diego’s Verari Systems

When San Diego tech firm Verari Systems abruptly laid off nearly all of its employees last month, senior vice president Dan Gatti maintained that the doors remained open, a few executives were staying on, and the company was restructuring its business. In a Dec. 14 statement posted on Verari’s website, the company said it had initiated a process to protect “our customer investment and benefit our creditors as we restructure the business…There are several options that are being considered to provide solutions to our customers.”

Several former employees denounced the company’s line in e-mails to me and in comments posted beneath our story, saying all 200 employees were terminated Dec. 11 and Verari, which specializes in data storage hardware and green data storage centers, has no business left to restructure.

It now appears that Verari has indeed ceased operations. An advertisement on its website is soliciting offers for an asset sale, saying, “All assets will be sold by CMA (Credit Management Association) as assignee for the benefit of creditors.” Such language reflects a well-established tool that is an alternative to bankruptcy for insolvent companies that cannot continue to operate. A rough translation is that Verari pledged its blade-based computers and other equipment to secure a bank loan—and the banker is selling the assets to recoup the debt. The deadline for submitting bids was 5 p.m. yesterday.

The CMA representative handling Verari’s asset sale did not return my call. The Burbank, CA-based company explains on its website that secured creditors view the process known as a “general assignment for the benefit of creditors” as useful “because the secured creditor is relieved of the legal costs and risks associated with the foreclosure and sale of its collateral.”

It seems likely that Verari’s insistence on characterizing its shutdown as a restructuring was intended to assuage customers that have installed Verari’s data storage equipment and who might reasonably expect some level of continued technical support. Those customers include Akamai, Microsoft, Qualcomm, Petrobas, Harris, and Lockheed-Martin.

Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.