Can US Market Stiffen BakBone?

In a move aimed at raising much-needed funds, BakBone Software Inc. (TSE: BKB) today filed with the U.S. Securities and Exchange Commission to start publicly trading in U.S. markets (see BakBone Files Forms, Earnings).

The storage management company offers distributed, multivendor packages for backup and archiving and competes with the likes of Veritas Software Corp. (Nasdaq: VRTS). It says the filing is a key step in a long-planned strategy to raise capital in the U.S. markets.

BakBone was formed in March 2000 through a reverse acquisition, in which a shell company based in Alberta acquired a series of storage software companies, including Japan's NetVault Corp. KK, and set up headquarters in San Diego.

"We are financially based in Canada, but our headquarters is in the U.S.," says a spokesman. "We have always had a goal to move to U.S. capital markets."

BakBone needs the money. In its fourth-quarter financial results, released to analysts last week, it revealed 14 percent sequential revenue growth to CDN$2.6 million (US$1.69 million), but a net loss for the quarter of CDN $0.29 (19 US cents) a share.Analysts say the loss was greater than expected. "The Company exited fiscal 2001 with... a negative working capital position of [CDN]$304,000," wrote analyst Brian D. Pow (!) of Acumen Capital Partners in a research note today. "Based on the Company's cash utilization and current growth rates, cash will continue to be tight and the Company will need at least an additional [CDN]$10 million in cash for fiscal 2002."

Pow downgraded his BakBone ratings from Buy to Hold, and his 12-month stock price target from CDN$10 to CDN$3.60. At press time today, BakBone's shares were trading at CDN$3.65 on the Toronto exchange.

BakBone's ambition is to make sufficient funds on the U.S. markets to carry on its growth strategy, which includes selling its products through various bundling arrangements. Right now, BakBone has bundling deals with FalconStor Software Inc., IBM Corp. (NYSE: IBM), Nishan Systems Inc., and Seagate Technology Inc.. It also has a joint development agreement with FalconStor.

Brian Pow says arrangements like these are key to the future success of BakBone, which up to now has been successfully signing up resellers but not gaining revenue, due in part to the overall economic climate.

- Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com