Com21 Inc. has thrown in the financial towel, announcing it has voluntarily filed for Chapter 11 bankruptcy and intends to sell off its lines of cable-modem termination systems to Arris Group Inc.
The Milpitas, Calif.-based company filed its reorganization plans with U.S. Bankruptcy Court in the Northern District of California this week. Under the reorganization schedule, Com21 will have to present a reorganization plan to its creditors, probably in late August.
Meanwhile, Com21 has frozen payments to its vendors and suppliers, pending court authorization of payment.
As part of the filing, the company announced negotiations to sell off its Data Over Cable Service Interface Specification CMTS product units and its Ireland subsidiary to Arris. That process has not been completed, so there is no sale price set.
If it is successful, Arris will take over the technology it has, in part, already licensed from Com21. This spring, Arris cut a deal with Com21 to rebrand, market and sell its DOXcontroller 1000XB CMTS as a mid-capacity unit. The resultant Cadant C3 fills out Arris' product line, sitting between its high-capacity Cadant C4 and smaller Cornerstone 1500 unit.
Com21 had also been in the business of producing cable modems, and as recently as April it gained DOCSIS 2.0 certification for a unit from Cable Television Laboratories Inc. But DOCSIS cable-modem shipments dwindled to just 23,000 units in the first quarter of 2003, a 63% drop compared to same quarter 2002. That reflected a strategy shift in the past two years, with Com21 refocusing its DOCSIS business the CMTS side, marketing its DOXcontroller XB system line.
Despite the shift, business has not been good for Com21 in the past year. In July 2002, the company hired Investec Inc. to help evaluate its strategic plans and come up with funding alternatives. The company was delisted from the NASDAQ exchange in February, and revenues for the first quarter of this year dwindled to just $3.4 million, a 44% drop compared to the $6.1 million gathered for the same period in 2002. Net loss totaled $4.9 million, but that was an improvement compared to the $5.3 million net lost posted in the first quarter 2002.
The Com21 reorganization may focus on video systems. Com21 debuted the first elements of a DigitalHeadend system this fall, including a showing at December's Western Show. The system was designed to support on-demand services for smaller-market footprints at a lower cost to operators. Going forward, that may well be a large part of the reorganization plan.