Calluna Plc, the Scottish maker of tiny disk drives, is heading back to the market to raise 5.8m pounds ($9.4m) to alleviate a cash shortage. This follows a fall in demand for its older drives and a longer-than-expected development time for its latest drive.
The shares fell 6.5% to 14.25 pence on news of the rights issue of 50.2 million new shares at 12.5 pence each. Calluna raised 2.1m pounds ($3.4m) in July 1998 and directors expect to report a pre-tax loss of 3.3m pounds ($5.2m) in the current financial year.
Cash-strapped Calluna has also given up hopes of marketing its Hardwall product, which intelligently partitions hard drives and is claimed to make them immune from hacking. Though reports suggest that the product, called PC Bodyguard in the US, has been tested by the Pentagon, Calluna reports that sales have been disappointing. The company is reviewing how the technology can best be exploited and is considering a number of options, including licensing to other parties.
Meanwhile, in its core business Calluna is facing a downturn in shipments and lower prices for its older type III drives, and there have been delays in its new type II drives, which can store up to 1Gb of data on a drive 1.8-inches wide and 5-mm thick. Production is now expected to start in the next few weeks.
While the type III drives were aimed at niche data storage markets, Calluna claims that the type II has the potential to be a mass-market product. What gives the company optimism is an estimate that there are 40 million portable computers with compatible slots for type II drives and the number will continue to grow.
The only competition, claims Calluna, comes from flash cards, which it says are considerably more expensive per megabyte and have a current maximum storage capacity of 224Mb.
The next six months will be crucial to Calluna’s future as it appears to be exhausting investors’ patience and may not be able to survive another big set-back. The one factor that buoys the share price is that with promising technology, a continued failure to make money will turn it into a tempting takeover target.
