Zitel Corp has announced its complete exist from the storage market and handed over the manufacturing of its storage products to Hitachi Computer Products (America) Inc. The Fremont, California company will now focus on its software and Year 2000 interests. Hitachi Computer Products, a subsidiary of Hitachi America Ltd, will start manufacturing Zitel’s storage subsystems at its facility in Norman, Oklahoma within the next two to three months, while Zitel looks for a company to take the storage business off its hands altogether. Although Hitachi will be manufacturing the products and providing the support, the products will still be sold under the Zitel name for the time being. According to Zitel general manager Jim Hogan, the company’s storage business is no longer economically viable. Zitel has identified the software and year 2000 remediation business as a much more financially healthy option. Zitel was established 20 years ago as a storage operation, and it was only a year ago that it broadened its reach and moved towards the software business when it bought Datametrics Systems Corp, Palmer & Webb Systems Ltd, and Palmer & Webb Systems NV (CI No 3,176). The storage business accounts for 50% of Zitel’s revenues, but it has been hindering the company’s profits. This year Zitel has reported growing losses with six month net losses standing at $10m from a loss of $2.5m at the same time last year (CI No 3,399). Hogan is confident that once the storage business has gone, the company will be able to claw its way back to profitability, and he anticipates this will occur in the next three months. While Zitel is getting out of storage for financial reasons, it is quick to point out that passing its products on will ensure its customers are not left high and dry. Under the terms of the agreement Zitel has with Hitachi, there is a termination clause which would enable any future buyer of the business to take on the manufacturing, but it has the option of leaving it with Hitachi. Some 40 staff will be affected by the company’s decision, but Hogan is confident the majority of them will be able to seek new jobs with a future owner. The company is remaining tight lipped about possible purchasers, but hopes it won’t be too long before the division is off its hands altogether.
