SyQuest Technologies Inc, the maker of removable hard disk cartridges, is staring bankruptcy in the face following the Fremont-based company’s failure to secure additional credit facilities before its cash reserves evaporate. In a statement issued on Monday, SyQuest said it had suspended operations and was considering alternatives which included filing a Chapter 11 petition under the Bankruptcy Code. The company requested a halt in the trading of its securities, with the shares finishing up at just $0.34 a piece. SyQuest’s removable disk drive cartridges were usurped by alternative products such as Iomega’s Zip drive and the company has failed to adapt to the changing competitive landscape. Loss-making since 1995, SyQuest reported a huge cash outflow from operations of $95m in its last quarter through June. The company was forced to issue $120m of stock just to stay solvent, and with only $13m of cash left at the end of the quarter, it needed a new source of credit, and quickly. Unfortunately for SyQuest, it inevitably breached the loan covenants with its existing finance provider, Greyrock Business Credit, who promptly cut SyQuest’s borrowing powers by two thirds to just $10m. An alternative investor has clearly not been found, and despite drastic efforts to cut costs including sweeping lay offs, SyQuest has hit the wall. The company said it would maintain limited support to its customers.
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