Spare Backup CEO switch coming
Make money or else
Cloud backup provider Spare Backup is trying to get a new CEO, Stephen Meyer, who is currently helping the company with capital formation. Cue bells ringing and the alert button going bananas. What is going on?
The quarter's revenues were $546,242 but there was a net loss of $2.54m. The annual results are more painful to look at. In 2009 Spare Backup revenues were $2.69m while its net loss was $10.57m. The corresponding 2008 numbers were $1.38m revenue and a net loss of $15.13m. Roughly speaking, costs are five times revenues. Things are getting better though - in 2008 they were more than ten times revenues. They are just not getting better fast enough.
Spare Backup's SEC 10Q report for the first quarter of 2010 contains this statement: "These matters, among others, raise substantial doubt about the ability of the Company to continue as a going concern."
US-based Spare Backup is a start-up that sells cloud back services through branded retailers, mostly in the UK and mainland Europe, where an unbalanced 89 per cent of it's money comes from. It has built a cloud data centre with costs upfront to support customers who pay the retailer a subscription fee which is shared between the retailer and Spare Backup. In other words it needs a large mass of subscribing customers to provide a revenue stream big enough to pay the data centre infrastructure and running costs, and it hasn't got one.
Customer subscription payments are trickling in and data centre costs are gushing out. Spare Backup is burning cash much faster than it's coming in.
Part of the reason is that virtually all of it's customers are in Europe, particularly the UK. It had an early success in the UK with Dixon Stores Group which went sour, and now has two big wins there with Comet and Carphone Warehouse. There are no equivalent customers in the USA where competitors like Carbonite, EMC's Mozy, Symantec and others have more traction, more capital, more brand recognition, and more technical and marketing resources.
Mozy is in Europe too now and life is getting tougher.
Spare Backup's crazy background
Spare Backup has an almost unbelievable background for an IT storage company: real estate development. It started up at the end of 1999 as First Philadelphia Capital aiming to buy into other businesses and do mergers, acquisitions, and whatever it took to make a profit. It combined with a Florida real estate holding company called Conservation Anglers Manufacturing Inc in October, 2000, and changed its name to Newport International Group in January, 2001.
There were various commercial real-estate transactions and then a merger in February 2004 with Grass Roots Communications Inc, which was involved with multimedia communications over the internet. Its president and CEO was Cery Perle who became Newport International CEO, replacing Soloman Lam, the original CEO.
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Comment from Cery Perle
Here is a comment from Spare Backup CEO Cery Perle:-
I am bringing in a CEO (Stephen) to our business, because it is now expanding in a global way, Steve has a proven track record and at this point our business needs a "day to day" operator to help expand on all of its relationships. I am still going to be "day to day", but as Chairman (I handle business development and our product roadmap).
Our business model is very simple which I do not think you and I have actually sat down and talked about...(when do you have time?).
We are more a "white label" company with our core product being "Backup and Recover"...We have been in devolvement, for the last 4 years on additional products (mobile, sync, cloud services) spending a great deal of money in doing so, however this month alone (June) we are launching 3 partners, 2 of which are in the cloud and one in retail, on the shelf.
See we partner with large brand name companies that want our product line or some parts of it, which we then customize and develop for them(Sony-My memory center, Comet-FileSafe, Car Phone-My hub, etc.)...With this model we can truly compete as it is our partners brands that the companies you mention in this article have to compete with...This also makes our cost of acquisition a lot less than the companies you have mentioned.
Let me also talk about the revenues; we have proven that you can make money in the space as we were starting to show signs of this with regards to DSGi, before that relationship turned sour also note that we have been reducing all of our cost and there should be some news out within the coming weeks with regards to that....The numbers you are mentioning are including NON-CASH items, we have to book certain things in correct ways which also report non cash (it looks higher than it is)
The "on going" concern we have had since day one, it is a disclaimer that we have had for the 6 plus years I have been there. I think that will be removed this year, as the company starts to show profits (finally).
This paragraph here:
"Customer subscription payments are trickling in and data centre costs are gushing out. Spare Backup is burning cash much faster than it's coming in."
We are burning less cash than we have before and are launching with the number 1 company in the US, that sells mobile phones through the internet “Simplexity” in the coming weeks, plus we are launching a new channel with Sony, who has been a partner in the US too for a few years now….
We are also in some stages of negotiations with a few major name brand companies in the US now (go look at our SEC 8Ks), this is another reason why I am bringing Stephen into the company as we are growing.
RE "There are no equivalent customers in the USA where competitors like Carbonite, EMC's Mozy, Symantec and others have more traction, more capital, more brand recognition, and more technical and marketing resources."
Again the above statement is wrong as we have equivalent partners that we are launching, and more that are coming soon to be announced…With our model we are competing head on head with the above reference companies as it is our partners brand, which has more brand name recognition and technical resources as they are marketing to their customers, they know their customers so they know how to approach them for the sale at a lower cost of acquisition…"