Cygnion Runs Out of Cash, Fires Most Workers
Cygnion Corp., a maker of wireless products for small businesses and home offices, filed for bankruptcy protection this week and terminated all but one of its 80 employees.
The privately held Irvine company, which was spun off just 10 months ago by telecommunications giant Ericsson AB, owes $18 million to 300 creditors.
It has lost about $20 million since January on revenue of $4.6 million.
“We ran out of cash,” said Cygnion’s bankruptcy attorney Evan Smiley. “With our tremendous debt burden, it was difficult to attract new investors.”
On Monday, the company terminated 79 workers and 20 consultants. But in a sign of the heavy demand for qualified high-tech employees, 50 of Cygnion’s workers, including software engineers, were hired immediately by Valence Semiconductor, which also took over Cygnion’s lease in the Irvine Spectrum.
“We are a rapidly expanding company and [Cygnion employees] had skills that were useful for our businesses needs,” Valence Executive Vice President Kevin O’Grady said.
Valence, which designs semiconductors for the broadband communications market, purchased Cygnion’s lease at the Irvine Spectrum for $1.2 million in cash. Valence plans to move into the 45,000-square-foot space in September and make it the company’s new headquarters, O’Grady said.
In addition, Valence plans to buy some patents and intellectual property rights from Cygnion within the next 30 days, which would bring Cygnion another $4.3 million in stock and cash.
Ashley Shaver, Cygnion’s former director of finance, has been appointed president, and hopes to hire back some employees gradually, Smiley said. The company hopes to emerge from bankruptcy in six months, he added.
Although Cygnion raised $20 million from WK Technology Funds in Taiwan, the company spent the money developing and marketing its key product, CyberGenie, a wireless phone system that also manages e-mail.
Cygnion is looking for a strategic partner to distribute and market CyberGenie, which has won stellar reviews and is sold at Office Depot and Staples, among others.
Cygnion, which has suspended its manufacturing operations, has $8.4 million worth of CyberGenie systems on hand, Smiley said. The company has also terminated its contract with General Electric, which provided the bulk of Cygnion’s customer support services.
Major creditors include Flex International Marketing Ltd., which is owed more than $5.6 million; Ericsson, nearly $2.6 million, and FCB Worldwide, about $1.7 million.
