Xdrive Files Chapter 11; GeoCities Founder Makes Bid
By SAMANTHA LEE
Xdrive Technologies Inc. has filed for Chapter 11 bankruptcy protection with a prepackaged plan to be acquired by one of its former board members, David Bohnett, pending Bankruptcy Court approval.
On July 8, Marina del Rey-based Xdrive accepted a $1.2 million offer for its assets from Carolwood Acquisition Corp., a holding company for Bohnett's L.A.-based Baroda Ventures.
Three days later, Xdrive filed for bankruptcy, listing assets of $1 million and debts at $4.3 million.
Under terms of the offer, $300,000 is earmarked for debtor-in-possession financing for the online data storage company.
"There is no guarantee Carolwood will be the owner," said Jeff Garfinkle, an attorney with Brobeck Phleger & Harrison, who represents Carolwood. The offer is "still subject to being overbid," he said. A sale must take place by Aug. 30.
Bohnett founded Santa Monica-based GeoCities Inc. and sold it to Yahoo! Inc. in 1999 for $3.7 billion in stock. He sits on the boards of locally based Stamps.com, Gamesville.com and Online Partners. Bohnett had no comment.
From mid-1999 to end of 2000, Xdrive raised over $120 million from investors including Goldman Sachs, Soundview Ventures, Softbank, Alex Brown and J & W; Seligman.
As recently as February, Xdrive had acquired rival storage company FreeDrive Inc. for an undisclosed amount.
Xdrive offered its customers the ability to store and retrieve data using the Internet. After launching its free service in 1999, the company grew to more than 9.3 million users after two years and its payroll swelled to 270 employees. Advertising and referral agreements generated $800,000 per month, but that was far short of the $6 million per month in operating costs.
The company imposed a fee-based rate structure in May 2001, and hired Karl Klessig as its president, who began to slash costs. But customers were reluctant to pay for services they could get on sites like MSN's Hotmail or on Yahoo. Subscribers fell to 12,000.
In January, Xdrive began soliciting new investment and also began considering selling the company. In June, its board solicited bids from six companies, including ResponseBase, JLT, Big Vault and Bohnett's Carolwood.
Xdrive's bankruptcy attorney, Scott Clarkson of Clarkson Gore & Marsella, said the company would continue to operate. "Service will improve and the customer base will expand, because they won't have debt pressure to contend with," he said.
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