VAR FusionStorm Sees Growth Ahead After Lawsuit Closure, Jeskell Sale

A top FusionStorm executive said that the solution provider is enjoying a strong growth in its business despite the recent $11 million legal judgment against the company and the sale of its federal business to help pay that judgment.

Dan Serpico, president of San Francisco-based FusionStorm, said settling the lawsuit and selling the Jeskell federal government side of its business lets FusionStorm concentrate on growing its core commercial business.

The upbeat assessment of FusionStorm came during a time when many of its peers have wondered whether the company will survive.

FusionStorm was sued by San Diego-based solution provider TIG after allegedly stealing TIG employees and business secrets in setting up a Tampa branch office. FusionStorm was found guilty in a California jury trial, and settled the case in August for a total of nearly $11 million.

Earlier this week, FusionStorm said it agreed to sell its Jeskell business to a trio of investors as part of its efforts to raise the cash to settle that lawsuit. FusionStorm acquired Jeskell four years ago this month.

Next: FusionStorm Sees Post-Lawsuit, Post-Jeskell Growth

The lawsuit and subsequent sale of Jeskell have spawned rumors in the channel about the future viability of FusionStorm, including rumors that the entire company might be for sale.

"Rumors of our demise have been grossly exaggerated," Serpico said. "Every company on the planet is for sale at the right price. But we're not entertaining any plans now."

Not including the Jeskell portion of its business, FusionStorm revenue is up about 40 percent from January through September compared to the same nine-month period last year, Serpico said.

"That's despite all the distractions including the lawsuit," he said. "Our customers continue to buy. With the TIG thing coming to a close, we're very bullish."

Settling the lawsuit was an important factor in the decision to sell Jeskell, Serpico said. "There's no doubt that the lawsuit with TIG created a hole in our balance sheet, and this helps," he said. "The sale brings liquidity to the table."

Next: Mixed Feelings About Selling Jeskell

Serpico said he has mixed feelings about the sale of Jeskell.

"The business was doing well," he said. "But it was not a core part of our business. It was still missing a few things that could have made it stronger. And, with the overall growth expected for FusionStorm, it eventually could not have qualified as a small business under federal government guidelines."

FusionStorm talked to several potential bidders for the Jeskell business, all of whom had the opportunity to take all or part of Jeskell, Serpico said. "The buyers got just what they wanted," he said.

Jeskell was one of about a half-dozen acquisitions FusionStorm made in the last five or six years, Serpico said. That should not be interpreted as meaning that FusionStorm depended on acquisitions to grow, he said.

"We weren't a growth-by-acquisition or a roll-up company," he said. "Over half our business growth was organic."

Next: Settling The Lawsuit

TIG President and CEO Bruce Geier said that FusionStorm's sale of Jeskell is part of an effort by FusionStorm to pay TIG what it is owed by the lawsuit. Geier said that FusionStorm has been making payments as promised, and that there is a balloon payment due. However, he declined to give specific amounts for the payments so far and the balloon payment.

Serpico said he his very actively engaged with TIG, Geier, and the TIG CFO to finalize all payments resulting from the lawsuit.

"I have every reason to think we'll figure it out," he said.