Home Director closes its doors for good

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Wednesday, June 1, 2005

LIVERMORE, Calif.--After a number of efforts to recharge its failing business, including selling off its installation arm Digital Interiors, Home Director ceased operations in late April due to its negative cash position and its inability to raise or borrow additional funds.
The company--a supplier of home networking products that went public in April 2003--struggled to find a place in the market since it was spun off of IBM in 1999 and lived through a number of reorganizations and management teams. In mid-March, the company announced its most recent restructuring and the sale of its Digital Interiors subsidiary, the company's home networking installation business, to 180 Connect, an installer and integrator of home wiring and electrical systems, for $350,000. Digital Interiors, which was sold so the company could focus on supplying products, according to Tom Wilky, the former vice president of marketing for the company, and was the largest revenue generator for Home Director.
Michael Liddle, chief executive officer of Home Director, said the demise of the company came down to not being able to raise enough capital to keep going.
'We had a reasonable business and new products ready to go to market in the first quarter," Liddle said. "But we also had a significant cash crunch because of reduced revenues and a lower cash balance. It just happened at a time in the market when it was too difficult to raise additional capital."
Liddle, who joined the company in January 2004, said that available cash was a problem even then. A private placement worth $5 million the company secured in late 2003 was already spent when Liddle joined.
"Virtually all the money was gone and we had to go out and immediately raise another $5 million," he said.
But Liddle said there were other reasons for the company's failure including inventory problems, reduced revenues and a lower cash balance.
The company's biggest attempt to build an integrator network was through its Sears Connected Home program--a home integration partnership between the two companies that rolled out in 2003.
"I spent 10 months working on the Sears Connected Home program to see if we could establish a network of installers and it ultimately failed," Liddle said.
The premise of the deal was constructed so that Home Director would install the product and identify installers, and Sears would provide brand, sales and marketing support.
"It was supposed to be a program Sears sold with their sales force and Sears failed to do that," he said. "And Home Director was too small to carry the program."
Also contributing to the program's failure was the high percentage of revenue Sears was asking integrators to pay. Sears did not return phone calls prior to press time.
"The integrators just couldn't justify paying a significant chunk of revenue to Sears just to get a Sears' business card," Liddle said.
Another one of Home Director's partnerships was a joint deal with HomeLogic, a provider of home management and control solutions based in Marblehead, Mass. Joe Lautner, vice president of sales and marketing for HomeLogic, said the venture was supposed to commence in November 2004.
"The partnership never evolved into anything," Lautner said. "But it didn't affect us at all."
Even as the company is in the midst of selling of the remainder of its assets--a process that is expected to be completed within one month--Liddle said he was hopeful at times that the company would survive considering it had six new products expected to come to market in the first quarter and had signed a number of strategic dealers with developers recently.
"I actually believed we had a chance to get it done," Liddle said. "We had accomplished a lot of what we set out to do."
But now, it is unlikely that the company will be able to satisfy its creditors or make any distribution to its stockholders.