Liberate files for Chapter 11
Liberate Technologies, a formerly high-flying maker of software for set-top boxes, files for reorganization under U.S. bankruptcy laws.
Liberate plans to file for a voluntary Chapter 11 reorganization in U.S. District Court in order to resolve some of its liabilities and strengthen its financial position, the company said. Liberate currently has $222.3 million in cash and short-term investments, and $21.7 million in current liabilities.
"The management team has been working on a turnaround of Liberate for about a year now. But we still have significant obligations and exposure we're trying to get out from under," said Greg Wood, Liberate's chief financial officer.
The company has, for example, $46 million in lease obligations through 2010 for a vacant building in San Carlos, Calif. But through bankruptcy laws, Liberate would have to pay only 12 months worth of rent, or 15 percent of the remaining balance on the lease.
"We also inherited dozens of contracts when we invested in the company that are not consistent with our current direction," Wood said. During the past year, a new management team stepped into place, with the company's second-largest investor, David Lockwood, filling the chief executive post. Wood was also part of that new team. The company is transforming itself into a software vendor for digital cable systems.
Liberate traces its pedigree to database giant Oracle. In the mid-1990s, Oracle CEO Larry Ellison created NCI to promote his vision of low-cost, networked PCs.
NCI was later split into two companies: Liberate to pursue interactive TV projects; and New Internet Computer, now closed, to push networked PCs.
The bankruptcy protection filing is the latest setback for the company, which has undergone an investigation into its accounting practices by the U.S. Securities and Exchange Commission; the above-mentioned management shake-up, relating to the SEC investigation; and a work force reduction of roughly 30 percent.
Liberate anticipates emerging from bankruptcy protection within four to six months, the company said.