IBM Database Partner Faces Cash CrunchIBM Database Partner Faces Cash Crunch

An IBM partner that provides tools to help businesses move their databases from a rival platform to IBM's DB2 environment is facing a cash crunch and an uncertain future.

In a filing with the Securities and Exchange Commission, ANTs Software said it "has suffered recurring losses from operations and generated negative cash flow from operations that raises substantial doubt about the company's ability to continue as a going concern."

ANTs said it had just $330,000 in cash on hand as of Dec. 31, that its burn rate is about $580,000 per month, and that it posted a net loss to stockholders of $43.73 million last year.

San Francisco-based ANTs specializes in tools that help enterprises move from a Sybase database to DB2. Under a formal alliance with IBM struck in 2009, it developed the ANTs Compatibility Server (marketed by IBM as DB2 SQL Skin)—which has been used by a number of customers, including Pep Boys and BJC Healthcare, to move from Sybase to DB2.

In an interview, ANTs CEO Joseph Kozak insisted the company's situation isn't as dire as the SEC document—a 10-K form filed March 31—portrays. "We've always gone down to what looks like fumes, it's the way we choose to do business," said Kozak, who noted that most of ANTs' stock is held by private investors and lenders.

Kozak, a former Oracle sales VP and former CEO of Lombardi Software, said ANTs recently secured a $7 million line of credit that will see the company through at least the end of the year. He added that ANTs is also close to closing a licensing deal with a second major enterprise software vendor, which he declined to name, and that ANTs has "a healthy product pipeline."

ANTs has built a business around trying to take the pain out of database migrations. According to Forrester, a full-on database migration can take anywhere from six to nine months, or even years, given the need to first migrate the schema, then the data, and then the application code—but SQL Skin adds a compatibility layer that reduces the migration time to weeks or even days, according to IBM marketing materials.

As recently as October, IBM named ANTs as a finalist in its CTO Innovation Awards.

Along with tools from open source developer EnterpriseDB, ANTs' offerings contribute to IBM's efforts to capture competitive wins from two of its biggest rivals in the database market—Oracle and Sybase. Oracle last month said it would no longer develop software that can run on HP servers powered by Intel Itanium, a move that could allow IBM to snag even more wins amid customer uncertainty over the situation.

But ANTs could have trouble developing future solutions, or operating at all, unless the company improves its cash position or successfully positions itself for a buyout from IBM or another vendor.

"We are actively seeking, and will have to continue seeking, additional sources of financing to enable us to continue the development and commercialization of our proprietary technology," ANTs said in its SEC filing.

An IBM spokesman declined to discuss whether IBM is prepared to inject cash into its partner or acquire the company outright. The spokesman said Sybase-to-DB2 migrations can be done without ANTs' technology. "We'll do whatever it takes," he said.

ANTs said its finances took a major hit with the loss of its largest services customer at the end of last year, and that it reduced its employee headcount from 68 full-timers to 48 on Jan. 4. To boot, ANTs has been sued for damages by Sybase. Sybase claims ANTs improperly helped another software company poach a Sybase engineer. A trial is set for later this year.

ANTs' shares were trading at $0.32 as of midday Wednesday on the NASDAQ over-the-counter market, off from their 52-week high of $3.25.