ClearCube Technology Inc., which makes desktop virtualization systems, Tuesday announced that it is spinning off its software unit into a new company named VDIworks.

"We started developing a rich set of tools to manage virtual assets and devices, but as we have grown up, people think about ClearCube as hardware more than software," CEO Rick Hoffman says. "We thought about how do we get visibility around this very good set of software tools we have and take advantage of the momentum in desktop virtualization."

The company makes so-called PC blades, which enable users operating from terminals to have the power and capabilities of desktop PCs operating on a centralized computing platform. The company's network hardware and software eliminates bulky desktop processing units and connects users to dense PC blades located in a central, secure location.

ClearCube will continue to offer end-to-end systems for centralized desktop computing, inluding the hardware.
VDIworks' product, on the other hand, will be the software platform for creating, deploying and managing virtual desktop systems. ClearCube will continue to offer what will now be VDIworks' software, using it via an OEM relationship with its former unit and continuing to market it under the name Sentral.

Like most spinoffs, the complexity of the agreements that had to be arranged between the now-distinct companies was the trickiest part of the spinoff, Hoffman says. Another challenge was making sure that VDIworks was prepared to work with other hardware vendors, he adds.

"We were getting requests from customers to decouple our software from the hardware," Hoffman says, adding that some customers had already chosen other server vendors for their hardware needs.

The spinoff news follows a $5 million investment from Paladin Homeland Security Fund LP, announced in February. Since it was founded in 1997, ClearCube has raised a total of $120 million. It announced a $25 million Series D in 2004, which then-CEO Carl Boisvert said would be the company's last private money. 

But the company attempted, in part because of its close relationship with IBM Corp.'s [IBM] widespread global services unit, to expand into too many geographies, Hoffman says.

"We tried to do too much too fast," he says. "Because we didn't invest enough in each of the groups, we struggled."

ClearCube has since trained its focus on North America, Europe, the Middle East and Africa. It still has an office in Tokyo, Hoffman says, but "doing business in Japan is a real challenge," and consequently ClearCube is winding down its operations there.

The latest funding will enable ClearCube to reach cashflow break-even in the fourth quarter of 2008, Hoffman says. Part of the investment will provide seed funding for VDIworks. Hoffman will take the reins of VDIworks, while ClearCube chief operating officer Randy Printz will become ClearCube's CEO.

See May 6 press release from ClearCube
See August 2004 story from TheDeal.com