Whither LNXI?

Rumors being reported by John at InsideHPC.com suggest LNXI may not be long for this world. It would be sad to see them go.

I had heard things like this in the past, in large part due to the problematic acceptance schedules of the government. When you sell a big huge thing to the government, the government withholds payment until you can prove it is working to their satisfaction. This is called the acceptance test. Unfortunately, such acceptance tests wreak havoc upon smaller companies with limited capitalization. You are effectively paying for the gear that someone else gets, and they don’t have to pay you for it until it works the way they wanted.

Which means, if you have $1M in outstanding purchases, waiting for payment and it takes you 90 days to get it working, you will likely have a 120+ day outstanding bill from the government, and your suppliers want to be paid net-30 or less.

Now have a few of these running simultaneously. And have enough people working for you that your cash flow requirements need ~300k$/month to pay salaries/benefits. And add onto this investors who get cold feet (“not another dime” spake the VC).

This is a recipe for disaster.

The government demands the lowest cost on hardware/software/services. So all this extra time and effort is effectively free service on the part of the company providing it. It is unfunded. Your margins are already in the toilet.

It is a losing proposition for a smaller company. Even if your technology is perfect (none is), you occasionally get onerous terms. FWIW, we have a tendency to reject onerous terms out of hand. It is unwise business practice to accept them. It increases your risk, it does not increase your reward. You can’t raise your price to reflect the increased risk of these terms. There is an opportunity cost associated with accepting them.

My favorites have been demands for net-75 terms from a company in bankruptcy, or in a case a few years ago, a demand that we give the potential partner a world wide irrevocable license to our product software, to do with as they wish, to rebrand/resell as they wish, and deny our own IP claims and ownership.

Um… yeah. Right.

I hope LNXI isn’t in this boat, they have some good people and products. Unfortunately it wouldn’t surprise me.

Sometimes it is best to wave off bad business. Not all deals are good deals, and some of the deals can be downright destabilizing.

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