June 18, 2002 5:30 AM PDT

Novell exec's start-up goes bust

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Tilion, a business software company founded by Novell's No. 2 executive, has ceased operations.

Tilion, a start-up builder of business software to simplify supply chains, laid off 20 of its remaining 28 employees last week and is looking to use its large hoard of cash to coax a possible deal with another company, according to Peter Shields, Tilion's president and chief executive.

Novell Vice Chairman Chris Stone left Tilion this year for his second tour of duty. Stone founded Tilion in early 2000 and ran it until his return to Novell.

The timing of Stone's return to Novell was thought to be independent of the performance of Tilion, but Novell's No. 2 executive said such start-ups could not survive in the current depressed technology climate.

"There is a skeleton crew of people that will work out a merger with another company," Stone said in response to an e-mail request for comment. "Supply chain start-ups hit a wall and need to merge to survive."

Tilion had raised $46.5 million in two rounds of venture funding, according to the company's Web site.

A former employee who requested anonymity said he was taken aback when Stone left and knew the end was near. "One day (Stone) was gone and instead, a group of investors we had never met showed up and told us Chris Stone was leaving Tilion to go back to Novell," the former employee said. "You should have seen the faces drop. I was furious."

Stone is still listed as the Chairman of the Board on Tilion's Web site.

Stone has moved swiftly to shore up a faltering Novell since his return, plucking software development tool provider SilverStream Software last week.

At the time of his departure from Tilion, Stone said the company remained well-positioned and had a large chunk of cash left in the bank from its rounds of venture funding. The start-up does have "in excess of $15 million" remaining in its coffers, according to Shields.

"We're aggressively looking for a combination opportunity," Shields said in an interview Monday. "At the same time we're going to reduce the staff to a core group of people."

Shields, the chief financial officer, and six engineers remain at the company, Shields said.

Shields said Tilion was founded on the premise that Application Service Providers, or ASPs, a once-hot niche, and Extensible Markup Language, or XML, an emerging Web programming language, would be pervasive in corporations by now.

"Those two things haven't happened," Shields said. "We're still here, the doors are open, and we're looking for a good opportunity."

 

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