Breakthrough storage software business booming

LAFAYETTE – Breakthrough Systems Inc., a Lafayette-based provider of firmware and software for the storage industry, has seen a huge boost in its business as a result of its recent partnership with Intel Corp. Breakthrough has joined the Intel Storage Community to bring new storage capabilities to Intel?s offerings.
For Breakthrough, it means exposure to more and larger customers. ?Our partnership with Intel has brought us into deals that were huge for a company our size,? said John LoPorto, Breakthrough?s chief executive officer. LoPorto said they wouldn?t have been able to win some of their new business without Intel.

Breakthrough provides the software that makes storage devices work on the chip level. In doing so, they provide a buy versus build alternative to the storage industry. In years past, standard industry practice was to build a new storage ?widget,? which then required recoding of the whole standards-based layer, involving typically 100,000 to 300,000 lines of code that could take up to 18 months to write. Breakthrough can provide those standards in 30 days, providing a dramatic competitive advantage because it drastically reduces the time to market.

Breakthrough is the first to do this for the storage industry, and is working to change industry standard practices. Now that there is an option to buy semicustom firmware, LoPorto said it doesn?t make sense for companies to keep recreating it. ?Our products make the development of storage architecture faster and cheaper,? he said.

In business for more than 12 years, Breakthrough has changed considerably since its inception.

Originally, the company was more involved in contract engineering. The company acquired a large intellectual property portfolio that allows them to work across the spectrum of storage standards. Breakthrough no longer does contract engineering, but has switched to an ?off-the-shelf product? that translates to a much higher margin business model, LoPorto said.

For the first time, Breakthrough is pursuing outside capital. Up until this point, the company has been completely self-funded. The funding will be used to support sales and marketing initiatives as well as relationships. LoPorto declined to disclose the amount of funding they are seeking or company revenues since they are still in the planning stages of the funding initiative. Breakthrough has just secured an investment bank and plans to become aggressive with the funding initiative in the first quarter of 2007.

According to LoPorto, the biggest challenge facing Breakthrough is increasing pressure for growth. He wants to be sure to focus the company on growing responsibly and not overextending itself. Before the company makes any significant investment in hiring or expanding its facilities, he wants to be sure they have solid revenues lined up. LoPorto believes the Intel partnership will provide a significant step in that direction.

?We are expecting the Intel deal to at least double or triple our top line with a similar ripple-down effect on our bottom line,? LoPorto said. ?We?re able to sell the same code again and again within the same market.?

As the company?s revenue grows, so will its size. LoPorto predicts the company will double, in large part to support the Intel relationship. Breakthrough currently employs 12 people, and LoPorto is looking to do some aggressive hiring in the first quarter of 2007. He said the company will also be looking for new space in the second quarter of 2007, but intend to stay in Boulder County.

?The talent pool here is part of our strength,? LoPorto said. ?Customers love the fact that we?re located here. It is truly a cross section of the whole industry.?

LoPorto describes the company?s customers as blue chip players who have bought from Breakthrough for two to three generations of its product. ?Fortune 100 customers buy our products again and again and again,? he said. ?Our biggest strength is our references.?

Breakthrough?s customers include QLogic, Seagate, Quantum, Iomega and several others.

LoPorto predicts Intel will change the way the storage space industry does business just as it has impacted the hardware and PC market. ?Intel has the ability to dominate any market it goes into,? LoPorto said. ?We are thrilled to be riding their coattails.?

?We are ubiquitous across the storage industry; our boat rises and falls with the industry,? said LoPorto.

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