By Eric Fetters

Herald Writer

BOTHELL — Vixel Corp, which specializes in storage networking technology, is selling its software division for up to $10 million and reorganizing its remaining operations to cut expenses.

Between the software group sale to Fujitsu Softek and the reorganization, Bothell-based Vixel went from 155 employees to 100 as of Monday.

About 30 of the 55 leaving the company worked in the software group and may be hired by Fujitsu Softek, which is setting up its own local office.

The sale raises money for Vixel and helps it focus exclusively on storage network hardware, company officials said.

"By aligning our operations to support our new business model, we believe we have taken a significant step forward toward our goal of becoming profitable," Jim McCluney, Vixel’s president and chief executive officer, said in a statement Monday.

Fujitsu Softek — more formally called Fujitsu Software Technology Corp. — is buying the company’s software product, SAN InSite, along with associated intellectual property and development resources.

Under the agreement signed last week and announced on Monday, Vixel will receive cash payments of $5 million and up to an additional $5 million over the next four years from sales of Fujitsu Softek software based on SAN InSite.

The transaction is expected to be completed later this month, according to Vixel.

In addition to the money raised from the software group’s sale, Vixel is reducing its operating expenses by 20 percent compared to last year, said Kurt Adams, chief financial officer. For 2001, the company reported a net loss of $21.9 million, following a loss of $23.6 million in 2000. Cash and investments at the end of 2001 totaled $26.0 million.

Before buying Vixel’s software group, Fujitsu Softek, based in Sunnyvale, Calif., already was building the SAN InSite software into the storage area network packages it sold.

Adams said it was a disadvantage for Vixel to own the software to manage only part of a storage area network.

"When people go out for storage network management software, they want the programs to manage it all now," Adams said.

Vixel now will focus on markets for its embedded storage switch and other hardware for storage area networks, which are used for efficient storage and backup of computer data.

This is not the first time Vixel has refocused after changes in the tech market. The company originally was launched in 1991 as a maker of optical transceivers used in fiber-optic networks. During recent years, the company got out of that business and began ratcheting up production of its storage network switches.

After Monday’s announcement, Vixel’s stock, which has traded as high as $5.10 during the past year, closed at $3.80, down 2 percent from Friday’s close.

You can call Herald Writer Eric Fetters at 425-339-3453 or send e-mail to fetters@heraldnet.com.