Ever since Informix Corp pulled off the earnings surprise of 1997 with its fourth quarter profits $0.05 per share, the darkness has receded slightly for the Californian database company, and newly installed CEO Bob Finocchio is full of enthusiasm, albeit tinged with realism, for the company’s future. Speaking at the Hambrecht & Quist technology conference, Finocchio said he refused to subscribe to a view of a saturated database market where everybody who ever needed a database had already bought one; a view which gained momentum earlier this year when many of the big players, including Informix, Oracle Corp and Sybase Inc, hit a simultaneous brick wall. There is too much inventory in the pipeline, he conceded but I don’t think there’s ever been so many seats or Giga bytes of storage being installed as there are right now. And he confidently predicts that Year 2000 work, a factor often blamed by the database industry for stealing away customer’s IT budgets, will expand the future market, as older data sources are opened up. This time last year, Informix was stumbling through a nightmare substantially of its own making. Poor accounting practices, symptomatic across the database industry, combined with a slow down in the general market, forced huge adjustments to Informix’s reported results. The shares dropped almost out of sight, and a de-listing from Nasdaq loomed. But after the pain of re-statement and recrimination came an upbeat end to the year. James Pickrel, analyst at Hambrecht & Quist LLC called Informix’s fourth quarter results, one of the most startling comebacks from one of the most severe falls in the software industry. Against a consensus of estimates predicting huge losses, the company made a five cents per share profit. And Bob Finocchio’s job has certainly become a little easier with the threat of de-listing having receded. But he knows full well what lies in store if his company even pauses for breath. His business strategy now is to try to raise Informix above the low end, commodity sector where Microsoft Corp is giving code away, and where the database engines supporting ERP applications from SAP AG and others are almost invisible. Informix will stay a pure database company, unlike many in this sector, but fighting only for the high end users who need fast, powerful systems. And Informix intends to spend heavily on R&D to defend this position, said Finocchio. Because while the senior management team responsible for Informix’s woes have been swept away, the engineering team has remained intact. But we cannot go back to what we were, we have to change said Finocchio, referring to the old style, multi-year, all you can eat sales contracts so prevalent within the industry. Contracts which prompted aggressive selling, bad accounting, and which ultimately dragged the industry into the dirt. The new US accounting standard on software revenue recognition, SOP 97-2, will fundamentally change the way we do business, he said. It will bring some credible business practices to an industry that badly needs them. Essentially, the new SOP prevents companies from booking revenues early by selling large, up-front licenses. But while Informix reported profits from its fourth quarter, showing good control of expenses, revenues are still way below prior years. Finocchio’s biggest fear now is one of being marginalized. The danger for us is one of drifting into irrelevance. And so we need to grow the top line (revenues) through licenses and services. Although he said Informix would pull up shy of following Oracle’s example and becoming heavily services oriented. Like many others in this industry, Informix is hoping to grow substantially into data warehousing and web content management.
