View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Technology
May 2, 1997updated 05 Sep 2016 12:36pm


By CBR Staff Writer

I have never seen everything collapse at once as it did that last week of Q1, a subdued Phil White, CEO of traumatized database vendor Informix Software Inc, told analysts in yesterday’s teleconference as he finally revealing the extent of the firm’s cock-up last quarter. We have to make sure we never have another surprise like that again. There are a number of things that went wrong for Informix, but White sums it up thus: I like nothing more than to beat the hell out of Oracle [Corp]. But we screwed it up. And how.

By Gary Flood

It seems that White’s stubborn determination to beat Larry Ellison to the punch with a next-generation object-relational database may have seriously wounded his company in the process. The company saw a 34% revenue fall for the first three months year on year, from $204.0m to $133.7m, with net loss of $140.1m after one-time charges of $37.5m, compared to net profit of $16m for the first three months of 1996. The charges include $30.5m related to the write-off of good will and other long-term assets (including charges related to its restructuring of its troubled Japanese operation, whose head quit in January) and $7.0m to do with the purchase in the quarter of Centerview Software. North American sales fell 15%, to $69.1m, but that looks good compared to a disastrous 57% drop in what has always been Informix’s stronghold, Europe, which slumped from $84.8m to only $36.5m. Intercontinental declined 26%, to $28.1m. What money Informix did make this past quarter was mainly in services, for the first time this decade almost as much as in licenses – $71.7m versus $62m, compared to $152m and $53m licenses same period in 1996.

What happened?

So where Wall St had been expecting 30 cents a share loss, White gave it 93 cents a share instead. What happened? One has to wonder whether White egged on his developers and marketeers too much, urging them to give him something to prove he was ahead of Oracle almost for the sake of it. But what was so compelling as a value proposition in the product he was so proud of bringing to market? Techno-flash reasons very much aside, why buy it instead of the other Informix products? There’s the fact that Universal Server, the combined Informix relational and Illustra object- relational product, at $2,500 per seat is a hefty $1,000 higher than the existing Online Dynamic Server relational database offering. Plus, it only runs on two Unixes (Sun Microsystems Inc’s and Silicon Graphics Inc’s) and has no NT story whatsoever. Worryingly, NT seems to have completely escaped executive attention at Menlo Park – Gartner Group figures for last year suggest Informix sold about seven times less NT database product than Oracle, $23m as opposed to $153m – and NT is an increasingly important box to be able to tick in both the indirect channel, always a vital selling arm for this company, and in Japan, where Informix seems to have stumbled very badly. There is no question that this has been a painful wake-up call, but we’re confident current initiatives will ultimately put us back on the right course, said White in a prepared statement. In his Q&A with analysts, he expanded this verdict: Did we concentrate on our next-generation technology too much? I guess. Does everyone need Universal Server? Not yet. Is our core market strong and interested in migration to this new product? You bet. White says that 40% of Informix’s sales force are newbies, who became bedazzled by their bosses’ telling them all about how great Universal Server was, but who then neglected them to tell them to migrate to this brilliant future they had to persuade customers buy the existing products! Sales force shortcomings are generally getting a good deal of the blame – blame that one has to ask should really be laid at the company vision. How did a 17-year old corporation like Informix let itself get dependent on a handful of megadeals to save the quarter, which died gasping when the customers failed to cut the checks? How did a near-billion dollar company fail to see t

he gaps in its sales pipeline?

Brain-damaged tool strategy

Content from our partners
Unlocking growth through hybrid cloud: 5 key takeaways
How businesses can safeguard themselves on the cyber frontline
How hackers’ tactics are evolving in an increasingly complex landscape

How did it concentrate all marketing attention on Universal Server without managing to sort out its still brain-damaged tool strategy (how true it is to pronounce the Informix homebrewed tool, NewEra, as ‘NewError’), so that it was expecting customers to buy a more expensive product than the one they had, and for which there was no easy way to build applications to utilise it? And will we really let Ken Coulter, promoted only last November to executive vice president of worldwide field operations from senior vice president for international, get away with telling bemused New York analysts that the reason Europe did so badly was the Easter holiday and the annual CeBIT technology fair in Germany? Informix has also helplessly confused us all with how many databases it has – Illustra, at least one more version of which is due; ODS (Online Dynamic Server); its parallel version, XPS; Informix-SE, the low-end database it still supports; workgroup server and single-user versions of some or all of these; and Universal Server itself. It has even more confused us as to when there will be a single common code stream, when it will stop supporting ODS, et cetera et cetera.

Sales force realignments

So how will all this get fixed? Expect headcount reductions and other cut backs next quarter, which means more losses – White does not expect a return to profitability before the end of 1997 at least. More seriously, expect him to have to find some friendly bankers, as his cash pile is seriously diminished – down to $120.6m, from $261m at the end of 1996. There have been some sales force realignments; North American sales and the channels and partners group are now all under one sales force under Martin Brauns, who has replaced Ron Alvarez as VP North American sales; consulting, training and the advanced technology group have been brought back into the sales organisation; industry marketing and data warehouse marketing are to be under the eye of Steve Sommer, VP of enterprise solutions; customer service and product marketing have been put under Mike Saranga, senior VP product management and development; and Jeff Hudson, VP of business development, will focus on Universal Server. In addition, Alan Hendricks, who only became chief financial officer at the start of the year, has done the noble thing and resigned: Clearly none of us were expecting a reversal of fortune of this magnitude and, coming so soon after Alan joined, I can understand his decision, White commented. The share price flopped around for a while to slump back exhausted at just over $7, a tad down from its 52-week high of over $31. And then the very last thing White wanted duly happened – yet another class action suit, the sixth that we know about since April 1.

A mess

Like its predecessors, this suit focuses on what it alleges are problems to do with Informix’s interpretation of revenue recognition policies, citing inconsistent ways of recognizing revenue on sales and shipments with its stated revenue recognition policy, inflating revenues by $55m through undisclosed barter arrangements, and claiming revenues would continue to increase rapidly when the company knew that there were already excess products within its distribution channels. Truly, truly a mess. If only White had stuck to what was working, and not over-focused on trying to become Oracle, he wouldn’t have had to face all this. As he himself put it, the message that VARs and customers and partners liked – that at the end of the day Informix could deliver better scalable and high-performance systems than the other guys – was needlessly jettisoned; the company hasn’t released a single TPC-C or TPC-D benchmark result for a whole year. When White listened to whatever inner voice told him in late 1995 he was right to pay $400m for a semi-start- up like Illustra Technologies Inc that was making about $5m in sales, and that this was the way to wipe the smirk off Ellison’s face, he should have told his inner voice: Nah – let’s stick to our knitting instead. It’s probably best all round to let poor Informix lick its wounds for the rest of the year and sort out its myriad confusions, from which it will undoubtedly emerge a stronger, sadder, and wiser enterprise. Wake up call, Phil? Right – my alarm is miked up to Metallica’s PA, too.


Websites in our network
Select and enter your corporate email address Tech Monitor's research, insight and analysis examines the frontiers of digital transformation to help tech leaders navigate the future. Our Changelog newsletter delivers our best work to your inbox every week.
  • CIO
  • CTO
  • CISO
  • CSO
  • CFO
  • CDO
  • CEO
  • Architect Founder
  • MD
  • Director
  • Manager
  • Other
Visit our privacy policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.