By Gary Flood
Smalltalk programming environment vendor Parcplace-Digitalk, in a bid to stop its 1996 downturn accelerating into a tailspin, has canned all further work on the Digitalk Visual Smalltalk Enterprise (VSE) product. The financially troubled operation has placed an open letter to our friends and customers on its Web site, outlining the reasons for the decision. The news comes after a series of poor quarters and headcount reductions: the company’s share price has slipped from over $14 at its 52-week peak to a very weak pulse-beat of $1.75 as we were going to press.Parcplace, founded by Xerox Palo Alto Research Center luminary and Smalltalk co-developer Adele Goldberg, started life as a Xerox spin-off ten years ago. After six years of burning a lot of venture capital the company had a well-received IPO in 1994, enjoyed a brief spell of profitability during the short period object languages other than C++ were being actively considered by the Fortune 500, then started dipped into the red again after the $3m acquisition of fellow Smalltalk development environment player Digitalk, at the end of July 1995. VisualWorks – a cross-platform application development environment – was targeted to Cobol developers put off by C++’s complexity. But the independent Smalltalk vendors enjoyed an all too brief place in the sun before being threatened by IBM’s move into the market, and the wholly unexpected eclipse of familiar enemy C++ by the upstart Java. The open letter claims that Parcplace-Digitalk’s good news is based around the fact that its core competencies are in objects, components, CORBA, and distributed computing, and thus The market has finally caught up with our technology. The bad news is that license revenues in the United States have slowed due to a pause in demand as companies try and digest Intranets and Java. Is Java better than Smalltalk? No, but it doesn’t matter. Java is perceived by many as good enough, laments the company. The rival language’s broad acceptance, mindshare and momentum have had a negative impact on our business this past quarter. Parcplace-Digitalk’s fiscal 1997 ends at the end of March, and it’s unlikely to be too cheerful a set of results. The company has lost over $28m so far this financial, compared to $10.4m net loss on revenue up 11% to $49.6m for 1996, after $5.1m merger costs from the Digitalk combination. In the first half it lost $10.7m on revenues of $21.3m; for its third quarter, with sales down 40%, from $13.6m to $8.1m year-on-year, its net loss was $6.9m, comparing unfavorably to a net profit last time of $0.1m. The losses included charges from the Objectshare buyout of Smalltalk and Java software house Objectshare last July, and $400,000 set aside for a pending class action suit settlement, due to be approved by the court next month. To pare back expenses and return to profitability the company reduced headcount by 20% (to 190) in the last quarter, centralizing all engineering efforts in its Sunnyvale office, in the process closing an Austin lab and refocusing efforts at two other facilities at Santa Ana and Portland. Apart from new revs of the core products, the company is also hard at work on an integrated distributed computing effort incorporating technology from existing software, and is also a VisualWorks add-on that will allow coding in Java. All this spares no room for the Digitalk product, which will not be given any further development dollars, though it will be supported (though the company next says it is in fact looking to see if third-party support may be an option). The Jigsaw product to bring the VSE client and VisualWorks server software streams together has been canceled, though some of the already-developed code will be cannibalized for other projects. The news prompted one of Digitalk’s former international distributors, London based Smalltalk application developer The Bloomsbury Software Co Ltd, to say I told you so: the company’s managing director Peter Day says his company believed at the time the merger was more like a takeover by ParcPlace, and Bloomsbury always thought the demands of combining the two products would be technically very difficult. The company therefore ceased its agreement with Digitalk then, becoming a supplier of Smalltalk rival IBM Corp’s VisualAge Smalltalk. Where ParcPlace is hoping to persuade Digitalk users to migrate to VisualWorks, Bloomsbury maintains a move to IBM’s VisualAge would be far simpler, claiming that although the front end visual code is different, the underlying Smalltalk is the same. Day also claims IBM has been having no problems convincing customers to buy Smalltalk, implying Parcplace-Digitalk’s problems are not primarily stemming from the putative Java FUD factor. Fear, uncertainty and doubt certainly stalk the halls at Parcplace- Digitalk at the moment, no matter where the cause really lies.