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April 9, 1996

MUTANT ALERT! CAN GUPTA REALLY REINVENT ITSELF AS CENTURA?

By CBR Staff Writer

From Software Futures, a sister publication

Nearly two full years of losses, a reputation for poor marketing, and lack of user focus is enough to make any software vendor want to change its name. And that’s exactly what Gupta is doing, rechristening itself Centura Software (CI 2827).

By Clare Haney

Transformations are often painful affairs. There’s the inherent danger that in your rush to embrace new horizons you may end up junking too much of your past, chucking out what’s precious and irretrievable along with the dross. In the case of Menlo Park, California-based client/server low-end database and development tools company Gupta, there’s a good deal of its past that it probably wishes was dead and buried. Take the pain of seven consecutive quarters of losses (Q2, 3 and 4 fiscal 1994 plus the whole of fiscal 1995). On each occasion, without fail, the company solemnly assured the market that its next quarter would be profitable – only to singularly fail to deliver on its promises, time and time again. And how about those ever-present acquisition rumors? Back in 1994 we were talking Oracle. These days, given last April’s $17m cash injection into Gupta by Computer Associates, the Islandia behemoth is potentially in the frame for hoovering up the company. It makes sense if you consider that $7m of CA’s money went into having non-exclusive rights to Gupta’s SQLBase, which it then rebadged as its low-end database offering – OpenIngres/Desktop. With Gupta only valued at $70m, the equivalent of one year’s revenue, and its share price of $5.9 hovering dangerously near its year low of $4.9 compared with a 52-week high of $12.2, the company does look a tad vulnerable. Contrast this, if you will, with the (albeit) overinflated price Powersoft was able to command from Sybase back in December 1994 – a cool $875m, and that was amid the PowerBuilder Can’t Scale debate! Returning to Gupta, factor into this already sorry saga the quitting of the company’s auditor Arthur Andersen (since replaced by Price Waterhouse) towards the end of last year, followed by the obligatory shareholder lawsuit (still preceding) plus a very ill-advised and expensive foray into the single developer tools market with SQLWindows Solo, and rebranding might seem on the surface to be a pretty smart idea.

Call me Centura

Hence the metamorphosis which will see Gupta reborn by the end of this month as Centura Software Corporation. To avoid any confusion, its new name will be immediately followed by the words formerly Gupta Corp in parentheses until we all get the hang of who the hell Centura is (or rather, was). Why Centura you may ask? Well, apart from the implied connotations of entering a new millennium, Centura is also the name of Gupta’s new 32-bit high- end – we’re talking enterprisewide – Windows-based development tools family, half of which is set to ship this month. The Centura product family so far consists of four mainofferings. Centura Team Developer, a component-based application development environment built using the Win32 interface, can be seen as a big brother to Gupta’s existing low-end development tool, SQLWindows (see diagram). It includes support for three-tier architectures, an object compiler and an object repository, as well as a set of pre-built Internet QuickObjects for full access to Net data and services without needing to write any code. However the first release won’t be able to generate OCXs, because Gupta has yet to finalize server generation. Centura Ranger offers bi-directional heterogenous replication, which in Guptaspeak is termed universal replication, aimed at mobile and branch office applications. Centura Web Data Publisher allows organizations to publish data from corporate systems over the Internet or Intranet. Finally Centura Application Server provides application partitioning facilities for Centura apps. Centura Team Developer and Ranger ship this month, while Web Data Publisher and Application Server are expected to be released in Q2 and Q3 respectively. Gupta’s also

bought itself an Internet strategy by licensing the Java language from Sun Microsystems’ JavaSoft division – that’s the standard Sun fee of $250,000, plus a per copy sold charge – and it plans to embed the Java interpreter in a release of Centura Team Developer penciled in for the end of this year. This will enable Centura developers to create client/server apps or Java applets within the same development environment. Gupta is at pains to stress that Centura is not a replacement for SQLWindows – at least, not yet, describing it as a companion product. Centura is purely 32-bit, while SQLWindows is 16-bit, with a few 32-bit features starting to creep in. The next release of SQLWindows, codenamed Cyclone (in your dreams, Gupta!) should appear in the third quarter of this year. It will include a new object compiler (courtesy of Centura), an SAP application generator and revamped QuickObjects, pre-built objects from Gupta designed to enable application developers to get up and running quickly with object technology. And let’s not forget Gupta’s low-end database – SQLBase. A new release, version 6.1, should appear this month, with integrated data replication, new management capabilities and expanded network support, including improved support for TCP/IP networks. Gupta believes that with the release of Centura, the current 60/40 revenue split between SQLBase and SQLWindows, will shift further in favor of its development tools and away from its database. Talking of moving away from databases to tools: by its own admission, Gupta is hoping with the name change and its new tools to emulate Borland’s Delphi-assisted return from the grave. It’s interesting to reflect on the different emphasis these two, in many ways, very similar companies – both with strong technical reputations, both until recently led by charismatic, but not particularly business-oriented, founders and both suffering their fair share of loss making quarters and acquisition rumors – place on branding. On the one hand, Gupta assures us that research among its user base threw up the fact that while there was a very high awareness of its product names, the company name itself didn’t ring many bells for most customers. While on his recent strategy tour, Borland’s chief executive officer Gary Wetsel couldn’t emphasize enough the vital importance of branding, which meant retaining the Borland name at all costs because users were familiar with it. This is perhaps a good time to remember that Gupta’s co-founder, former chief executive officer and chairman, Umang Gupta, remains the company’s largest shareholder, with a 20% stake. While he is set to retire as chairman in May, he’ll still be around as a company consultant and is credited with the whole name change and new tools strategy. Presumably, an interesting scenario could develop if he wished to sell up or if indeed Novell, which owns around 7% of Gupta, decided to offload its shares. The company claims there’s no likelihood of either eventuality occurring. But then it would, wouldn’t it? At the start of this year, Gupta announced that it was making 17% of its 380-strong staff redundant and partly because of this would be taking a $9m restructuring charge in the fourth quarter. Its year-end results have been delayed by nearly a month, due to the company taking on board a new chief financial officer in the shape of Richard Gelhaus, the man responsible for taking SierraOnline public and for facilitating the merger between Spectrum and Holobyte. It claims Gelhaus needs time to get to grips with what’s going on at Gupta. Don’t we all? The previous acting CFO, Richard Heaps, you may remember, was castigated by Arthur Andersen as incompetent. Heaps has since been promoted to vice president of business operations. UK managing director David Port dismisses the whole Andersen farrago as largely a personality conflict. However he does readily admit that Gupta was spending beyond its means. Matt Miller, vice president of marketing at Gupta US agrees. Our costs were dramatically out of line with our revenue growth. In Q

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1 1994 our costs were $26m a quarter, by Q1 1995 they were $16m a quarter. Marketing was never one of Gupta’s strong points, as proved by the disaster that was SQLWindows Solo. At the time we have to admit having our doubts as Umang cheerfully told us that he didn’t expect to make any money on Solo, but it would seed the market as users inevitably scaled up to SQLWindows proper. We thought we’d make a new attack on individual and small developers. Our main focus was to outspend to get a share of the market, explains Miller. The attempt failed. In fact, a few months ago, Gupta quietly withdrew Solo from the superstore racks, although you can still download a free trial version from its Web site. The majority of the January redundancies were of staff involved in Solo marketing efforts. But is Gupta cowed? No way. We’re not the first company to have gone through an extended period of doom and gloom, says Miller, in mitigation. I was at Oracle when we were within a few hours of running out of money. Last year Borland was written off as dead, they cut their costs. They had worse problems than us, their revenues were decreasing, while we still see growth. Our solid core of revenue is not eroding like Borland’s has. Paradox and dBase went off the cliff, Delphi couldn’t replace that revenue that quickly. SQLWindows and SQLBase will provide our core revenue for some time, concludes Miller.

Through thick and thin

The one real thing Gupta – like Borland before it – has going for it is the loyalty of its user base. The company estimates it has more than 100,000 SQLWindows developers at some 20,000 sites, and over a million SQLBase users (although included in this latter figure are deals with other software vendors, such as PeopleSoft). But, as we’ve seen, even its corporate customers don’t necessarily hold out much hope that Gupta will remain an independent entity. In the main, they committed to Gupta’s software when it was the only game in town. Times have changed and the client/server development tools market is a rabidly competitive place. Gupta hasn’t moved fast enough to keep up and is in danger of becoming much more of a follower than a trendsetter. The dark clouds of financial uncertainty still make an initial or increased investment in the company’s software problematic. If, (note if rather than when) the company can make a significant profit, then it could make sense to buy from Gupta. As Miller says, We need to get the market’s attention and the only way we’ll do that is by making a profit.However, we’re not convinced that a name change and a focus on the enterprise and Internet arenas is enough to keep Gupta independent. If anything, it could make it more vulnerable to attack. After all, CA-Centura rolls off the tongue a lot better than CA-Gupta! Mutants and hybrids, being neither one thing or the other, have a notoriously short life cycle before they’re eaten up by something higher up on the food chain. Those Islandia vultures are circling as we speak!

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