It might be assumed that the business of hooking personal computers up to corporate servers would be a highly lucrative part of the software industry. Not so – at least, for connectivity software vendor NetManage Inc. It has recently been swimming in red ink and making sweeping cuts to its headcount. In July, it moved to tackle some of its woes with the acquisition of one smaller rival, NetSoft (CI No 3,199), and made very quick work of completing the formalities within the same month (CI No 3,215). The purchase was intended to enable NetManage to broaden its horizon beyond its traditional base of PC-to-Unix and PC-to- mainframe connectivity, and to play in the less crowded market of IBM AS/400 connectivity. The $26m cash buy-out gives NetManage NetSoft’s flagship product, NS/Router, a communications package that allows PCs to hook into AS/400s via terminal emulation.
But that move alone will not solve NetManage’s problems. The company shed almost 30% of its employees in 1996, finishing the year with net losses of $6m. And in June, it announced plans to trim less strategic products from its portfolio, including a number of Macintosh connectivity products which it originally bought from Apple, and which it now hopes to sell back to its beleaguered Cupertino, California-based neighbor. So far. the medicine has yet to start working. A net loss of $4.5m in the second quarter ending 30 June was accompanied by a revenues plunge of 53% to $12.7m. That performance is certainly out of sync with the connectivity market as a whole. IDC says PC-to- mainframe and PC-to-Unix software demand is likely to grow at 30% compound over the next four years. A month after the figures were posted, Netmanage’s chief financial officer, Walter Amaral, resigned to pursue other opportunities. With his resignation effective almost immediately, the company set about searching for a replacement, which it hopes to name soon. At least, the take- over of privately-held NetSoft will add a $30m revenue stream to NetManage’s top line.