The Sunnyvale, California-based company reported sales of $17.6 million, up from $16.3 million in the prior quarter but down 17% from $21.3 million in the year-ago period. The company is yet to break into the red, and posted a net loss of $533,000. That is much improved on the previous quarter’s net loss of $2.1 million, but a little worse than the year-ago net loss of $430,000.
Vitria is in turnaround mode after things fell apart during the tenure of the previous CEO, Gary Velasquez. Mr Velasquez was named CEO in May 2003 when then-CEO JoMei Chang stepped up to the chairman’s role. But things came to a head for Mr Velasquez within a year, after the company posted sales for the first quarter of 2004 of $14.2 million, down 37% from the year-ago period. Mr Velasquez left shortly after to pursue other opportunities.
The man who co-founded Vitria in 1994, Dale Skeen, was made interim CEO in April 2004 while the company looked for a replacement, but it recently announced that Mr Skeen is staying in the post for the foreseeable future.
For that reason, these latest results are important because they give an idea of whether Mr Skeen looks capable of getting the company back on track. The performance so far is encouraging rather than stellar. Sales are up about 8% sequentially and the net loss is far more acceptable, at about $0.5 million compared to a net loss of $2.1 million in the previous quarter. But it is still a loss. On a conference call after these latest results were announced, Mr Skeen said: the execution across the company is improving.
One thing the company can’t be accused of is poor liquidity: cash and short-term investments came to $78.6 million. But the cash position also serves to show just how much work the company still has to do to placate its shareholders, since its market capitalization, at $130.5 million, is a low multiple considering that $80 million cash stockpile. It is also a multiple unlikely to change very much until the net loss turns into regular net income figures.
It remains something of a mystery why Vitria lost such momentum. In 2001, it made full-year sales of $135 million, but since then it seems to have struggled while the competition in the integration and business process management market has made hay. SeeBeyond reported sales of $45.8 million in its latest quarter, webMethods posted $55 million and integration giant Tibco made $125.7 million. Vitria was one of the first companies – if not the first – to talk about business process management and its potential benefits in driving down complexity and increasing business efficiency, yet it is finding it hard to find consistent growth or profit despite the market itself growing.
Perhaps the problems are largely those of execution, but it surely hasn’t helped that the company has been happy to change its spots to position itself for the latest wave of hype. In 1997 it talked about business-in-realtime solutions, in 1998 it was an enterprise application integration company, by 1999 it had become an ebusiness platform provider, and in 2000 changed again, this time to business process integration products and solutions which it has kept to this day. It has not presented a consistent message.
The company must hope that the increased interest in business process integration will play to its natural strengths, and that with its co-founder once more at the helm, it will see a return to better times. But it needs to start posting profits if the investor and analyst communities are to take it as seriously as its technology appears to warrant.
