Mounting losses, executive departures, and layoffs announced this week by four computer industry stalwarts are the latest symptoms of an increasingly competitive marketplace striving to cope with new Internet technologies, according to financial analysts watching the progression of press releases with growing dismay.
Jerry Michalski, managing editor of the widely followed industry newsletter Release 1.0 attributed the current financial turmoil to the Internet's rapid rise. "Many companies had to adapt to the new environment...because of the nontraditional business environment. It's unclear where they're going to get revenue, so it's going to affect revenue streams on more companies than just these four. The question is, just how much is there room for major players in these various markets? There are going to be some casualties."
Digital, citing the unacceptable performance of its personal computer division, said it will take a $475 million charge against its fourth quarter earnings. The company will also lay off about 7,000 employees worldwide over the next 12 months. And yesterday, Enrico Pesatori, president and general manager of the company's computer systems division, resigned in a move widely interpreted as Pestori becoming the fall guy for Digital CEO Robert Palmer.
Today, Borland announced the resignation of its CEO Gary Wetsel, and said it expects to lose between 53 and 56 cents per share for its fiscal first quarter, due in large part to sagging sales of its Delphi development tool in the face of a competitive from Microsoft in the development tools market. Sales of the company's popular Delphi development tool were hurt by Microsoft's offer of a competitive upgrade price to Delphi users if they would switch to the Visual Basic tool.
But the company can't blame it all on Microsoft: Borland is also tardy with a new Internet and Java-based product lineup that might have recouped some of the Delphi shortfall.
Sybase said today that it expects to lose $20 million in its fiscal second quarter ended June 30. The company has long been the number-two player in the database market but has been consistently losing market share both to market leader Oracle and number-three Informix Software.
Sybase in the next few weeks will lay off 600 to 700 employees, and is expected to sell off or eliminate some peripheral product lines, according to company officials. The company will attempt to refocus its business on its core database, development tool, and middleware product lines.
And Adobe, which last week reported that its earnings for the most recent quarter dropped to 44 cents per share from 50 cents one year ago, announced the resignation of its first and so-far only chief financial officer, M. Bruce Nakao. The loss was attributed in good measure to Adobe's association with Apple Computer, whose profound financial problems have made front-page headlines for the past two quarters. But the company also announced its "Internet strategy" only this past quarter, long after most companies had cast their directions.
Of course, many of those strategies were half-formed and superficial. But the intense interest in Internet technologies has meant that every company is expected to say something about its Internet plans. Some observers say this kind of gold rush mentality is confusing customers, as a slew of small companies flood the market with new products.
"There is so much change happening all at once that buyers are confused," said Judith Hurwitz, president of The Hurwitz Group. "Buyers are not as comfortable with these new technologies, and can't follow the same rules as before. That makes the risk of technology selection, and choosing the wrong technology, much greater."
Hurwitz adds that the news is not all gloom. Despite poor results, Borland and Sybase have new, and one can presume innovative technology in the works, and she predicts that they should fare well against competitors, despite this quarter's problems. Also, despite a sagging PC business, Digital's AltaVista Internet search technology appears to be a huge success for the company and if previously announced plans to commercialize the technology take off, could help the company regain its reputation as a technology leader.