Informix reels from $140 million loss

CEO Phil While says the company was overzealous in promoting a new database technology and is now paying the price.

Mike Ricciuti Staff writer, CNET News
Mike Ricciuti joined CNET in 1996. He is now CNET News' Boston-based executive editor and east coast bureau chief, serving as department editor for business technology and software covered by CNET News, Reviews, and Download.com. E-mail Mike.
Mike Ricciuti
4 min read
Informix Software's (IFMX) CEO said today the company has been overzealous in promoting a new database design and is now suffering the consequences of the mistake.

The database giant today posted a larger-than-expected first-quarter loss of $140.1 million, or 93 cents a share.

CEO Phil White said in a statement that the surprisingly bad results are "a painful wake-up call" and that steps have already been taken to address management mistakes that contributed to the loss.

One of these management mistakes was a plan to abandon the Informix flagship database software in favor of a new object-relational database technology that White thinks is the future of the company.

Informix had planned to move its customer base from the longtime foundation of its product line, the Online Dynamic Server, to its new Universal Server database introduced just last December. Informix executives now say the move was premature and took the company's attention away from what customers want and are interested in buying. This made revenues drop sharply and contributed to the massive losses announced today.

The company has been trying to trump database market leader Oracle (ORCL) by emphasizing its Universal Server technology over its time-tested Online Dynamic Server. Informix did beat Oracle to market with Universal Server, which can store video, audio, Web pages, and relational data. Oracle 8.0 database, which will include similar features, isn't due to ship until next month.

Last month, Informix's director of database marketing Malcolm Colton told CNET's NEWS.COM that "there's probably no reason [to ship ODS] after the third quarter when we can demonstrate that Universal Server is faster than ODS."

Today, CEO Phil White said that Informix has now abandoned this calendar and will continue marketing three database servers for the foreseeable future: Online Dynamic Server, Universal Server, and Online Extended Parallel Server, a high-end parallel processing database. The earlier plan had called for all three of these to be melded into one product under the Universal Server label, beginning this fall.

"We will keep separate products going forward," White said today. "We had said that the relational business would fold into Universal Server and then the sales folks didn't sell relational [ODS], and that's the core of our business."

That failure to sell the core product resulted in the disastrous results for the quarter ended March 30. Informix reported revenues of $133.7 million, compared with $204 million in revenues for the same period a year ago. Last year, the company also reported $15.9 million in net income or 10 cents a share.

The results were worse than Wall Street analysts had expected. One month ago, Informix management warned that the company would post revenues in the range of $130 million to $145 million for the quarter. Analysts revised their expectations downward, but not nearly enough. A FirstCall consensus estimate issued yesterday predicted that the company would lose only 30 cents a share.

The company said that along with the product marketing missteps, the first quarter was also hurt by the failure to close several large sales. The company also reported declining sales across the board, especially in Europe. European sales plummeted 57 percent compared with its first-quarter results in 1996, while North American sales were off 15 percent, the company said.

The loss was also increased by $30.5 million in write-offs and a $7 million one-time charge related to the purchase of Centerview Software, White noted.

That wasn't the only bad news Informix released today. The company also lost its chief financial officer, Alan Henricks. Henricks had only joined the company in January. No reason was given for his departure, but White said the huge quarterly loss prompted his resignation. "The quarter was a surprise and a shock to me. You can imagine what it was to [Henricks]."

Lastly, shareholders have filed yet another class-action suit against Informix, the sixth since the beginning of April. The latest suit claims that the company made misleading statements about its revenue, and that certain Informix officers and directors sold about 960,000 shares of common stock because they knew things that would hurt the stock's price when made public.

The suit was filed on behalf of investors who bought Informix stock between April 16, 1996, and March 31 of this year.

In response today, the company reiterated changes to its management and organizational structure that it first announced April 1, when it disclosed the quarterly loss. Additionally, Informix said it will downsize operations "that generate inadequate revenues" and trim staff.

White said the company's Japan operation will be the first to be trimmed. "We will downsize Japan to one half of what it is, and will look at other operations," he said. "We have not said which areas will be affected, because we have not told [employees] yet."

But the real switch is Informix's decision to back away from its promotion of the cutting-edge Universal Server. "We got carried away because we felt we had a multiyear lead on Oracle," While said. "Now we're going back to our relational roots."

Oracle is also shifting the emphasis away from object support. Sensing that the market for object-relational database technology is slow to develop, the company will instead trumpet Oracle 8.0's scalability and data distribution features.