Java key to Sybase turnaround

The company is looking to its Java development tool, middleware, and Net technology to boost sagging revenues and differentiate the company.

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
3 min read
Hoping to offset sluggish database server sales, Sybase (SYBS) is looking to its Java development tool, middleware, and Net technology to boost sagging revenues and differentiate the company from a long list of competitors.

This week, the company announced a larger-than-expected fourth-quarter loss, and said it is taking steps to return to profitability by next quarter. Sybase CEO Mitchell Kertzman sees the company's best bets for raising revenue in three specific market areas: technologies to support mobile and occasionally connected users; data warehousing and business intelligence; and Internet computing.

Analysts said Sybase has the technology to do the job. Unfortunately, so do a trio of well-heeled competitors, including Microsoft, which analysts said poses the biggest threat to Sybase, as it moves into direct competition for departmental-sized technology.

To get back in the black, Sybase will have to convince potential customers that it has an edge. "Kertzman is doing the best he can, he's just in the bad situation to be marketing against Microsoft--and in that situation it doesn't matter if you're Hercules," said Esther Schreiber, an analyst with Credit Suisse First Boston.

Sybase--like competitors Oracle and Informix Software--has been hit hard by an industry-wide slowdown in database server sales. As part of this week's earnings announcement, Sybase disclosed that its software license revenue dipped by 19 percent for the quarter, and by 30 percent vs. the previous year.

Software company executives, including Kertzman, blame the slowdown on a range of issues, from the saturation of the high-margin online transaction processing market, which fueled the record growth of database companies over the past decade, to the ubiquitous millennium bug which is diverting limited IS budgets away from new software purchases.

Kertzman is counting on the company's three-pronged scheme to help to grow software license revenues from roughly 50 percent of the company's overall revenues to 60 percent.

But Sybase finds itself competing for IS dollars against much richer competitors with very similar agendas.

Oracle and Microsoft are closing in on Sybase's mobile and embedded systems business. Oracle is intensifying marketing efforts behind its Oracle Lite database and replication tools. And Microsoft plans to ship a mobile computing-enabled version of its upcoming SQL Server database with better replication abilities than current offerings.

On the data warehousing side, IBM and Oracle, along with a slew of specialty software competitors, are crowding in. Even Microsoft is getting into the act by partnering with data warehousing software companies and by launching tools to make building data warehouses easier.

And on the Internet computing front, all major software makers are in the game, and untold numbers of start-ups are filling in the voids with specialty products.

Sybase does have an ace or two up its sleeve: The company has a large and well-established hold on the financial services business. But as Microsoft's Windows NT eats into Unix's hegemony on Wall Street, even that could change in a hurry.

And Sybase's PowerBuilder development tool is still a favorite among corporate developers. "PowerBuilder is the only part of the business that is doing well," Schreiber said. However, Web-based development may displace PowerBuilder in the long run. Overall, tools, "is a bad business [in terms of margins and growth]," Schreiber said.

To catch the Web wave, Sybase is intensifying its marketing around Java-based development tools, middleware, and database software. The Java strategy could also help Sybase differentiate itself from Microsoft, which downplays Java's role in enterprise computing in favor of its ActiveX technologies.

Sybase is in the process of rolling out a soup-to-nuts Java lineup, including its Jaguar CTS component transaction server, PowerJ development tool, and JConnect for JDBC Java-based middleware.

The lineup has been well received by customers and garnered high marks from technology analysts. But the question remains, why choose Sybase?

Sybase executives say the answer is that the company has the best combination of end-to-end technologies, support for Java and ActiveX, along with a strong services arm.

To have a chance of competing against Microsoft, Sybase has to improve its reputation for powerful, but difficult to use software. "Sybase has always marketed to a technical audience," Schreiber said.

Critics point to a muddled marketing message that fails to adequately emphasize the company's strengths, such as its middleware--Sybase is a market leader in database connectivity middleware--and development tools.

And rumors continue to swirl that the company is on the block. Kertzman has attempted to find a buyer for the company, to no avail, sources said.