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FileMaker eyes bigger clients, spruced-up image

Database company FileMaker is finally emerging from Apple's shadow and is now setting its sights on bigger targets--larger clients and a spruced-up image.

    FileMaker is finally emerging from Apple's shadow and is now setting its sights on bigger targets--larger clients and a spruced-up image.

    Some speculate that an initial public offering also is a possibility for the database maker.

    But before FileMaker can reach its lofty goals, the company--formerly called Claris--has to clear up some public relations potholes, some observers say.

    "They have massive customer-relations problems," warned one software developer, who asked not to be named.

    The problem stems from a growing number of developers and customers who are upset by some new pricing policies, as well as policies that limit the use of add-on software that extends the functionality of FileMaker's database program.

    But the complaints so far have not slowed the company's momentum. It has worked for the last year under parent company Apple Computer, all the while building its customer base and revenues by selling to smaller groups of users. Now the company aims to lure bigger fish--those that might otherwise go with products from database rivals such as Oracle, Sybase, Informix, and even Microsoft.

    The company has been going strong since the early 1990s. In 1998, Claris, as it then was called, reorganized. The reborn FileMaker took the name of its main product that remained after all the other Mac-related software went back under Apple's direct control.

    FileMaker has made a profit every quarter for seven years running. It had $85 million in sales for its first full fiscal year since the reorganization. According to FileMaker, operating profit margins are at 20 percent, meaning the company made about $17 million (pre-tax) for parent company Apple. That's a drop in the bucket for Apple, which had net earnings of $601 million for fiscal 1999, but earnings and revenue are moving upward at a healthy rate, FileMaker executives said.

    Last month, the company revamped its product line, releasing a new version of FileMaker Pro 5, its flagship product. The firm is also set to spruce up its image. A $4 million ad campaign, which is about twice the company's normal yearly ad budget, is appearing in publications such as Fast Company, Business Week, Wired, and Business 2.0.

    If successful, the new products and revamped image could pave the way for Apple to spin the company off and take FileMaker public, although there don't appear to be any immediate plans to do so.

    Hitting a pothole?
    But before FileMaker can get any bigger, it may have to deal with making sure its current customers stay in the fold. Among the issues that are riling developers and end users: Restrictions in the licensing agreement effectively prevent developers from using FileMaker Pro 5 with software that links to Web-based applications from third-party vendors that add e-commerce capabilities, among other uses. The previous version had no such restriction.

    Another drawback, according to sources: Pro 5 limits the number of separate computers that connect to the database to 10 during a 12-hour period. Pro 5 Unlimited, which doesn't have this restriction, isn't out yet. Many users are complaining in postings on user group sites about how they are going to have to upgrade to the $1,000 version of FileMaker's product to get the same capabilities they had before.

    Responding to the complaints, FileMaker president Dominique Goupil said it's a matter of technology. The company couldn't justify keeping the same prices when considering that Extensible Markup Language (XML) and other technologies are included in the product, technologies that are needed for the more upscale applications.

    The new products compare favorably to others with similar features, he said, but when users compare that to the previous product's price of $199, "People will be disappointed," he acknowledged. Still, "we needed to adjust our business model accordingly," Goupil said.

    He may have to adjust again. One source said he knows of a number of customers who are in the process of switching to products from other database makers. Some are already swooping in to take advantage of the discontent: A company called ACI US is offering its database software to FileMaker users for $99 and claims it is already seeing "overwhelming demand."

    FileMaker moves upward
    But despite the complaints, FileMaker looks to keep its momentum going. The company reworked its licensing plan so that more customers would need to buy the $1,000 version of its software that allows for unlimited users--which is a near requirement for companies hoping to use to tie their databases to the Web.

    The company also has been increasing its focus on selling so-called seat licenses to large offices, so that the company is less dependent on software upgrade cycles by getting a more consistent revenue stream, said Carl Olofson, an analyst with International Data Corporation. In August, the company signed a 15,000-seat license with the National Institutes of Health to go with licenses already purchased from FileMaker, one of its largest such deals.

    FileMaker's clear intention is to move out of the small workgroup setting they are popular in and up into large corporate accounts, Olofson said. However, "The competitive waters are full of sharks as they move into this territory," he said.

    One reason to take the company public would be to finance new product development and marketing on a level that's more on par with what its competitors are doing.

    For instance, although Goupil wants to keep FileMaker focused on database software, he does say there are some interesting trends that will provide opportunities for expansion. The proliferation of devices such as handheld computers and cell phones is one area of interest he said, without elaborating.

    It's an area already of interest to database heavyweights Oracle and IBM, who are both planning on offering products that will allow laptop, handheld PC, and cell phone users to easily replicate and synchronize data with corporate databases. All will have to contend against products from Sybase that are already on the market.

    While talk of spinning FileMaker off or even selling it outright to another company, such as Oracle, have persisted ever since last year's reorganization, company executives say there are no such plans currently in the works.

    "Right now there is no plan on changing the structure of the relationship [with Apple]," said Goupil. "Things are working really well. There are some benefits of being in the Apple environment, such as having our products featured in the Apple [online] Store," he noted.

    In any case, the database market is big enough for FileMaker to find plenty of new business, Goupil said. He cited a GartnerGroup study saying that by 2003, 80 percent of all information technology (IT) work will be done outside of a company's central IT department. In this environment, Goupil said there will be opportunities to replace larger databases from the likes of Oracle, while gaining entr?e into places where huge databases aren't required.