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Informix CEO: We won?t go broke

Bob Finocchio details his plans to make the ailing company a more viable competitor in the database software business.

Bob Finocchio has faced more

Bob Finocchio
Bob Finocchio
difficult business decisions in his first 100 days than most CEOs make in an entire career.

Finocchio, former president of 3Com (COMS), took over as president and CEO of Informix Software (IFMX) in July amid financial turmoil, management shakeups, and product-marketing snafus. Last week, Informix restated financial results for its last 14 quarters and announced a product reorganization intended to turn the company around and make it a more viable competitor in the database software business. NEWS.COM's East Coast bureau chief Mike Ricciuti asked Finocchio to detail his plans for the turnaround:

NEWS.COM: How do you address concerns about Informix's financial health? And what do you tell your customer base, now that Oracle (ORCL) and others are offering them large incentives to switch to their products?
Finocchio: There should be no doubt about our financial health. We have great products and we are relatively close to breaking even. A few more orders, and we will break even. I'm not aware of losing any business to Oracle. The reality is that we won?t go broke. We have plenty of money and we have better products than Oracle.

Informix restated revenues

Besides the product reorganization, what else have you done to strengthen the company?
In sales, we have brought in lots of new leadership. We've promoted internal people in Europe, Asia/Pacific, and in Latin America. And we have streamlined the field organization--we had too many people helping sales people, for instance. And, we need to build a channel, even in our traditional areas, like Unix. And on Windows NT. We really took our eye off the ball there. We need to be in the midst of NT.

Given the company's financial difficulties, will Informix cut its research and development spending?
We will maintain R&D at current levels. We have left that intact. This is not a time for us to retreat and live off of the installed base. We'll maintain the same number of people, but R&D is more focused now. We'll leverage our investment in our server architecture and in other areas. But the total we spend will remain the same. We've adjusted the knobs without changing the total. Work on development tools will make up a smaller percentage of R&D spending. We will partner with tools vendors, like Microsoft (MSFT), Sybase (SYBS), and others. Overall, we will be spending less there. Core R&D spending is in the database business.

Is Informix planning to enter the market for middleware? Competitors like Oracle, Sybase, and IBM (IBM) are well-established in this market, and analysts identify products like application servers as one of the hottest new product areas for database vendors.
There are already some well-established players in the middleware space. BEA Systems (BEAS), Tibco, Microsoft, and others. What you will see us do is to partner with those vendors, and tie our database software to their middleware. That's a part of our overall strategy. What Oracle is doing is trying to push Microsoft and Windows out. Our strategy is to partner with Microsoft. To the extent that we can work with Microsoft is to our benefit--let Larry [Ellison, Oracle CEO] fight them. We're also aligning with Netscape (NSCP), Sun [Microsystems] (SUNW), and other companies.

Last quarter, Oracle reported that its database server sales rose only 6 percent. That's considerably less than analysts expected, and has led some to believe that the market is beginning to saturate, and that a slowdown is coming in database-server software sales. If that happens, Oracle has its applications business to fall back on, and Sybase has tools and middleware. What will Informix do, since it sounds as if you're relying on database software alone to bring in revenues?
First of all, parts of the database software market may be slowing down. Not all of it. And the business is changing, to an extent. Packaged [business] applications from SAP, PeopleSoft (PSFT), etc. are becoming very popular. Lots of database seats are sold [in conjunction with those applications] but the margins are lower. When we sell into an SAP solution, the cost per seat is lower than for custom applications. The OLTP (online transaction processing) market is not growing largely. But three areas are growing--data warehousing, distributed enterprise applications, and Web content-management. Informix can tell customers that, because of our technology, we can build a Web site or a data warehouse that Oracle can't build. We'll focus on the things that we do well. We can grow faster in the Web and content-management areas than Oracle. We are contrarians. We are keeping our emphasis on the database--there is a lot we can add there. It would be dumb for us to try to emulate Oracle. Oracle is very good at being Oracle. We're better at trying to be Informix.

How do you rate your primary competitors?
IBM is the best technology competitor. But they are limited by the fact that most of their software is trapped on IBM hardware. They are good at leveraging their position in existing accounts. Oracle has emerged as the market leader with the message that people should buy from them because they are the biggest. We want to be complimentary to Microsoft. The leading database vendor is trying to put them out of business. We realize that Microsoft dominates in the desktop and in tools.

What's your response to critics who charge that Informix is behind competitors in support for Windows NT?
As far as products go, virtually everything we sell will be on Windows NT by Christmas. We don't have an effective channel for delivering NT products. That's what we need to build.

Recent History at Informix
July
27
Robert "Bob" Finocchio is appointed president and chief executive.
July
31
Finocchio is elected chairman of the board.
Aug
7
Company posts losses of $120.5 million, lines up a $40 million equity investment.
Sept
22
Company delays in filing a quarterly financial report, then announces it will double the amount of its restated '96 results and add '95 results to the audit.

Company lays off 440 employees; announces it will lay of 10 percent to 15 percent of its entire workforce in the third quarter.

Oct
2
Company names Jean-Yves Dexmier CFO.
Oct
29
Analysts report that the company plans to announce the repackaging and repricing of its Universal Server database by the end of third quarter.
Nov
18
Company reports a larger-than-expected third-quarter loss; experiences a setback when it announces that it will have to restate financial results beyond the extent it had previously announced; becomes the subject of a Securities and Exchange Commission investigation; lines up additional funds by gaining a $185 million investment and a revolving credit line, in addition to selling some of its of property; lowers operating expenses to $195 million in its third quarter from the $235 million reported for its first quarter; changes accounting procedure to book revenues when sales are made to end users, rather than when sales are made to resellers