August 10, 2000 1:35 PM PDT
Informix retools to survive tough database market
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The company yesterday announced it will cut about 500 jobs, or 12 percent of its work force, as part of a major restructuring that executives say will save the company $70 million to $80 million a year.
After years of financial struggles and executive turnover, Informix, the No. 3 database maker behind Oracle and IBM, appeared to have its finances in order as it strung together six consecutive quarters of revenue growth.
But last month, the software company announced a shortfall as second-quarter revenue fell 4 percent, from $250.6 million last year to $240.5 million this year. Net income was $5 million, or 2 cents per share, far below Wall Street analysts' expectations of 12 cents per share.
After the company's stock fell 77 percent this year, Informix last month fired chief executive Jean-Yves Dexmier, replacing him with board member Peter Gyenes. Yesterday's restructuring marked the first major moves by Gyenes.
"The fact that they're doing this restructuring so quickly shows they're taking control of the situation," said analyst Jim Pickrel of Chase Hambrecht & Quist. "The prior management lost a firm group on consistently executing in sales and marketing. My sense was it was largely self-inflicted."
Informix executives yesterday announced plans to consolidate the company's five businesses into two: the Database Business Operations division, which will sell the company's various databases and technology that collects and manages companies' information, and the Solutions Business Operations division, which includes the company's e-commerce and data analysis software.
With the move, Informix will take a $75 million to $90 million charge in the third quarter and an additional charge of $10 million to $15 million in the first half of 2001. The company expects to buy back 6.4 million of its shares in hopes of increasing its stock price.
Peter Fiore, Informix's senior vice president of the Solutions Business Operations division, said the company will spend the next month formulating a new plan for the company and announce it after the first week of September.
Fiore, however, said the company will retain its focus on e-commerce. Like its rivals Oracle, IBM, Microsoft, Sybase and others, Informix sells Internet-focused database software that businesses can use to develop e-commerce Web sites.
"We have not changed strategies, but there are clearly many areas in execution and operations that can be improved," Fiore said in an interview. "We'll come up with a complete bottoms-up plan by Labor Day that will identify what products we go ahead with."
Informix executives said that merging with the recently acquired Ardent Software has taken longer than expected. The 800-person company makes "data warehousing" tools, software that allows executives to analyze data to make better business decisions.
"They started venturing into new areas like data warehousing and e-commerce and developed good products in the area, but they spread themselves out too much," analyst Brian Eisenbarth of Collins & Co. said of Informix.
The once high-flying database maker appeared to be on the comeback trail last year, putting years of financial turmoil behind it. In January, the company settled charges by the Securities Exchange Commission that it improperly inflated revenues and earnings in 1997.
Despite the renewed financial problems, Wall Street analysts say Informix still has a shot to turn the company around. Analysts at Collins & Co. and Chase H&Q give Informix a "buy" rating, even though the stock has dropped from a high of $21.25 to about $5 this year.
And even with the stiff competition in database and e-commerce software, the market is big enough for Informix to do well in the future, analysts say.
"They've got a new team in place, getting streamlined, and good things will come out of this," Eisenbarth said. "Oracle has really captured a lot of the market, but there's plenty of business to go around."