Informix feels the heat

Informix CEO Robert Finocchio is in the hottest seat in the software industry right now. Brought on to repair damages caused by former Informix executives, Finocchio is fighting for Informix's viability in the highly competitive database industry. And he's fighting to keep Informix's customers loyal. Informix's financial problems came to light in May of this year. Until just recently, few people knew the extent of how poorly former CEO Phil White and his executive team had managed Informix's business. Even Finocchio expressed dismay at how badly damaged the company was compared to what White had told the financial community

Informix CEO Robert Finocchio is in the hottest seat in the software industry right now. Brought on to repair damages caused by former Informix executives, Finocchio is fighting for Informix's viability in the highly competitive database industry. And he's fighting to keep Informix's customers loyal.

Informix's financial problems came to light in May of this year. Until just recently, few people knew the extent of how poorly former CEO Phil White and his executive team had managed Informix's business. Even Finocchio expressed dismay at how badly damaged the company was compared to what White had told the financial community.

"Things were much worse than I had anticipated," Finocchio says. "I thought that there were revenue issues, but I had no idea that we would have to restate the numbers."

Although Finocchio would like to move forward and work on repairing the company, some say it's like drinking from a fire hose.

"They need to quickly and assertively put the financial uncertainties behind them. That is a huge challenge," says Peter Kastner, vice president at the Aberdeen Group, in Boston.

Indeed, last week was Informix's roughest. Not only did the company announce that it may have overstated revenues and net income by at least US$250 million in 1995 and 1996, but NASDAQ initiated the process to remove Informix from the Exchange due to its failure to file a 10Q on time.

Finocchio is trying to hire a chief financial officer (CFO) willing to take on the task of straightening out Informix's books. In lieu of an official CFO, Menlo Park-based Informix has hired a retired Price Waterhouse executive as a consultant to the board of directors and "there are thousands of people involved in figuring out what happened," Finocchio says.

Also on Finocchio's already full plate is cutting costs. Informix has already downsized by 1,200 people and plans another layoff next quarter, say sources.

"Sales and marketing expenses were completely out of line, so we're going to get that under control," Finocchio says. "We're not cutting R&D [research and development] expenses in any way. We're not going into retreat mode."

Oracle, Informix's biggest foe in the database industry, would like nothing better than to see Informix throw in the towel. Oracle executives spent a great deal of time at Oracle Open World in Los Angeles last week digging Informix's grave.

"There are only three database companies now. Microsoft at the low end, IBM at the high end, and Oracle across the board," says Oracle's senior vice president of servers Jerry Held, in Redwood Shores, California.

Others are less pessimistic.

"People were counting us [Sybase] out a year ago and we've come back, so I'm reluctant to count them out," says Sybase chairman and CEO Mitchell Kertzman, in Emeryville, California.

Finocchio shrugs off the criticisms.

"We're easy-pickings right now," Finocchio says. "That's part of the price we have to pay, but those criticisms will eventually go away once we're back on track."

Oracle executives assert Informix's recent financial problems are related to product quality. Analysts and customers think otherwise.

"The bottom line is that they appeared to not have good [financial] controls, but that doesn't equate with not having financial strength," says Steve Bitler, assistant corporate controller at Sears Roebuck & Co., in Hoffman Estates, Illinois. "We still believe that they are a viable company with great technology."

Generally, Informix's customers agree the financial issues make them uneasy. But most are waiting to see how Informix performs before considering other databases.

"Sure, it worries us from the perspective of how Informix spends the money necessary on new product enhancements and support, but we haven't seen any falloff in any of these areas," says Rob Geller, vice president of IT at MCI, in Colorado Springs, Colorado.

For one customer, the financial debacle was the last straw. Mike Baxter, assistant division chief for database management for the state of Maryland, in Baltimore, is considering converting its Informix-based applications to Oracle next year.

"We lost three months of time because of the problems we encountered with their NT product," Baxter says. "We fixed the problem, but Informix seems to be releasing things that are not being tested thoroughly."

Informix plans to do a better job of articulating its product strategy.

"One of the errors I think we made was initially positioning Universal Server as a multimedia product and that got people confused about how it fit with our On-Line Dynamic Server," Finocchio says. "Universal Server is still based on our core database architecture, and I don't think people realise that."

In the next quarter, Informix will announce a product strategy organized around four key markets: online transaction processing, data warehousing, branch automation, and the Web. Sources say Informix will offer products in each market that are simple to purchase and priced according to options.

Reorganising strategy won't be enough for Informix. Finocchio needs to bring order to Informix's financial house. It is critical he does: Customers are beginning to worry.

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