Informix Corp.'s stocks continued to decline today in the wake of yesterday's announcement that the company's accounting errors are more extensive than first thought.
While financial analysts reportedly are ready to write the database maker off, software industry analysts said the company has a chance to recover, although its credibility is seriously damaged.
"I just can't believe that a company of that size can go over the cliff so badly," said Dave Folger, program director at the Meta Group. "The financial situation is killing their credibility."
Informix said yesterday that it needed more time to complete an audit of its 1996 earnings and that the audit will be expanded to fiscal 1995. As a result Informix will need to adjust its financial statements to reflect lower revenue of up to US$200 million for 1996 and $50 million for 1995.
The company added that these numbers are only rough estimates as the audit is ongoing and that the restatement for 1995 and 1996 will affect the earnings for the first two quarters of fiscal 1997.
The restatement would double the amount originally expected. When the audit was launched in August Informix said it would restate 1996 revenue by between $70 million and $100 million.
Since Informix is late filing its second quarter report with the Securities Exchange Commission, the NASDAQ stock exchange has started de-listing proceedings of Informix stocks, a move Informix hopes to avoid. Informix requested a hearing with NASDAQ officials to seek an exception to the de-listing requirements, company officials said.
Trading at NASDAQ today under the new symbol of INFXE, the company's stocks closed at $6.6875, down $0.8125 from yesterday's close of $7.5.
While it remains to be seen what the outcome of the financial audit will be, the uncertainty created by the difficult financial situation is taking a toll on Informix sales, analyst said.
"Who would want to buy anything from them right now," said one analyst who wished to remain anonymous.
Despite the difficult situation analysts agreed however that it is too early to write off Informix, which has a loyal customer base.
"We believe that, while its downward spiral may discourage new project wins, the Informix installed base will not dissipate quickly," said Zona Research Inc. of Redwood City, California in report today.
"Databases are not like soup," Meta's Folger said. "You don't switch brands with the next purchase."
Informix would be well advised to now concentrate its sales and marketing efforts on its traditional relational Online Dynamic Server database, giving up its focus on its new object oriented database, the Universal Server, analysts said.
"They have wasted enough R&D dollars on Universal Server," Folger said.
Backed by a huge marketing effort, Informix was the first major relational database developer coming to market with an object-oriented database, giving it a short-lived lead in the market. However, since customers where not ready to adopt the cutting edge technology, sales for Universal Server fell short of expectations, analysts said.
"They committed the classical Silicon Valley blunder of selling a product before its time," said Vernon Keenan, a director at Zona Research. "I can't see anybody adopting Informix's technology."
But the company continues to push the technology.
In a letter to customers posted on the company's Web site Informix President, CEO and Chairman Robert Finocchio said the company's fiscal troubles have nothing to do with Universal Server.
"Of one thing I am sure -- the company's performance and operational issues have nothing to do with the performance or customer acceptance of Informix - Universal Server," Finocchio said. "We are pleased with the customer acceptance of our industry leading Informix-Universal Server product."
Citing several customers Finocchio said users are "extremely happy with the product."
But analysts said Informix has not convinced enough third party developers to build applications for Universal Server, the company has neglected the Windows NT market and its perceived lead in the object-oriented database market has been marginalized by its competitors' marketing.
"They have a long way to go towards re-establishing credibility with IT buyers," Keenan said.
Informix, based in Menlo Park, California, can be reached at http://www.informix.com/.