ASHTON-TATE : Confronting a Hard Life in the World of Software
In retrospect, the confrontation was inevitable.
On one side is C. Wayne Ratliff, a rumpled, 40-year-old computer software wizard who wrote the pioneering electronic filing program called dBASE, which propelled Ashton-Tate into the ranks of the Big Three makers of personal computer software, with Lotus Development and Microsoft.
On the other side is Edward M. Esber, the buttoned-down, 34-year-old chairman and chief executive of Ashton-Tate, a by-the-numbers MBA from Harvard who has little patience for the “cult of personality” that has grown up around the PC software business.
Tension Building
“The only industry that is more personality-oriented,” snaps Esber, “is Hollywood.”
Tension between Ratliff, a solitary software writer, and Esber, the quintessential organization man, had been building since 1984. That was when Esber took control of the firm after 41-year-old founder George Tate--described by many as “the soul of the company”--dropped dead at his desk of a heart attack.
Ratliff had been named Ashton-Tate’s chief scientist in 1981 after selling the firm the rights to dBASE II and led the in-house team that developed dBASE III. Still, by 1985, Esber would call Ratliff “no more important to the success of the company than the guy on the loading dock who throws the boxes onto the trucks,” according to Ratliff and others.
The simmering feud erupted into a pair of bitter lawsuits in January, after Ratliff left Ashton-Tate and began writing a new generation of database software for a small competitor, Migent Corp.
The dispute could not have come at a worse time for Ashton-Tate. The Torrance firm lost nine key executives last year and must confront sharply heightened competitive and technological hurdles as a new generation of personal computers comes to the fore.
The 7-year-old company’s lucrative dBASE line, which dominates the database category and provided 63% of Ashton-Tate’s $210.8 million in revenue last year, is being squeezed by more sophisticated programs from above and less expensive, look-alike clones from below.
Worse, Ashton-Tate is growing increasingly isolated from industry giant IBM--even as its principal rivals strengthen their ties to Big Blue.
Microsoft’s lucrative strategic relationship with IBM dates to 1981, when IBM picked the Microsoft Disk Operating System--MS-DOS--to run its personal computers. Last month, IBM renewed Microsoft’s profitable franchise by endorsing Microsoft’s Operating System/2 for IBM’s new generation of PCs.
Lotus Development unveiled its own strategic alliance with IBM on April 27. Beginning next year, the two companies will jointly distribute a mainframe computer version of Lotus 1-2-3, the dominant PC spreadsheet program. Other joint software programs will follow.
Company Targeted
All this activity threatens to leave Ashton-Tate out in the cold. Indeed, IBM has taken dead aim at Ashton-Tate, the smallest of the Big Three publishers of PC software. Last month, Big Blue announced--but has not yet shipped--database programs that will allow its new generation of PCs to effortlessly share data with IBM mainframes.
What is more, IBM will include the database software in what it calls the “extended edition” of OS/2, the successor to MS-DOS that will control the computer’s basic operations. In other words, IBM’s database software will come with its machines.
Some observers contend that Ashton-Tate’s dBASE is “a toy” compared to IBM’s and others’ planned offerings. Esber acknowledges the threats, but notes that Ashton-Tate has an $85-million cash hoard and 18 months to prepare for the IBM onslaught.
Despite Esber’s projection that sales will climb to about $300 million this year, Wall Street is worried. Just last month, Ashton-Tate withdrew a planned offering of 2 million shares of common stock.
The firm cited “fluctuations” in the price of its shares--which have lost about one-third of their market value this year, while shares of Lotus and Microsoft have zoomed ahead.
Technical Prowess Questioned
Securities analysts question Ashton-Tate’s technical prowess, citing frequent delays in delivering such promised new products as dBASE for Apple’s popular Macintosh.
Others fret about Ashton-Tate’s high rate of turnover and wonder whether the company can negotiate the new competitive and technical shoals without the guidance of its two founding fathers and the developer of its flagship product.
Tate is dead; Ratliff is a competitor, and Hal Lashlee sold most of his stock and resigned from the board last year. (Lashlee is the “Ashton” in Ashton-Tate. “It just had a better ring to it,” a spokesman says.)
Lashlee, whose stock holdings in Ashton-Tate once totaled nearly $100 million, couldn’t be reached for comment. Dubbed “the phantom” by friends, he shuns the limelight and divides his time between homes in Venice Beach, Lake Tahoe and Florida.
Former associates say the founder left because he thought Esber was overpaying for acquisitions. Sources say Lashlee also opposed Esber’s decision to move into what some wags have dubbed “Ed’s Edifice”--Ashton-Tate’s starkly modern and lavishly furnished office tower near the intersection of the Harbor and San Diego freeways.
“A lot of people are wondering whether Ashton-Tate has the right stuff,” Esber acknowledges. “The perception, the concern, is that we don’t.” He says it will be “very hard to stop these concerns until we deliver our (next generation) of products and IBM delivers theirs.”
Esber professes to be unconcerned about turnover at the company. “The people we got are better than the people we lost,” Esber asserts.
“I’ll stack Harry K. T. Wong (a database expert who was named senior scientist in February) against anybody who has left the company, and I underline anybody. “ But Wong cost Ashton-Tate a bundle. To get him, Esber had to agree not to sue Wong’s employer, WordTech, over a dBASE clone called dbXL.
Esber also contends that other new recruits, including President Luther Nussbaum and Chief Financial Officer George Farinsky, are “building the foundation for a $500-million company.” Ashton-Tate, he says, had “reached the point where it had to stop being a start-up and start becoming a business.”
In that sense, the Ashton-Tate saga is more than the story of one company. With its fast fortunes, clashing egos and bitter recriminations, it is the story of the coming of age in the PC software business.
“It is a tale of innocence lost,” says Robert Byers, author of a dBASE primer published by Ashton-Tate that has sold more than 500,000 copies.
Employees wistfully recall the times George Tate would roam the halls of the company’s old Culver City warehouse-turned-headquarters at 7 a.m., rewarding early risers with $100 bills.
It was Tate, too, who decided to fill the corporate mascot’s perch with a parrot named Ashton.
Nothing, it seems, was too outrageous. An early Ashton-Tate advertisement compared rival database programs to sump pumps because, the ad explained, “both suck.” To the amazement of staffers, the ad ran in trade publications.
The whimsy in the software industry even extended to the naming of computer programs. Before Ratliff sold the rights to his invention to Ashton-Tate in 1981 and the product was rechristened dBASE II, its creator--a “Star Trek” fanatic--sold the program as Vulcan in honor of Mr. Spock’s powers of total recall.
Unhappy Experience
Ratliff’s unhappy experience with Ashton-Tate isn’t unique. In the fast-moving technology business, companies often outgrow their founders or scientific stars.
“When you have an idea that is really successful and it becomes the foundation for a big company, the company can grow so large that its interests and yours diverge,” says David Bunnell, publisher of PC World and other computer publications.
“The personal computer was created by renegade hobbyists who were committed to individualism,” Bunnell notes. Ratliff’s alienation as Ashton-Tate took on the trappings of a big business is consistent with the industry’s history.
Never mind that dBASE II helped spark the personal computer revolution by opening up a whole new realm--beyond spreadsheets and word processing--for PC users.
dBASE II and its successors allow users to store, sort, cross-reference and otherwise manipulate all manner of data--everything from customer lists to personnel records to accounts receivable.
Using dBASE, for example, a retailer can pull up the names and addresses of all customers for a specific product in a specific ZIP code. The data can then be used to write personalized letters or in other marketing efforts.
From 1981 to date, Ashton-Tate has sold a staggering 1.5 million copies of dBASE II and its successors; countless illegal “bootlegged” copies are also in use.
Losing Market Share
Last October, Ashton-Tate threw a “dBASE Goes Gold” party, awarding gold Porsches to the millionth buyer of the program and its lucky dealer.
But the runaway success of dBASE, which lists for $695 and provides fat profit margins for the company, has eluded Ashton-Tate in other software lines.
The company’s MultiMate word processing package, which lets PCs emulate Wang word processors, has been losing market share to WordPerfect Corp.’s WordPerfect, Microsoft’s Word and other rivals. To stem the erosion, Ashton-Tate put out an enhanced version of MultiMate last month.
Ashton-Tate’s widely admired Framework package, which integrates word processing, database, spreadsheet and graphics functions, also has had disappointing sales.
Analysts point to the fact that dBASE II, MultiMate and Framework were all acquired--rather than developed--by Ashton-Tate as a sign of the company’s technological weakness.
And while most applaud Esber’s diversification strategy, some contend that Esber overpaid for MultiMate and Framework. An underground newsletter at Ashton-Tate lampooned the “dBASE Goes Gold” promotion by proclaiming a “Framework Goes Tin” celebration.
For now, however, Esber’s diversification efforts will have to take a back seat to protecting Ashton-Tate’s dominant position in the database market. A stunningly more powerful generation of PCs incorporating Intel’s 32-bit 80386 microprocessor is coming to market.
Esber, a veteran of VisiCorp, is painfully aware that past transitions in technology have dramatically reshuffled the fortunes of software makers.
The Ashton-Tate chairman notes that VisiCorp “was wiped out overnight” when Lotus introduced its 1-2-3 spreadsheet for the then-new 16-bit IBM PCs.
Lotus 1-2-3 quickly supplanted VisiCorp’s 8-bit VisiCalc spreadsheet program. By 1983, VisiCorp was forced to merge into another company.
But Esber vows that history won’t repeat itself. He is counting on Ashton-Tate’s huge base of loyal users and planned new products to ensure future growth. And he notes that IBM’s new database programs for PCs will appeal almost exclusively to its big corporate customers.
The other 70% or 80% of the market--consisting of small businesses and self-contained units at large companies--”is our playing field,” Esber asserts.
Industry May Suffer
Indeed, some analysts agree that the threat from IBM has been overblown. “I am strongly recommending Ashton-Tate stock,” says Brian Mutert, a software analyst at the Robertson, Colman & Stephens investment firm in San Francisco.
But others believe that the bitter lawsuits between Ashton-Tate and Migent will divert the attention of both companies, slow innovation and damage the entire independent software industry.
Ashton-Tate fired the first shot in January, after Ratliff began writing code for a new generation of database software--known as Emerald Bay--for a tiny competitor, Migent.
Migent, located in Incline Village, Nev., is headed by Carl M. Gritzmaker, former Ashton-Tate vice president of sales, and is staffed in large part by two dozen defectors from Ashton-Tate.
Ashton-Tate’s lawsuit charges Ratliff, Gritzmaker, Migent and others with engaging in “nefarious schemes” to “raid” Ashton-Tate personnel and steal its trade secrets and technology. The Ashton-Tate complaint asserts that Ratliff left the company after it spurned his “extortionate” demands.
Sought 5% Royalties
Ratliff contends that all he was after was a 5% royalty on sales and an independent team within the company to develop the next generation of software for Ashton-Tate.
Migent fired back within a month, accusing Ashton-Tate in a separate lawsuit of trying to “hamstring” Migent and monopolize the market for database software.
Emerald Bay, Migent suggested, was months ahead of Ashton-Tate’s next generation Diamond Project, both of which were aimed for IBM’s new 32-bit personal computers.
The lawsuits raise several intriguing questions: What is proprietary information, and what is in the public domain? Can a company stake a claim on the contents of a former employee’s mind?
Beyond those questions are others concerning the long-term prospects of the independent software industry. Many software makers say the rift and other highly publicized lawsuits in the industry sadden them.
“We should be fighting in the marketplace, not in the courts,” says Ronald S. Posner, former executive vice president at Ashton-Tate and now head of Belmont, Calif.-based Ansa Software. “I am afraid the only beneficiary will be IBM.”
