Lotus Taps IBM Veteran to Run Software Group

Lotus Development Corp. has named W. Frank King III, a former executive of International Business Machines Corp., to take charge of its software development and marketing group.

The appointment was made just one day after Lotus said it would be several months late in shipping a key new version of its best-selling 1-2-3 spreadsheet software.

Analysts said Wednesday that the delay will hurt Lotus’ 1988 earnings but will not jeopardize its overwhelming lead in the personal computer spreadsheet market.

Investors were less optimistic. Lotus’ stock fell $3.50 to $25.25 as more than 8.4 million shares changed hands, making it the most actively traded issue in the over-the-counter market.

King replaces Charles J. Digate, whose sudden resignation last week fueled speculation that the new 1-2-3 project was in trouble.

A 17-year veteran of IBM, King, 48, was most recently vice president of development for its personal computer business.

Analysts said his first priority will be to ensure that the improved version of 1-2-3 is released as soon as possible.

Lotus, which had planned to ship the new program by midyear, said late Tuesday that it would not be ready until the fourth quarter.

Analysts said the delay should not trigger a mass exodus among the more than 3.5 million users of 1-2-3, which accounts for two-thirds of Lotus’ revenues.

“Die-hard users won’t switch in large numbers,” said Smith Barney analyst David Readerman.

While analysts remained positive about Lotus’ long-term outlook, they reduced their estimates of the company’s 1988 earnings. They had expected the new program to generate up to $50 million in sales this year.

The problems come at a bad time for the Cambridge, Mass.-based company, which earned $72 million last year on revenue of $395.6 million, analysts said.

Although Lotus controls about three-quarters of the spreadsheet market, competition is heating up. Microsoft Corp. and Borland International Corp. have introduced rival packages that offer many capabilities not found on the current version of 1-2-3.

Analysts expect Lotus’ share to drop to about 65% of the market this year, with Microsoft and Borland gaining among individual and small business customers.

The updated 1-2-3 program will be faster, offer higher-quality graphics and link multiple spreadsheets, Lotus said. It will also work with a new generation of PCs from IBM and others.

Analysts said the software was delayed not only by technical problems but because some features had to be redesigned after a prototype received lukewarm reviews.

Lotus Chief Executive Jim Manzi said more time was needed to ensure that the program could work with both OS/2, the operating system designed for IBM’s new PS/2 computers, and MS-DOS, the standard system for older IBM PCs and compatibles.

“Getting the product absolutely right when it goes out the door is our top priority,” he said.