Ashton-Tate Posts Big Loss for Quarter; President Quits
Ashton-Tate Corp., reeling from problems with its latest personal computer database software, Tuesday announced both a $19.8-million quarterly loss and the resignation of president and chief operating officer Luther J. Nussbaum.
Chairman and Chief Executive Edward M. Esber Jr. said Nussbaum had quit as a result of “differences in management philosophy,” but he declined to elaborate. Esber, who brought in Nussbaum from Businessland in 1986 for his “operational expertise,” will permanently assume the post of president.
Nussbaum, reached at his home Tuesday night, described his departure as being “as amicable as a departure of this kind can be.” He declined to comment on his differences with Esber.
Ashton-Tate grew to be the nation’s third-largest independent software vendor on the strength of dBase, a program for storing, sorting and managing large amounts of information in a personal computer. But the most recent version of the software, dBase IV, released last fall after several delays, contained a large number of bugs, or errors, and damaged the Torrance-based company’s reputation.
The financial results released Tuesday were worse than the company had projected; last month Ashton-Tate said it expected to lose $15 million for its second quarter ended June 30. The company’s actual loss of $19.8 million came on revenue of $59.5 million, down from a profit of $11.5 million on revenue of $71.9 million in the year-ago quarter. Ashton-Tate’s stock fell $1.75 to close at $14.50 Tuesday in heavy over-the-counter trading.
“This is a reflection of the trials and tribulations of the dBase IV development process,” said Marshall Moseley, an analyst with the market research firm Dataquest. Whether the company can return to profitability in the third quarter still depends on the release date for the revised dBase IV program, Esber said, and he would not predict when that would occur.
“The highest priority is shipping a quality product,” he said.
The second quarter loss was higher than expected, Esber said, because of low tax benefits on its losses in overseas jurisdictions, though he could not explain why that was not anticipated.
Ashton-Tate has also attributed its financial difficulties to excess inventories, which resulted from extensive use of a now-discontinued delivery practice known as “channel stuffing.” This involves shipping large inventories to distributors at a discount just before the end of a quarter in order to boost revenue. Nancy McSharry, an analyst at International Data Corp., said Ashton-Tate had four to seven months of inventory on hand, compared to an industry norm of 45 days.
While most analysts expect a financial recovery in the short term, they were divided on the company’s longer-term outlook. Ashton-Tate has long suffered from over-dependence on the dBase product, which still accounts for 75% of revenue, and a lack of new, internally developed software.
IDC’s McSharry said Ashton-Tate has “a good strategy.”
“They still have 45% of the market (for new shipments of PC database management products) and 50% of the installed base, and the next biggest vendor has 7%,” she said.
“This seems like the culmination of the bad news,” added Kevin Cluskey, an analyst with Swiss Bank Corp. “They’re a good company with a very good franchise and a good balance sheet with no debt.”
Another analyst, however, who asked not to be identified, said: “They have fundamental problems that Esber inherited--the limitations of their product, their misunderstanding of third parties, too many diversifications into too many areas.”
The analyst added that the resignation of Nussbaum was probably due to genuine business disagreements rather than a personality conflict, but declined to speculate on the nature of the dispute. A number of high-level executives have departed since Esber assumed the chairmanship upon the death of George Tate in 1984.
Several analysts suggested, however, that Nussbaum’s resignation was linked to the problems with dBase IV, which was released last fall but infuriated users with its large numbers of bugs.