THE TIMES 100 : THE BOTTOM LINE : Back From the Dead : Reorganization, Good Timing Revived Informix
When Phillip White joined Informix Software Inc. as chief executive in May, 1989, the company was on the brink of becoming another casualty of the ruthlessly competitive high-technology industry.
Founded in 1980 by technical wizard Roger Sippl, the Menlo Park-based company had made impressive strides marketing an advanced type of database software that allowed its customers to convert from large mainframe computers to smaller, cheaper desktop computers.
But Informix’s early success was threatened by its mismanaged acquisition of Kansas City-based Innovative Software Inc. As a result, Informix quickly fell from grace on Wall Street, its stock plummeting to $3 a share in early 1989 from a high of $31.25 in 1987.
What a difference three years has made. Today, Informix is enjoying a dramatic turnaround. Even after a September stock split, its shares have climbed back up, surging late last week to nearly $35 a share. The company’s profit jumped 280% in 1992, to $47.8 million, ranking it fifth among California firms with the fastest profit growth last year, as calculated by STAR Services, the San Francisco business research firm that compiled The Times 100. Company officials point out that profit was boosted by license revenue from a one-time $21.8-million government contract.
Informix’s success can be partially attributed to being in the right place at the right time. The recession has helped speed the move by business away from database programs running on mainframes and minicomputers to programs designed for smaller desktop machines.
“All of the database companies are benefiting from the downsizing phenomenon, and Informix is particularly well positioned in the Unix database market,” says Terry Murphy, vice president of Smith Barney in San Francisco. “The market has grown 35% to 40%, and they’ve been in it for a long time.”
But good timing doesn’t tell the whole story. After joining the company, White embarked on a reorganization, laying off about 200 employees and expanding into international markets. He also combined Informix and the troublesome Innovative Software, which had been operating as a separate company with its own sales and research staff.
“Informix hadn’t done a real good job of merging the two companies,” White says. “That had caused financial problems and missed (shipping) dates.”
Aiming to cut costs and get new products to market faster, Informix has forged partnerships with some of its customers.
“Doing joint development makes you more market-driven,” White says. “We find a customer that has a market requirement and who will allow us to jointly develop it. That way you know you have a marketable product, and you don’t waste research and development time.”
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An example of such partnerships is its relationship with retailing giant Kmart Corp., which was looking for a way to increase employee productivity. Informix designed software for use with hand-held computers supplied by Symbol Technologies. The hand-held devices, equipped with a bar code scanner, eliminated the need for workers to transcribe inventory codes and orders by hand. Kmart says the system has cut down on errors and saved the company millions of dollars.
“Marketing that way is the future wave of small companies,” White says.
“It allows a company with 1,300 people to focus all its energies in selected areas, turn itself around in a short period of time and have great prospects for the future,” White adds.
The results of Informix’s moves have paid off. For example, annualized revenue per employee has climbed from $100,000 in January, 1990, to $219,000 (excluding revenue from government contracts) in January, 1993. The company is debt-free and is generating $1 million to $1.5 million in cash per week from operations, according to White.
“The outlook for both Informix and its group of competing companies is very bright,” says Ken Burke, an analyst for Pacific Growth Equities in San Francisco.
As business continues to move away from mainframe technology supplied by the likes of International Business Machines Corp. toward smaller computers, much of that business will go to smaller companies like Informix, he says.
