The PenUltimate Workout : Collective Stamina Helps Irvine Software Company Survive
Every day at 4:15 a.m., Paul Mondschein rises for his morning workout. First it’s him against the stair-climbing machine, then he does about 2,500 sit ups. He faces even more punishment with free weights and Nautilus machines. Sometimes he plays squash. It’s always about 90 minutes long. On weekends, its up to three to five hours.
He says rigorous exercise is the only thing that keeps him sane as chief executive of a start-up company, PenUltimate Inc., in the treacherous world of designing software for pen-based computers.
Mondschein and PenUltimate’s 26 employees say it’s their collective stamina that helps them survive in a business where the body count is high; the best known victim was Momenta Corp., a Silicon Valley company that lost $40 million before it collapsed in 1992.
The losers staked their companies on widespread acceptance of pen technology, where a computer user enters computer data by placing a pen directly on the screen, thereby replacing the mouse and traditional keyboard. By now, the pen computing market was supposed to be $3 billion a year.
The technology was billed as a more intuitive way of entering data into a computer. Some companies, like Momenta and Apple Computer Inc. with its widely criticized Newton, also tried to create computers that recognized handwriting.
But Mondschein, 45, says 3-year-old PenUltimate has survived because of its tenacity, its willingness to undergo mid-course corrections, and its foresight in relying on more than just pen computing.
As religiously as he pushes himself in his workouts, Mondschein works seven days a week. His favorite Latin slogan is “ Nocte dieque incubando ,” which translates to “by thinking about it day and night.”
“In the early days we were pigeon-holed as another pen computing company,” he said. “We tried a different approach. Pen was a technology, but mobile computing is a real market. Within that market, we decided to focus on . . . (making) the salesperson’s job easier.”
PenUltimate has become the only company pitching in-depth sales automation software to structure a traveling salesperson’s life, according to an analysis by the Gartner Group, a market researcher in Stamford, Conn.
Its software uses a pen mainly to take electronic notes, which can be stored in the computer and passed on to a sales manager. No handwriting recognition for translating writing into typewritten text is involved. And it can even run with a keyboard, instead of an electronic pen.
The biggest selling point is the software’s ability to analyze data and predict--based on sales patterns from previous customers--when a sale might close. For instance, at any given point in the sales cycle, the software predicts the odds of a successful sale.
“Their name starts with the word ‘pen,’ but I don’t think of them as a pen-based computer company,” said Thomas Betcher, an analyst for the Paulson Investment Co. in Portland. “They’re serious about offering solutions to mobile people.”
Mondschein joined Larry Taylor, a software veteran who worked for Orange County’s MAI Systems Corp., to start the company in August, 1991. Mondschein and Taylor raised $73,500 from family and friends; Mondschein’s home serves as collateral for the four-year lease on the company’s Irvine headquarters.
Since the beginning, almost nothing has turned out the way they expected. Mondschein said he couldn’t find any venture capitalists willing to take a risk with his fledgling company. He has since come to consider that a bit of luck, he says.
“The most dangerous thing for a young company is to have too much money,” he said. “Momenta’s mistake was having $40 million” in investor money.
PenUltimate’s initial software was created to run on what is now considered an obsolete software system. On Taylor’s advice, the company switched after a few months to adapt its programs to run on what has become the surviving technology, Microsoft Corp.’s Windows for Pen operating system.
The company also decided against selling a computing system to law enforcement agencies, so that police or sheriff’s deputies, for example, could use the systems to automatically write traffic tickets. But it took too long for government agencies to decide whether to invest in the systems, so PenUltimate shelved that project.
Meanwhile, the initial burst of pen technology was a nationwide bomb in the early 1990s. Among the few survivors are systems designed for delivery drivers, where pen computers are convenient.
PenUltimate raised $4 million in a public offering in December, which gave it the money to sell its main product, SalesForce. Its strategy has been to equip its own traveling salespeople with pen computers and the software, which organizes their sales pitches and simplifies communication with bosses. And last month, the company raised an additional $1.9 million in a private offering.
PenUltimate has signed about a dozen contracts, but sales are a pittance so far. For the nine months ended March 31, the company reported revenue of $129,093, compared to zero sales the year before. The company lost $2.3 million, compared to a loss of $883,171. On a per share basis, the loss was $1.76, compared to $1.13 a year earlier.
The future is still unsure, but Mondschein said he is confident because the company has a backlog of 1,600 copies of its software, which sells for $1,500 to $2,500, depending on the size of the order.
Over the next few months, the company will begin filling most of its initial orders. A five-month delay in the public offering, blamed on slow processing by the California Department of Corporations, set the firm back.
But Paul McBride, chief financial officer, estimates the company can break even in the quarter ending Sept. 30. By July, PenUltimate expects to supply up to 500 copies of its software to the IBM Personal Computer Co.
PenUltimate hopes to benefit from the resuscitation of pen computing as a niche industry. The cost of pen technology has fallen and now the feature is marketed mainly as a supplement to a keyboard, not as a replacement. IBM’s ThinkPad computers come with both keyboards and pens, selling for prices from $2,899 to $3,399.
Jim Alfaro, program manager of pen computing at IBM, says his sales representatives love the PenUltimate software because it frees them from tedious report writing.
“When Miller Time comes around for the salesperson, the last thing they want to be stuck doing is writing reports to the boss,” Mondschein said. “With our software, they just hit a button and the (handwritten) report is sent over the phone line to the boss.”
Alfaro also likes PenUltimate’s SalesForce: Central version for managers because it gives him instant updates on sales forecasts for the coming quarter from all of his salespeople.
“Right now, I have no way of telling exactly what is happening with the potential sales,” Alfaro said. “Forecasting is where most sales organizations fall down and shoot in the dark.”
