FileNet Unveils New Software Product Line
In an effort to reclaim its dominance in the business software world, FileNet Corp. launched a new brand line this week and phased out some of its older products.
The new Panagon line merges the company’s disparate technologies, offering a software package that lets people use the Internet to manage the flow of their paperwork.
Coinciding with the release, FileNet executives said Tuesday the company’s fourth-quarter revenue and net income exceeded both their own and Wall Street’s expectations. The news marks the most solid proof to date that the company has exited a painful restructuring phase and is ready to resume growing.
“This past year has been filled with change, sometimes difficult change,” said Lee Roberts, the company’s president and chief operating officer. “What we’re doing now is the most important thing that has happened to this company since FileNet was started.”
Prior to 1997, the Orange County company was the industry leader within the document-management arena--software that allows users to archive, manage and access their information electronically.
But as FileNet was trying to grow through acquisitions, its hold on the market began to slip. Technology was changing. A slew of competitors vied for its core customers--banks, insurance companies, government agencies.
“Their technology has always been solid,” said Gerry Murray, a technology analyst with the research company International Data Corp. “But if they’re going to compete against companies like IBM or Oracle Corp., FileNet needs to focus on their marketing approach.”
FileNet’s troubles emerged after it acquired three companies in two years: International Financial Systems Ltd. of New York, a producer of archiving software; Saros Corp. in Bellevue, Wash., a maker of document-management software; and Watermark Software Inc., a Burlington, Mass., a developer of business image-documenting software for PCs.
These acquisitions in 1995 and 1996 were designed to help FileNet expand its business and create new markets for its product line.
“What it did is give us indigestion,” Roberts said. “Our sales forces weren’t working together. The technology wasn’t working together. FileNet became sluggish because we underestimated how hard it was going to be to integrate everything together.”
By early 1997, sales fell 29%, and FileNet registered a loss of $9.4 million in the first three months of the year. Last spring, the company laid off 160 employees--including nearly 50 in Orange County--and shut down a subsidiary in Massachusetts.
The company needed some radical changes, said Roberts, a former IBM marketing executive who was brought on board last year to spearhead the shift.
International sales became a crucial area, and the company replaced most of its senior sales executives. FileNet refocused on software development and began to phase out its hardware line.
Panagon marks the culmination of the shift, making the company’s powerful software simpler to use. Rather than opening dozens of applications and running the risk crashing their computers, users launch a Web browser--either Microsoft Internet Explorer or Netscape Navigator--and documents and images are only a point and a click away, FileNet staff members say.
Early indicators of the company’s turnaround seem promising, say analysts. FileNet, which employs about 1,600 people, is hiring again. It has a new logo featuring a Microsoft-like window, playing up the fact that Panagon runs on Windows 95 and Windows NT operating software.
FileNet executives announced Tuesday that they expect revenues to hit about $76 million for the fourth quarter ended Dec. 31, a 5% increase over revenue of $72.6 million for the same period in 1996.
Earnings for the quarter are expected to be about $5.8 million, or 36 cents a share, up from $3.2 million, or 20 cents a share, a year ago, Roberts said. Analysts generally were looking for flat revenue and earnings of 30 cents a share, according to Zacks Investment Research.
FileNet’s stock dropped $1.09 a share on Tuesday, closing at $32.28 on Nasdaq. While the company’s stock remains far below its February 1996 peak of $65, it has rebounded from last year’s low of $10.31 a share.
