Informix Corporation Business Information, Profile, and History

Company Perspectives:

Informix is leading the next great wave in database innovation to enable the world's leading corporations to manage and grow their businesses. With its focused technology strategy, superior customer service, and best-of-breed partnerships, Informix is the demonstrated technology leader for corporate computing environments ranging from workgroups to very large OLTP and data warehouse applications as well as a catalyst in major new IT trends such as dynamic content management, the Web, smart cards, and mobile computing.

History of Informix Corporation

Informix Corporation is a leading developer of relational database software for computers using the UNIX operating system. Its market, however, is dominated by such competitors as Oracle, Microsoft, and IBM. As a young company, Informix was considered to have emerged at the right time to take advantage of a trend among corporate computer users switching from mainframe systems to networked microcomputers. Yet following a 1988 merger with Innovative Software, the company has experienced a series of troubling setbacks. An accompanying string of reorganizations and leadership changes, the latest in 1999 under newly installed CEO Jean-Yves Dexmier, was expected to help place the company back on track.

Adapting Relational Database Management to UNIX

Originally named Relational Database Systems Inc., this software company was founded by 25-year-old entrepreneur Roger J. Sippl. Sippl's background included a B.A. in computer science from the University of California, Berkeley, and a stint as manager of database research and development at Cromenco, a manufacturer of microcomputers. In 1980 Sippl invested $200,000 in the new company and became its president, chief executive officer, and chairman.

Relational Database Systems was a pioneer in 1981 in distributing fully relational database management systems (RDMS) for multi-user computers through its product line, INFORMIX. RDMS programs link multiple files together and permit the comparison and analysis of the data in these files. RDMS software had existed since the 1970s as customized or proprietary software for mainframe computer systems. Relational Database Systems was one of the first companies to specialize in offering RDMS software packages designed to run on the UNIX operating system used on many microcomputers.

Relational Database Systems quickly became a leader in the new field of UNIX-based database management software. The company gained a technological edge over its competitors by developing its products specifically for workstations and personal computers. Oracle and Relational Technology Inc., other leading RDMS companies at the time, had instead revised software they had originally developed for mainframes and minicomputers.

In the summer of 1985, Relational Database Systems introduced a significant new product, INFORMIX-SQL, a RDMS that featured an ANSI-standard query language that was based on International Business Machines Corporation's (IBM) Structured Query Language (SQL). Although the software was for UNIX, the use of IBM's SQL opened up a potential market of IBM computer users familiar with that query format. The company also introduced INFORMIX-ESQL/C, which offered additional programmable features in the C language.

Also in 1985, the company introduced the first SQL-based RDMS software version for local area networks of DOS-based personal computers. The design of separate "front-end" and "back-end" components of the company's SQL software, developed several years prior, made it most efficient when running on client/server networks. On this type of system, multiple users at individually networked computers could share database files kept on a designated computer known as a server.

The company moved further into providing software for programmers when, in February 1986, it introduced INFORMIX-4GL, a programming language designed especially for developing databases. This was its first application-building language to combine the needed fourth-generation application programming features along with SQL, and which further could be used under all versions of UNIX. Later in 1986, it introduced versions of INFORMIX-4GL and INFORMIX-SQL that ran on the VMS operating system of Digital Equipment Corporation's VAX minicomputers and MicroVAC workstations. Also in 1986, the company began development of INFORMIX Datasheet Add-In, a product that added true RDMS capabilities to Lotus 1-2-3.

A Surge in Sales: Mid-1980s

Relational Database Systems had $2.1 million in revenues and $169,000 in earnings in 1983. Over the next three years, the business grew more than tenfold. Revenues in 1986 were $21.1 million, and earnings were $2.4 million. The number of employees grew from 22 in 1983 to 214 in 1986. By the mid-1980s, Relational Database Systems had developed a broad marketing network comprising original equipment manufacturers (OEMs), value-added resellers (VARs), dealers, and distributors. By 1986 OEMs had packaged the company's software products with over 150 different kinds of mid-range computer models and contributed to 22 percent of Relational Database Systems' sales. VARs, which customized the company's software for specific industry markets and also combined it with hardware, accounted for about 13 percent of sales. International distributors were responsible for 13 percent of sales, up 200 percent from 1985.

The company's own direct sales force was significantly expanded through the opening of six regional domestic sales offices between mid-1985 and the end of 1986, and the sales staff increased from 12 to 84 people. Direct sales to corporate end-users made up the largest share--32 percent of the company's revenues in 1986. Another 12 percent of sales were to the government sector.

In August 1986, the company changed its name to Informix Corporation in anticipation of an initial public offering. The company was reincorporated in Delaware under the new name as a holding company, and an operating subsidiary, Informix Software, Inc., was created and headquartered along with Informix Corporation in Menlo Park, California. Informix Corporation went public on September 24, 1986, by selling 969,446 shares at $7.50 per share, raising $6.7 million. The company raised an additional $2.3 million by selling 330,554 shares to Altos Computer Systems, which put Altos's investment in the company at 23 percent.

Merger-Generated Losses: Late 1980s

In February 1988, Informix made the significant strategic decision to acquire Innovative Software Inc. of Lenexa, Kansas. It was hoped that Innovative's microcomputer software products, and especially its front-end applications, would complement Informix's RDMS software and offer clients integrated office automation software. Innovative, which had 1987 revenues of $18.8 million, had developed a package of integrated software applications for the personal computer called SmartWare. Michael Brown, one of the two Innovative founders, became president of the merged Informix, while Sippl retained the posts of chairman and chief executive.

The companies, however, had very different products, markets, corporate cultures, and geographic locations, and were difficult to integrate. Furthermore, the decision to retain dual headquarters led to confusion and inefficiency. Employment increased from 350 to 1,200, while expenses doubled. There was significant turnover in sales and marketing personnel, and two vice-presidents of sales left the company in 1988. Earnings, excluding merger costs of $800,000, steadily declined from $2.5 million in the first quarter of 1988 to the company's first loss of $2 million in the fourth quarter. Furthermore, Informix's accounting methods had to be revised due to criticisms from investors and auditors. To top it all off, in late 1988 Informix was the subject of a class action lawsuit by shareholders charging company officers with inflating the company's stock price. The company ended 1988 with a $46.3 million loss.

Problems in managing the merger contributed to delays in introducing new products. Release 4 of Informix's database engine was delayed from early 1989 to the end of the year. A SmartWare upgrade was also many months late. A new spreadsheet software package called Wingz, which Innovative had begun developing in early 1987, was announced in January 1988, but did not ship until the spring of 1989. Wingz was Informix's first product for Macintosh, and debugging the software took much longer than anticipated. Losses continued in 1989 and 1990.

Despite innovative features and favorable reviews, Wingz never had a reasonable chance of becoming a successful product. It could not compete with Microsoft Corporation's Excel, which held an estimated 70 to 90 percent of market share for Macintosh spreadsheet programs. Likewise, SmartWare II was not a big success because integrated software--a single package that combines word processing, spreadsheet, database management, and other capabilities--never became popular in the United States despite SmartWare's relative success in Europe.

New Management, Corporate Reorganization: 1989

It took a new chief executive with more professional management experience to turn Informix around. Sippl, retaining his post as chairman, turned over the management of the company to Phillip E. White in early 1989. Until then, White had been president of Wyse, and prior to that spent 15 years at IBM before two years as vice-president of sales and marketing at Altos. Sippl eventually gave up day-to-day control as chairman in 1990 and left in 1992, feeling that his start-up company had grown too big for him to manage.

White announced a corporate reorganization in January 1989. He laid off about 200 employees--15 percent of staff--and eliminated the dual nature of the company. Instead he created two product divisions, the Workstation Products Division in Lenexa and the Advanced Products Division at the headquarters in Menlo Park. The Advanced Products Division was responsible for Informix's traditional database, network, and application-development software, while the Workstation Products Division became responsible for Wingz and other office productivity software.

White also took over the presidency of Informix and the management of the Advance Products Division, while former Informix president Michael Brown became president and general manager of the Workstation Products Division. In 1990 White relocated some of the manufacturing operations to Kansas, where labor costs were lower. By the end of 1989, office automation software, developed primarily by the Workstation Productions Division, accounted for 27 percent of Informix's revenues, while database management software accounted for 36 percent. Software development tools, such as INFORMIX-4GL, made up 37 percent of sales.

White's turnaround of Informix proved spectacular. At the beginning of 1990, Informix introduced a new, high-end RDMS product for enterprise-wide use called INFORMIX-OnLine. Designed for online transaction processing, it featured distributed processing, fault tolerance, and multimedia capabilities permitting the storage and retrieval of digitized sounds and graphics. The company returned to profitability in 1991 after losses of $46.4 million in 1990. The following year, sales increased 46 percent to reach $283 million, and net income quadrupled to $47.8 million. Contributing to 1992 sales was a single $26.8 million contract for the Army National Guard and Army Reserves. Informix's stock price, which had fallen as low as $1.31 a share in January 1992, shot up to around $38 a share by the spring of 1993. The market capitalization of the company rose 24 times in the same period to reach $1.2 billion. Manufacturing costs dropped from 13 percent of revenues in 1989 to only five percent in 1993.

Most significantly though, Informix was able to continue growing by taking advantage of the accelerated demand for UNIX-based business software applications among corporations switching from mainframe computers to networks of server-based personal computers and workstations. In 1989 Informix introduced INFORMIX-STAR, software that enabled users of its new INFORMIX-OnLine RDMS to retrieve data from not one but multiple network servers.

Strategic Investments and Partnerships: 1990s

Under White, Informix followed a new strategy of investing in its core databases and software developers' tools while delegating add-on software applications and greater marketing responsibilities to its growing network of about 2,000 value-added resellers. Increasingly, the company shared the costs and credit for developing new products with other corporate partners. Informix began working with Sequent Computer Systems Inc. on a parallel processing data query product; with Siemens A.G. on a data dictionary; and with Symbol Technologies Inc. on programming tools to aid in the development of applications for wireless networks. Informix also licensed Hewlett-Packard's SoftBench framework for third-party computer-aided software engineering tools. Having learned its lesson from the Innovative merger, Informix did not pursue any more acquisitions, but rather engaged in strategic investments with other companies. As a result of these strategies, Informix was able to maintain operating margins in the early 1990s of over 20 percent.

Meanwhile, Informix began to deemphasize its office automation software in order to concentrate on database management software and programming development tools. Informix also expanded its overseas sales. Its first quarter 1993 European sales increased 48 percent, while Oracle's increased only four percent. In 1993, through 30 overseas sales offices, foreign sales accounted for 58 percent of Informix's revenues, up from 54 percent the year before. The company's lower-end RDMS, INFORMIX-SE, sold through international VARs, did especially well in Europe.

In early 1993, 80 percent of Informix's sales were for software running on the UNIX operating system, and the company claimed to be the world leader in the number of installed RDBSs on UNIX computers. However, having decided to further expand its offerings for other operating systems, Informix increased its marketing efforts for a version of its RDMS launched in 1992 to run on Novell Inc.'s Netware Loadable Module. Informix also began making its INFORMIX-OnLine available for Microsoft's Windows NT server operating system and entered a joint marketing deal with Microsoft for a software package consisting of the INFORMIX-SE Client/Server Software Developer's Kit and Microsoft Windows NT, which began shipping in January 1994. In addition, it began looking into more support for the Macintosh platform, and introduced a new pricing system in December 1993, aimed at setting the software price according to the value that its customers derived from it. This user-based pricing model replaced a pricing structure based on machine class. While emphasizing value to the customers, the new pricing system was also expected to raise revenues slightly on average. Shortly thereafter, competitors began to follow Informix's example in pricing methods.

Informix developed a new product technology in late 1993 called Dynamic Scalable Architecture, the first database management design to combine parallel-processing capabilities, data replication, and connectivity in a single product, while also being adaptable to a user's growing needs. Dynamic Scalable Architecture was first incorporated into INFORMIX OnLine Dynamic Server 6.0, introduced in December 1993. In March 1994, Informix shipped OnLine 7.0, its first true multi-processing database. Codesigned by Informix and Sequent Computer Systems Inc., it featured parallel data query, which automatically splits user queries into several parts which run simultaneously across multiple processors.

In 1995 the company reported record revenue of almost $709 million, a 51 percent growth over 1994, and earnings of $105 million, an increase of 59 percent. The company's stock hit a 52-week high in February with a newly released version of its so-called relational database management software. In December, the company sealed its leadership position in the object-relational category with the agreement to acquire Illustra Technologies, which offered content management technology.

The following year, Informix entered into two successful partnerships--first with Gemplus and Hewlett-Packard to develop smart cards for secure Internet and electronic commerce applications, and then with Digital Equipment to open the Advanced Technology Center in southeast Asia. Universal Server, the first database to store any kind of information, including graphics, and video, became possible with the merger of Informix's own relational database management software and an Illustra program, which relied on the new object-relational database management technology. Informix began to market the Universal Server and, by year-end, had moved to second place in its industry behind only Oracle. Its share of the database market was now six percent, and its stock hit its all-time high of about $36.

However, the tide turned suddenly in 1997 when the company lost $140 million in its first quarter. Shares plunged 35 percent, and the company was forced to lay off ten percent of its employees. White, soon after replaced by Robert J. Finochio, attributed the loss to the company's failure to close sales on existing products while gearing up for the introduction of Universal Server. Finocchio ordered a refocus on basics, and the building of a new management team to define Informix's marketing mission, but the company's financial woes continued. In August, as shares dropped another 22 percent, it announced that it had booked questionable sales as completed transactions and planned to restate its 1996 financial results. The restatement eventually extended to three and one half years and involved a reduction of more than $250 million in sales and earnings. For 1997, the company suffered losses of $357 million as revenue fell to $662.3 from $727.8 million. Informix's share of the database market dropped to 5.6 percent, and its stock hovered at a low of $4.

In an attempt to move forward, Finocchio trimmed Informix's product line to one main product aimed at the largest corporations--spatial information systems examine relationships between demographic information and geography--and began to focus on high-profit niche markets like electronic commerce, retailing, and media, instead of selling cut-rate database packages. The company was reorganized into two new business units: Data Warehouse Business Unit Group and i.Informix, which focused on web commerce. As the only company in its industry to cover Unix, NT, and Linux, Informix sought to remarket itself, changing its logo and tag line to "The one with the smartest data wins." By the second quarter of 1998, it had once again turned a profit. It expanded its staff to nearly 3,600 and agreed to buy California-based Red Brick Systems Inc. Revenue rose 11 percent to $735 million and net income was almost $58 million for the year.

Finocchio stepped down in 1999, replaced by Jean-Yves Dexmier. Under Dexmier, the company attempted to put the past to rest by paying out $142 million to settle a lawsuit with stockholders concerning Informix's recent losses. Moving forward into the next century, it unveiled its Foundation 2000, a data and content management platform for the Internet and announced its new strategy of going direct to customers rather than focusing on technology for use in developing products for end-users.

Principal Subsidiaries: Informix Software, Inc.