With a stock price that was last week languishing at a 52-week low of $US14 and a string of unprofitable years, it was probably only a matter of time before Platinum Technology had to make some hard decisions.
Last week, the US systems management and database software company announced that it is sacking 15 per cent, or 1000 members, of its staff and taking a restructuring charge of between $90 million and $110 million in the first quarter of fiscal 1999.
"In my heart, this is something I think has been necessary for a long time," said Don Saunders, senior vice president responsible for Platinum Technology's Asia-Pacific operations.
The restructuring plan, which Platinum Technology expects to result in annual savings of about $US90 million, will not have much of an impact on its Asian operations and no layoffs are to occur in the region, Saunders said.
Prior to the restructuring announcement, Platinum Technology executives in Asia had hammered out a plan designed to boost the efficiency of the company's regional operations and therefore will not see a significant impact from the restructuring, Saunders said.
"There's no specific reduction in headcount that is attributable to this (corporate restructuring plan)," he said. "We had changed how we handle some pre-sales, moving people from the regional team back out into the countries to get them closer to the country and more productive. We had a small regional selling group and we shifted them into the countries as well so it's kind of a non-event in Asia," Saunders added.
From a revenue standpoint, Asia is growing rapidly for Platinum Technology and is expected to be profitable over the coming year.
"We did $32 million last year and we expect to do $54 million this year for Asia. The numbers are on track to expect a profit," Saunders said.
Overall, Platinum Technology reported a net loss of $2.5 million for fiscal 1998 on revenues of $986 million. The company has not had a profitable year since 1993, while aggressively notching up well over 50 acquisitions over the past few years.
Last year's purchases included data-modelling specialist Logic Works, training company Mastering and process-management software vendor Learmonth & Burchett Management Systems, as well as a $500 million merger with Israeli security specialist Memco Software and the acquisition of Silicon Graphics' VRML software developer Cosmo Software.
Tellingly, the company is opting to suspend its acquisition activity in favour of focusing on consolidating its existing business, Platinum Technology officials said.
"The consolidation is definitely something that has to happen. . . . I think we waited a little long to do it," Saunders said.
As part of the restructuring plans, product development - formerly divided up into five business areas - will now be split between two main business units: Enterprise Management and Application Lifecycle & Knowledge Management, the company said.
Platinum Technology also plans to shut offices that are "close in proximity" to one another, the company statement said. A report carried in the Wall Street Journal puts the number of offices set to be closed at 12.
No Asian offices will be closed as part of the restructuring effort, Saunders noted. "The offices (to be closed) are really in the development environment. When we've acquired all these companies, the position we took was to leave them operating in their current location. For example, I think in Houston we have four distinct offices and we're just consolidating them into a single facility," Saunders said.
The main planks of the company's restructuring are refocusing on Platinum Technology's core businesses and ensuring that every customer has a single point of contact within the organisation's sales, support and consulting operations, the company said. Key software to Platinum Technology going forward will be its products based on IBM's DB/2 databases -- one of the company's traditional strengths -- and software suites (for instance, enterprise management suite ProVision and application development management suite ADvantage), as well as the vendor's data warehousing software.
Somewhat ironically, earlier this month, Platinum Technology resolved a long-running dispute over company names with ERP (enterprise resource planning) software vendor Platinum Software. Part of the origins of the dispute stem from when similarly named Platinum Software was in severe financial difficulties several years ago. At that time, Platinum Technology took out advertisements in the press to stress that it was a completely different entity from Platinum Software.