Informix urgently needs to find new sources of cash, according to its latest financial report to the US Securities and Exchange Commission. The stricken database supplier is facing continuing operational losses well into 1997 and doubt about the success of its current product strategy.
The company?s latest financial report, filed last week following its horrendous $140 million first quarter loss, says Informix will go to commercial banks and the capital markets in search of additional funding after its cash supply at the end of March was slashed to $120.6 million from $261 million.
The company is facing a series of additional costs in the coming two quarters which will add to the financial pressures it is already facing from a 34 per cent year-on-year drop in sales and an indirect channel blocked by unsold product. These include restructuring charges for an as yet unspecified number of job cuts and possible charges related to its new Superstore outlets.
In the SEC report, the company warns that, as well as the anticipated costs of restructuring in the current quarter, things could get worse. "The company may be required to further restructure its operations. Restructuring may include reductions in force, asset sales or write-offs and other measures designed to reduce ongoing operating expenses," it explains.
As well as needing cash to offset anticipated operating losses, more working capital is going to be needed to meet $38.3 million of capital commitments over the next six months. These are costs incurred mainly by the company?s new Superstores, a UK-piloted plan to create outlets where customers can test drive their Informix applications.
This scheme has been significantly pared back, but doubts remain about its potential for success. "If the company?s Information Superstore strategy is not effective in increasing revenues, the company may be required to write off a significant portion of [the] costs and take other charges associated with the superstores," admits Informix. The company laid out $125 million on the superstore project in the first three months of this year alone.
An alternative financing route being pursued by the company is to refinance or sell 27 acres of land which it bought in Santa Clara, California for a major new Informix campus. In January, Informix put down a $61.5 million cash collateral deposit with Banque Nationale de Paris as part of the original transaction.
But although the company has managed to reduce its monthly loan repayments on the lease by reassigning interest on that $61.5 million, it is likely to fall foul of what it calls "certain financial performance criteria" related to the lease. "The company expects it will not be in compliance with these financial covenants at the end of the second quarter and is currently in the process of discussing the terms of the contract with the lessor," says the SEC report.
The filing repeats Informix' admission that its salesforce overemphasised its new object-relational Universal Server product in the first quarter, but includes a new piece of information: object-relational products accounted for only 10 per cent of first quarter licence revenue.
Officially that figure includes both Universal Server and its base technology Illustra, but since no copies of Universal Server have actually been sold, it can be assumed that all licence revenue comes from existing or new Illustra customers. Separately Informix said that it expects to release details of Universal Server customers in the coming weeks.
But the SEC reports comes to a grim conclusion: "While the company continues to believe Universal Server will be successful in the marketplace and ultimately replace [the relational] Online Server products, there can be no assurance that market acceptance of Universal Server will occur in the timeframe envisioned by the company or at all."
The report was filed as Informix stock continued to be among the actively traded on Wall Street amid strengthening rumours that a takeover - whether hostile or friendly - is almost certain. Informix chief executive Phil White is set to meet with shareholders at a company meeting on Thursday.
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