Red Brick Systems has closed down its UK subsidiary as it turned in a set of first quarter figures well below analysts? expectations.
The UK subsidiary, which also acted as European headquarters, has now been closed because ?the employees didn?t meet their objectives?, according to Mark Olsen, director of corporate marketing.
Staff numbers have been halved to five, and they will work in a newly created UK and European channel team, managing relationships with resellers. Gary Smith, UK managing director, has left.
While financial analysts went berserk, talking about class action suits and querying the absence of a profits warning, the data warehouse software supplier?s share price stayed relatively stable at $7. The company?s stock price has been on a steady decline since February, before which it hovered around the $22-$24 mark.
Red Brick attributed this to the freefall in Informix? shares as a result of its shocking first quarter figures and the fact that a large chunk of its stock had been sold to the markets in February by a third party, making it very liquid.
For its first quarter ending 31 March 1997,the firm generated flat revenues of $6.5 million, half of the $12.3 million analysts had expected.
Net losses amounted to $6.4 million compared with profits of $400,000 in the same period last year. But operating expenses soared to $11 million from $5.6 million last time, while licence revenue dropped 31 per cent to $3.7 million.
Analysts at Morgan Stanley on Wall Street added more gloom to the already dismal picture, by stating that they had reduced their estimates to a loss of $1.3 million for this year.
Even worse, the company did not expect the firm to move back into profit until the end of next year, when it would make profits of only $570,000. Revenues would grow only seven per cent this year and 28 per cent next, the investment firm predicted.
Mark Olsen, Red Brick?s director of corporate marketing, said: ?We had a bad quarter, but we?ve got a pretty good understanding of what happened and we?ve implemented programmes to help rectify the situation. The first quarter is traditionally our toughest anyway, but approximately 30 deals we expected to book didn?t make it into the quarter. Customers delayed their buying decisions, but we still believe most of it is viable business, although we can?t speculate when the deals will be closed.?
He added that Alec Wilson, the company?s new vice president of sales, who was brought in in January, hadn?t managed to make necessary changes as quickly as he would have liked.
But, the company was now transitioning to a model more suitable for a larger organisation. As a result of this quarter?s figures, it had speeded up the creation of a prospect building and post-sales support unit. This was previously expected to be implemented in the second half of the year, but had now been pushed forward to within a month.
?We have confidence in our products and the way we do business and we won?t radically cut back on staff. We want our sales staff to do more selling and less prospecting and territory work. The staff currently spend only 35 per cent of their time selling, but we want to double that by the end of the year,? Olsen said.
US channel sales were also slower than expected, he added, but a dedicated team was also being put in place to improve channels management.
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