One Company Resolves Midlife Woes

Progress Software reorganizes its product lines in an attempt to recapture its entrepreneurial spirit.

In a move its president said was a way to "combat middle-age fatigue" and regain a startup mentality, Progress Software Corp. is reorganizing to separate its myriad product lines into distinct businesses.

"The motivation and goals have to do with making sure these new ventures were starting up—the open-source database and e-business messaging—are successful," said Progress President Joseph Alsop, in Bedford, Mass. "That involves making sure the people who are involved have motivation to succeed comparable to the kinds of motivation they would have in a startup."

Accordingly, the companys newest ventures have become wholly owned subsidiaries, with key employees and managers receiving stock options separate from the overall Progress stock. Sonic Software Corp. oversees the SonicMQ E-Business Messaging Server, and NuSphere Corp. oversees the enhanced MySQL open-source database and its support and services.

The database and application server products—including 4GL and WebSpeed—that Progress is best known for will be combined under a new unit called Progress Co., along with the companys application development and management products.

Also new is a separate R&D arm, called PSC Labs, based in Cambridge, Mass. The parent company will continue to be called Progress Software Corp., with about 1,300 employees.

Brent Williams, an analyst with McDonald Investments Inc., in New York, said the move is not surprising. "They have a more diverse product line than many companies their size," Williams said, adding that the product lines mandate different business models, with some involving relationships with OEMs and others with direct sales to end users.

"Then with NuSphere, theyre trying to capitalize on the open-source movement and support an open-source database, which is yet again a different business model," Williams said.

Like many other technology companies, Progress has seen its share price take a hit. The company had a 52-week high of $28.25 on Jan. 24, 2000, and hit a low of $10.93 on Aug. 23. Last week, the company was trading in the $15 range.

Alsop acknowledged that last year was tough financially but said the restructuring was under consideration for a couple of years as part of a plan to recapture the entrepreneurial feel that the 20-year-old company had when it started.

A reorganization is a smart move from a technology standpoint as well, said Mike Gilpin, an analyst at Giga Information Group Inc., in Cambridge, Mass.

"Organizing [into different units] makes a lot of sense when some of the product lines are very late in the product cycle, and other product lines are much newer and positioned in emerging markets," Gilpin said.

Separating the products is a way to differentiate the lines and draw attention to them, but the company needs to ensure that each unit gets adequate funding, he said.