BEA sees a turnaround ahead
Published: 20 May 2004 11:10 BST
The battleground
BEA and others are competing in the multibillion-dollar market for software to build and deploy business applications. BEA's WebLogic Platform suite includes an application server -- the software needed to run applications -- as well as a portal, integration software and a Java development tool. The company has sought to reduce its dependency on the WebLogic application server, which fuelled its rapid growth in the late 1990s, by selling the WebLogic Platform suite of products.
When BEA launched WebLogic Platform 8.1 last summer, the company said its Workshop development tool would make Java programming easier and simplify the process of integrating multiple business applications -- long a pain point with corporate customers.
The product strategy is showing signs of success. The company's customer base of Workshop developers has grown since its launch. BEA's revenue from licences and services in integration software more than doubled last year to $147m, according to research firm IDC. The company's fourth quarter, ended 31 January, was its best, bringing BEA's annual revenue to more than $1bn.
And though BEA's competitors, notably Oracle and IBM, seem to be having success selling their own Java application server suites, WebLogic applications are not easy to displace because they are designed to do the critical back-end processing of business applications.
"We're still comfortable with the strategic direction of the company…because you're investing in a platform," says Richard Lynn, vice president of global applications and architecture at Pfiser Pharmaceutical, which has accelerated its use of BEA's software and tools over the past year. "One bad quarter does not cause too much concern unless it's coupled with other signals that they may be losing their strategic focus."
At its eWorld customer conference, BEA intends to describe how it will expand its product line and to articulate its overall technology vision. According to descriptions of conference sessions, BEA will discuss tools built around Web services protocols to ease the management of WebLogic applications. The company will also detail "Diablo", the code name for the next version of the WebLogic application server, which is being designed to improve its clustering capabilities. Another product in the works is an enterprise service bus (ESB), code named QuickSilver, which is not expected to be completed until next year, according to a software executive who works at a BEA partner company.
BEA's service bus plans mirror efforts at IBM to build a standards-based integration software product. Several smaller specialised firms already sell ESBs, which are used for integrating systems. But new projects such as an ESB could spread BEA too thin, said the software executive.
"I think they're two years late with this," says the executive, who's familiar with BEA's ESB plans. "If this product already has the potential to be commoditised, why do they want to start building it now?"
Apart from expanding its product line, BEA has taken other steps to shore up its competitive position. The company, which has a strong partnership with Hewlett-Packard, in April signed an agreement with Veritas to make BEA and Veritas products work together smoothly for utility-computing-like data centres.
BEA earlier this year revamped its partner program to recruit more value-added resellers, distributors and third-party software providers to sell its WebLogic software. Addressing its missteps in the past quarter, BEA said its top sales executive in the Americas has left and it temporarily put Charles Ill, executive vice president in charge of worldwide sales, in charge of the Americas region.
In the past few months, it shifted around executives in charge of product development, designating an executive vice president in the products organisation, Olivier Helleboid, to do long-term planning. BEA also intends to create industry-specific versions of its software to better match the way its consulting firm partners, such as Accenture, sell to corporate customers.
Moving forward
The moves, along with an anticipated increase in adoption of the latest version of WebLogic over the course of the year, should get BEA back on track after a disappointing quarter, BEA chairman and chief executive Alfred Chuang said during the company's earnings call last week.
"Interest in WebLogic Platform for projects is now getting started for deployments later this year," Chuang said. "[We're] a very, very healthy company with an unbelievable balance sheet. We should be able to get back to our growth path pretty soon."
Analysts expect the following year to be important for BEA. As competition from larger rivals and open-source products heat up, BEA observers will be tracking how quickly its WebLogic Platform 8.1, which the company expects to fuel revenue growth, is being adopted by customers.
"This is not a tame management team. If you knock them down, they'll come up swinging," says Robert Becker, a financial analyst at Argus Research, which downgraded BEA's stock last week. "[But] while it's a solid company, they can't afford to miss a step."
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