Article

NetShift makes changes, looks ahead

NetShift Software Ltd. plans to move ahead after a sluggish start to 2002 and the departure of several top executives. A successful June has company officials optimistic about the future.

July 24, 2002

NEWBURY, England -- As befits someone with Silicon Valley experience, NetShift Software Ltd. chairman and chief executive officer Nigel Seed understands the stratospheric highs and morale crushing lows of life in the technology sector.

Seed's enthusiasm for the industry, and specifically NetShift's kiosk software development business, has been tested this year. A sluggish world economy has delayed numerous kiosk projects, stagnating NetShift's revenue base, and distorting the delicate balance between money coming in and VC funding going out at the UK-based firm.

But the summer months are lifting the gloom from Seed's shoulders. With revenue streams beginning to trickle again and NetShift taking steps to reduce its spending, the company's chairman is again confident in the company's prospects.

"We had a storming June," Seed said. "Deals that were slipping and sliding came in during June and it's boosted our confidence enormously."

A numbers game

According to Seed, the company had "about $1 million in software and services ordered and booked" in June, a figure that represented between 600 percent and 700 percent improvement over past months.

Among the projects that entered the company's books in June were the launch of a second-generation line of public access kiosks at BP Connect locations (See story: BP moves forward with new kiosk line) and an expansion of products with global telecommunications firm Vodafone Group.

NetShift's improved performance as spring turned to summer was the result of several factors, internal and external.

NetShift Software Ltd. chairman and chief executive officer Nigel Seed believes the company is poised for a high level of growth in the months to come.

Internally, the company wrapped up a review of its performance and procedures. The bottom line, according to Seed and NetShift board member Nick Callinan, was the decision to streamline the company and sharpen its focus.

"We just scaled back and reorganized," Seed said. "We were at about 55 people and scaled back to 40 or 45. That was to ensure we didn't burn through the $5 million and make sure the revenue we bring in is in line with what we're spending."

The $5 million refers to venture capital funding the company received in September of 2001 from Shell Internet Ventures BV. Callinan, Shell Internet Ventures' senior vice president, joined NetShift's board of directors when his firm made the investment. Shell Ventures, a division of petroleum company Royal Dutch-Shell Group, announced earlier this year that it was "no longer considering new investments in the Information Technology and Communications sectors," according to the company's Web site.

But the company has retained NetShift on its portfolio and Callinan remains on NetShift's board. Callinan said Shell remains committed to NetShift's vision, reasoning that the company's problems were no different from the rest of the sector.

"It's no secret that the IT industry has had a hard last couple of quarters," Callinan said. "We've found a lot of companies that said we want to do (kiosks), but not this quarter. Some companies with projects we thought would come in during Q1 said, `We'd like to wait,' and some are waiting through Q2."

Saying farewells

In streamlining its operations, the company said goodbye to one of its higher-profile employees with the departure of vice president of sales Derek Stewart. Seed, who is currently assuming the role on an interim basis, said it was "painful for me personally, because he's been a friend for many years," but did not elaborate.

Most of the other job cuts came in the development side of the business. Seed said the company had "too many engineers working on product development," with the end result that some of them were sitting around waiting for products.

Perhaps the highest-profile departure in recent months is that of vice president of marketing John Purcell, who left earlier this year to concentrate on his Irish-based consulting business, Purcell & Associates.

Purcell remains linked to NetShift however, accepting a position on the board of directors and retaining an investment stake in the company.

"I still subscribe to what NetShift is doing," Purcell said. "It's like the guy in the Remington (shaver) ads who said he loved the product so much he bought the company. I can't buy the company, so I bought into it instead."

Purcell contends that the problems that affected NetShift earlier this year were endemic of an industry-wide, perhaps global, malaise of spirit.

"I was bitten by the discouragement bug there for about six-to-eight months," he said. "I think it was post 9-11 more than anything else. But I'm really invigorated seeing the market the way it is right now."

While there have been changes in the company's main office, Seed said the North American office, launched earlier this year (See story: Crossing the Atlantic), would remain in operation.

"It was an easy decision to keep the North American office open," he said. "Rob (Gallner, who heads the department) and his team joined us right up to speed and firing on all cylinders."

Around the corner

Along with streamlining its work force, NetShift also evaluated its company philosophy and found that an approach that mixed back to basics with the realities of the current market was needed.

As a result, NetShift plans to concentrate on network services in kiosks and related sectors.

"Since Shell invested in NetShift the company has been committed to serving client-side and service-side needs," Callinan said. "But a number of people said `Help us design programs and specialty hardware,' so we've been sucked into providing bigger components."

Seed noted that the shift in emphasis means more work with international companies that operate on multiple platforms, such as BP and Vodafone. He believes that the market is moving in that direction anyway.

"The kind of market we dealt with, the little one-off deployment, is going to disappear quite frankly," he said. "But one thing we do know is a market that won't disappear is the one for big, meaty, industrial solutions. Â… We've asked ourselves, `Are we abandoning our roots?' We don't think we are."

With the release of version 6.0 of its Builder and Runtime software platforms in early July (See story: NetShift releases version 6.0 software suite), NetShift expects to enhance its reputation for creating industrial-strength solutions.

Version 6.0, which will market for $500 for a single copy, is designed for stand-alone and network projects that are built on strong revenue generation streams.

"We've been drawn in to the bigger, more robust products necessary to face the challenges in the market," Seed said. "Version 6.0 is the culmination of things. The orders we're getting now are not from the doctor's office or a kiosk at a camp. These are serious companies organizing serious projects with a serious expectation of ROI."