Progress Software To Divest 10 Product Lines, Cut Workforce By 10-15 Percent3:51 PM EST Wed. Apr. 25, 2012
Progress Software Corp. will divest itself of 10 product lines and lay off between 10 and 15 percent of its global workforce as the company focuses on its application development and deployment software, the company said Wednesday.
The new direction for the software company follows a five-month evaluation of the company's product portfolio, business model, capital allocation strategy, customer base and future opportunities, the company said. President and CEO Jay Bhatt launched the review when he joined the company in December.
Progress also will spend $350 million to repurchase its own stock during the current fiscal year and fiscal 2013 in an effort to increase shareholder value.
"Progress pioneered the creation of application development and deployment infrastructure tools, technology and software," Bhatt said in a statement. "Our new strategic plan is firmly rooted in this foundation and is designed to significantly improve Progress’ growth and performance. With our refined focus on providing advanced, leading-edge application development products and services to customers, we are confident that we will enhance value for all shareholders."
The moves are designed to help reverse a steady decline in sales and profitability Progress has recorded in recent quarters. In the fiscal 2012 first quarter ended Feb. 29, Progress reported revenue of $124.4 million, down 7 percent from $134.2 million in the same period one year earlier. Net income dropped 64 percent to $11.9 million from $28.3 million one year ago.
Progress has some 2,000 partners worldwide and the channel accounts for 70 percent of the company's sales.
The company will unify the capabilities of what it has identified as its core products: OpenEdge, the Progress Arcade portal, DataDirect Connect, and Apama Analytics and Decisions. That will create what the company described as "a next-generation, context-aware" development and deployment platform for cloud applications.
Progress will invest in sales, marketing and strategic product development for OpenEdge and the Progress Arcade portal; rejuvenate the DataDirect Connect database drivers by expanding the product portfolio, investing in new channels, establishing an online presence and launching a cloud connect service; and strengthen the capital market focus around Apama Analytics and Decisions and launching a real-time analytics cloud service.
The 10 "non-core" products Progress will divest are Actional, Artix, DataXtend, FuseSource, ObjectStore, Orbacus, Orbix, Savvion, Shadow and Sonic. Those products accounted for $172 million in sales in fiscal 2011, Progress said.
The company did not detail how it intends to divest itself of those products, but it did say it expects to complete the divestitures by "the middle to end" of fiscal 2013.
The workforce reductions and other cost-cutting efforts will reduce run-rate costs by around $55 million gross or $40 million net after additional investments by the end of fiscal 2012, Progress said. Along with cutting 10 to 15 percent of its workforce during this year's second and third fiscal quarters, the company will consolidate facilities and implement "a simplified organizational structure."