New ATG Boss Defines Mission

Says company’s prospects remain good despite fall of new economy

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Inevitably, nearly all companies reach a point in their histories when it comes time to transfer power from one executive to another. It's a defining moment that can often make or break a company. One of the toughest decisions an organization must make is whether to promote from within or hire from outside when choosing a new CEO.

Many companies have benefited from looking outside. Think IBM, for example. Few could argue that naming Lou Gerstner to head IBM wasn't a good move. The jury is still out, however, on Hewlett-Packard 's Carly Fiorina (who had worked at Lucent) and Compaq's Michael Capellas (who had worked at Oracle and SAP).

Then there's the other route, when companies promote from within. As chairman and CEO of Accenture, 25-year company veteran Joe Forehand, for example, has drawn praise for distinguishing the company among others in IT consulting.

Recently, one-time Internet wunderkind Art Technology Group (ATG), chose to promote from within when it named a new CEO. In late October, four-year company veteran and president Paul Shorthose took over, essentially kicking company founder and former CEO Jeet Singh upstairs to become co-chairman. Singh oversaw the company throughout a remarkable ramp-up and an equally humbling fall. A little more than a year ago, for example, ATG shares traded at around $50. At press time, they traded for less than $4. Furthermore, losses at the company continue to mount while revenue slides. For the third quarter ended Sept. 30, 2001, sales slipped by more than $5 million compared with the year earlier period, while losses reached $9 million.

The management reorganization was designed to show a willingness to change while simultaneously demonstrating consistency to investors, customers and partners alike. Many of the strategies Shorthose plans to pursue, for example, were enacted by Singh before his role shifted. In a recent interview, Shorthose outlined what role he thinks ATG can play. He believes ATG can become an important player in software again, even a platform player. He envisions ATG providing software that lets companies tie together their entire business lifecycles. "ATG gives customers a single window into companies and the ability to tie in with legacy back-end applications," he says.

No longer wanting to be a mere application server software company, ATG now wants to

develop apps that run atop third-party servers. That's why it's explored personalization and

e-commerce software, and why it has added B2B and portal capabilities to its portfolio.

Whether that's enough to sustain the company long term remains to be seen. Indeed, ATG might want to make some select acquisitions to bolster its portfolio, Shorthose says. As for detractors, Shorthose takes exception to those who depict the company as a one-time leader in Internet software.

"Obviously, we are not alone in this particular economy...But the good news is that we built a customer base of about 800, which gives us runway," he says.

Studious readers might take note that ATG appears to be building its own services capability. Service sales as a percent of overall revenue, after all, increased in the third quarter. But Shorthose insists that was an anomaly. "Our target model is 65-35 percent product to service. We're not looking to be a service company that has products; we're a product company that delivers services, [mostly through our channel."

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