Why Platinum Looks Like Gold

The specialized software outfit soars by underpricing its rival

Andrew J. "Flip" Filipowski isn't one to brood over setbacks. In March, 1987, after a bitter falling-out with his financial backers and partner over how to turn around DBMS Inc., the software company he had started in 1979, Filipowski was forced out. So he immediately recruited about a dozen key DBMS executives and software developers to launch another startup, Platinum Technology Inc. "It took me about 24 hours to shut that chapter and move on," says Filipowski, 41.

Good move. Platinum, ranked No.2 company on BUSINESS WEEK's list of the Hot Growth Companies of 1991 (BW--May 25), has seized a leading share of an arcane but burgeoning branch of software products that make it easier to use DB2, the popular IBM mainframe data-base program. In 1991, Platinum's profits surged 80%, to $4.5 million, as revenues vaulted 91%, to $27.9 million. And DBMS? Unable to reverse declining revenues, it was bought in 1990 by Computer Associates International Inc.

GUERRILLA TACTICS. While Filipowski can enjoy the last laugh, his Lombard (Ill.) company was every bit the bootstrap operation until recently. To enter the market for DB2 tools, which perform such functions as moving information between different data bases, he turned to guerrilla tactics. Its big rival, BMC Software Inc., refused to sell below list price, so Platinum discounted like crazy. And since BMC made all of its sales by phone, Filipowski differentiated telemarketing at Platinum by adding a small direct-sales staff and a global collection of independent computer consultants.

Perhaps his biggest coup was joining up with IBM. To encourage development of DB2 programs, IBM set up an arrangement last year called SystemView. As a member, Filipowski must fork over a stiff 10% of revenues from most of his software packages. In return, he has unparalleled early access to IBM's data-base research efforts. Also, IBM is marketing only Platinum's DB2 tools in Japan.

Filipowski's strategy is delivering. Platinum is neck-and-neck with BMC in these products, each with roughly 35% of total shipments in the $146 million market, says William S. McNee, a software analyst for market researcher Gartner Group Inc. But Filipowski still has some bugs to work out. "If anything, quality control is really the thing that needs to be hammered in," says Howard D. Buehler, data-base manager for Union Pacific Technologies. Although he has had a few glitches, Buehler figures he saved about $100,000 by buying five Platinum programs instead of bug-free BMC products. Filipowski knows customers will put up with bugs only for so long. By 1994, he's shooting for six-sigma, the statistical equivalent of perfection, or just 3.4 defects per million lines of software code.

For the time being, Filipowski's only other worry may be Platinum's stock. It has fallen sharply this year as part of a broad market retreat in technology stocks. But at 14 a share, or about 36 times estimated 1992 earnings, it's still too rich for some. Kemper Technology Fund and Invesco Trust Co.'s technology fund bailed out recently but are awaiting a chance to jump back in. "They've managed their growth beautifully," says Daniel Leonard, a portfolio manager at Invesco. That's not surprising: This time, Filipowski had a lot to prove.

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