Wang's Great Leap Out Of LimboGary Mcwilliams
The saga of Wang Laboratories Inc. has almost enough tears and triumphs to make a Hollywood classic. A highflier stumbles and slips into bankruptcy. But just when everything seems lost, it emerges from Chapter 11, bloodied but unbowed. And as if to dramatize its comeback, Wang issues new stock. The shares climb 46% within six weeks, to around 22. Happy ending?
Not exactly. Rapidly evolving personal-computer technology has transformed Wang's legendary minicomputers into high-tech relics. So the Lowell (Mass.) company is racing full throttle into the software and high-tech consulting business. Wang is hitching its future to one of the hottest business trends in Corporate America: re-engineering. With companies turning to reengineering gurus to help them ease their workloads, Wang sees enormous potential in software and services designed to reduce paperwork. The market could be worth $3.4 billion by 1998, according to the Gartner Group, a computer market-research firm.
NERVOUS. Before Wang can lay claim to any of that expected treasure, however, it must overcome some steep obstacles. It has to transform itself from a slow-moving hardware company into a fast-paced service provider. And it must struggle to overcome the lingering taint left from its bankruptcy. Fearing Wang could have a financial relapse, some potential customers are nervous about investing huge sums in new Wang products. "The question becomes: How much of your reputation do you want to stake?" says Luis Morales, vice-president for management information systems at Financial Security Assurance, a municipal-bond insurer.
And if all that weren't challenge enough, Wang CEO Joseph M. Tucci must persuade customers who own some 30,000 Wang minis not to abandon their aging machines. Not only does Wang see that existing customer base as a fertile ground for new software sales but the company needs its mini users just to survive. Servicing and upgrading the minis will account for two-thirds of Wang's projected revenues of $920 million in the fiscal year ending June 30.
It has been a long trek from minicomputer giant to budding software and services supplier. Back in the 1980s, Wang's minis were hot products among corporate customers that used them for word processing. But its office stronghold came under attack from lower-cost PCs. Wang tried to fend off the attack with "imaging" software that allowed its minis to store and retrieve electronic snapshots of documents. But the mini business continued to fall away, and Wang's fortunes deteriorated. The company filed for bankruptcy protection in August, 1992.
Wang finally emerged from Chapter 11 last September. And the new Wang looks vastly different. The company is small and nimble--much as it was in the 1970s, when it was run by its founder, Chinese immigrant An Wang. The company erased $1.3 billion in debt and other claims. Wang also slashed employment to 6,000 from 13,000. Another painful legacy of bankruptcy: On Feb. 16, its towering headquarters, built for $55 million, was sold at auction for a mere $525,000. And though Tucci expects to make a modest $20 million profit this year--Wang's first since 1988--it's a far cry from the glory days of 1984, when the company's profits climbed 38%, to a record $210 million, as its sales hit $2.2 billion, up 42%.
"CUSTOM SUIT." Now it's up to Tucci, 46, to start building the business again. A former Unisys Corp. sales executive, he became CEO in January, 1993, replacing Richard W. Miller. Together with Donald P. Casey, president and head of Wang's technology development, he has spent the last year crafting a strategy that he hopes will finally allow Wang to put the hardware business behind it.
Few in the industry doubt Wang has the technological wherewithal to mount a strong offensive in the software market. On Feb. 8, Wang released a new "workflow" program. It speeds tasks such as order processing by automatically routing electronic images and other forms to credit, stocking, or manufacturing departments. Unlike rival packages, Wang's workflow software identifies bottlenecks in activities by recording how long it takes to complete a task. Wang sees the package as key to its recovery. "This product can do for the new Wang what word processing did for the old Wang," says Tucci.
Technology alone, though, won't guarantee Wang's success. It's also going to take some hard selling. That's why Tucci has established a new software division. By June, he says, he will have 310 sales and support people at Wang's 175 global offices, dedicated solely to software. What's more, Wang has struck marketing alliances with Hewlett-Packard, Computer Associates, and ASK Group, which will offer Wang's software along with their computers or software packages. Likewise, Wang will try to sell their equipment with its software.
Wang is also creating a software-consulting operation to help companies use imaging and workflow programs to reengineer their businesses. Companies are increasingly turning to consultants to revamp and customize processes such as order entries and to squeeze the most out of new technology. "When you get into reengineering and workflow, you aren't buying a 42 Long off the rack anymore. You're buying a custom suit," says Elias Safdie, a former Wang employee and senior consultant with DMR Group Inc. Casey, 47, and a former executive at Lotus Development Corp., expects the consulting business to draw as much as $3 for every $1 in software sales.
Assembling a corps of consultants is expensive, however. Wang is currently training 240 of its staffers as software consultants. Tucci acknowledges that the training costs may force Wang into the red in the quarter ending Mar. 31. Indeed, a combination of those expenses and an expected seasonal sales slowdown has unnerved investors. Wang's stock is down 19% from its January peak, to 17 5/8. In the meantime, Wang is depending on outside consultants from Computer Sciences Corp. in the U.S. and CAP Gemini in Europe.
While he builds his new businesses, Tucci is lavishing attention on Wang's minicomputer owners. He consults his biggest customers frequently to find out their needs. Wang is already cranking out low-cost mini upgrades. Keeping customers happy is crucial since, Tucci says, Wang's new endeavors won't be big enough to replace the minicomputer business for at least two years. First Albany analyst David S. Benhaim estimates Wang's imaging and workflow software will add just $40 million to revenues this year, while its consulting business may generate $80 million. Longer term, Tucci hopes satisfied Wang minicomputer owners will hire the company's consultants and buy its software. Prudential Asset Management Co., a longtime Wang mini customer, has already hired Wang consultants to implement workflow software on a network of 250 PCs.
SHARING THE SLOPES. Still, it will take a lot more Prudentials if Wang is to succeed. While Wang was hunkering down with financial advisers, the imaging business was becoming much tougher. A slew of startups have entered the burgeoning imaging-software field. FileNet Corp. in Costa Mesa, Calif., has already deposed Wang as No.2 in the business behind IBM. And FileNet CEO Theodore J. Smith says he isn't too alarmed by Wang's resurgence. Outside of its mini customers, "it's not broadly competitive," he sniffs.
As the competition heats up, imaging prices are starting to fall. Wang's software goes for as much as $3,000 per workstation. But David Skok, president of Watermark Software, a small Burlington (Mass.) imaging-software developer, says his firm will release a product in April that will sell for as little as 10% to 15% of Wang's price.
Tucci, a former ski instructor who still participates in downhill races, is far from panicked by competition. With legions of corporations trying to use technology to ease workloads, he believes there's enough business to go around. And in a few years' time, Tucci says, Wang's business-building efforts will really start to pay off. The saga continues, but Wang may yet pull off a heart-tugging finale that would make Hollywood proud.