Quarterdeck to Cut Work Force 40%

Quarterdeck Corp., the onetime memory software leader that is struggling to succeed in the cutthroat world of Internet products, said Monday that it will shed 40% of its work force and take a charge against fourth-quarter earnings.

King R. Lee, who is serving as the company’s interim co-president, said about 100 people at Quarterdeck’s Marina del Rey headquarters will be fired. Analysts estimated that the total number of Quarterdeck employees who will be laid off nationwide will top 200.

The cutback comes as Quarterdeck continues its long quest to find a new role for itself in the volatile PC software business. The company first rose to prominence in the early 1980s with its QEMM memory management software and Windows-like interface known as Desqview.

But the continual improvements in Microsoft’s Windows software eliminated the need for many of the company’s products, causing revenue and profit--as well as the company’s stock price--to fall precipitously. Company founder Terry Myers resigned in 1994, and Gaston Bastiaens was brought in from Apple Computer with the high-profile assignment of giving the company a new mission.

Bastiaens positioned the company to compete in the ultra-competitive world of Internet software and went on an acquisition binge: Quarterdeck acquired 10 companies in 20 months to add technologies for Internet searching, collaborative computing, Internet phone software and others to the company’s portfolio.

Last December, Quarterdeck’s stock was trading above $30 a share, in large part due to enthusiasm about the company’s Internet strategy. But the products didn’t stack up to the hype: Quarterdeck earned $4.1 million on revenue of $70.7 million for the 1995 fiscal year, but by the third quarter of fiscal 1996, which ended June 30, the company was reporting a loss of $22.9 million on a mere $16 million in revenue.

Quarterdeck shares closed at $7.13, up $.81, in Nasdaq trading Monday.

Some analysts believe the company will not survive for long as an independent entity, and rumors swirled earlier this year that Santa Clara-based software developer McAfee Associates was poised to buy Quarterdeck. Bastiaens resigned in late August.

The layoffs announced Monday are necessary for the company to “even hope for profitability in the coming quarters,” said Paul Saunders, an Internet analyst with Van Kasper & Co. in San Francisco.

Lee said that most of the reductions would come by eliminating redundant positions created by the acquisitions.

“That’s the whole idea of doing an acquisition--you add the products and reduce the overhead,” said Terry McCrary, vice president of research at Auerbach Pollak & Richardson in Stamford, Conn. But with such a high proportion of employees on the chopping block, he expressed doubt that the layoffs would be contained to administrative workers: “Forty percent sounds like a lot.”

In the first announcement of Quarterdeck’s strategy since Bastiaens’ departure, Lee said the company will now concentrate on three business areas--its traditional PC utilities like memory management products; software for Internet and intranet applications; and a new direct marketing division made up of two companies Quarterdeck recently purchased.

“They have to come up with some kind of unifying strategy for the independent products they have,” said Tarun Chandra, a technology analyst at Laidlaw Securities in New York.

And they have to move quickly. For example, Chandra praised Quarterdeck’s Internet search technology, “but if they don’t make use of it right now, in six months or a year it’s going to be useless because of the pace of product development,” he said.

Indeed, Quarterdeck already faces long-term challenges from browser behemoths Netscape Communications and Microsoft Corp. Both companies are already building functions into their World Wide Web browsers like collaborative computing and Internet phone software--two of Quarterdeck’s more promising technologies.

“That means some of the companies they’ve acquired are going to have a hard time selling products,” Saunders said.

Lee said that even as operating systems and browsers become more sophisticated, Quarterdeck will continue to make money by finding new ways to add value to them.

But analysts speculated that Quarterdeck could itself be an acquisition target for another software company, such as McAfee.

“It would be a nice portfolio fit with McAfee with their anti-viral utilities and Quarterdeck’s utilities,” he said. “There are a lot of mid-size to large-cap software companies that would find this an attractive situation.”

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Decked

After recovering somewhat, Quarterdeck Corp.’s stock price fell when it couldn’t meet its production schedule. Monthly closes since October 1994:

Monday’s Close: $7.13

Source: Bloomberg Business News