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Stories Aren’t All Bleak for Software Firms

Stories Aren’t All Bleak for Software Firms

Novatel Could Be Delisted on Nasdaq If Its Stock Doesn’t Turn Around

CYBERBUCKS

by Mike Allen Senior Staff Writer

Based on recent news stories about Peregrine Systems and, the week before, on HNC Software, you’d think the local software industry is in a massive upheaval.

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But that perception isn’t accurate, says Bob Slapin. The executive director of the San Diego Software Industry Council says anecdotal evidence he has suggests the industry is on the upswing, not tanking.

While he can’t provide actual numbers, Slapin is convinced most local software companies are no longer slashing people and budgets, but adding to their staffs and growing revenues.

“Last week I got four calls from some software firms looking to hire sales and marketing people. That’s the first time in a long time that’s happened,” Slapin said.

Yes, some high-profile firms are obviously having troubles, but on the whole, there is more positive news than negative, he said.

“If you look at Websense, eAssist Global Solutions, WebSideStory and Cardiff Software, these are all growing companies, real up-and-comers,” Slapin said. “And there are a lot of new companies that have also been launched. We’re starting to see some real growth now after a long lull.”

Of course, it’s hard to know exactly how much growth is happening since much of it occurs below the radar screen. If publicly traded Peregrine announces it canned its CEO and CFO and its shares dive below a dollar, the whole world knows about it.

Yet if a small startup like San Diego-based BlueHornet doubles its current staff of 20, they likely won’t buy billboard space or even put out a press release.

That’s exactly what the company that specializes in customer relation management software and e-mail marketing has done in the past year. Founded in 1999 by two former Point Loma Nazarene University students, BlueHornet today counts more than 500 customers, including such names as Ticketmaster, TGI Fridays, Red Lobster, SignOnSanDiego, and the Kansas City Star.

Through its system of permission-based e-mail, the company is generating lots of new business for clients, all of which is generating new business for BlueHornet.

“We’ve probably been doubling our staff every three or four months, and our revenues are growing far faster,” said CEO Tim Marusich, who declined to provide any dollar numbers because of competitive reasons.

Business has been so good recently that BlueHornet can afford to pass up work. Marusich said the firm recently turned down two contracts worth about $100,000 because the potential clients were suspected of using the software to send unsolicited e-mails to customers, better known as “spam.”

“That’s absolutely what we’re not about,” Marusich said from his offices near Old Town on Pacific Highway.

What the company is about is doing business in a highly ethical way and building long-term clients. The firm’s first customers were churches, he said.

From all that he’s observed in recent months, the local software industry is definitely on the upswing, Marusich said.

That’s evidence he’s culled based on discussions with clients, partners and competitors, but it all points to the same thing , the industry is growing, not shrinking.

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Ready Or Not: It took about eight months, and generated one of the more acrimonious proxy battles in U.S. corporate history but the merger of Hewlett-Packard and Compaq finally was completed last week to much fanfare broadcast around the world over a newly launched Web site.

“After eight months and millions of hours of integration planning by our teams, today we are ready to do business as the new HP,” said Carly Fiorina, the company’s chairman and CEO.

The merged giant of Palo Alto-based HP and Houston-based Compaq, which overcame the strong opposition of board director Walter Hewlett, had combined annual sales of $81.7 billion in fiscal 2001 and operations in 160 countries.

It also has about 150,000 employees, but 10 percent, or 15,000 of those jobs are expected to be cut over the next two years, mostly through attrition.

As with any merger, layoffs are a certainty and would begin May 13 and be mostly completed within six to nine months, Fiorina told her troops.

Surprisingly, the news isn’t causing too much stress at HP’s Rancho Bernardo plant where they make printers and have some 1,800 full-time employees.

According to company officials and most observers, the local unit will likely remain unscathed and may even see some additions once the assimilation gets under way.

Only time will tell.

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Novatel Wireless On Notice: Novatel Wireless Inc. was put on notice by Nasdaq last week that it could be delisted if its stock fails to close above $1 for 10 consecutive days by July 29.

That would be a tall order for the local telecom firm that last closed above a buck on March 8, and closed May 7 at 39 cents. Its 52-week range was between 29 cents and $4.40.

Novatel makes wireless data modems and software that are used by a variety of wireless devices. The telecommunications industry, particularly anything to do with wireless, has been decimated over the past year and half and shows few signs of turning around any time soon.

Last month, Novatel reported a net loss of about $8 million for its first quarter, but that doesn’t include another $8 million it really has to assume for converting a bunch of its preferred shares to common shares. Throw that in, and the real bottom line it reports to SEC is minus-$16.1 million.

Last year, Novatel reported a net loss of $91 million on revenues of $43.6 million, compared to a net loss of $46.9 million on revenues of $61.1 million. About a year ago the stock was trading in the high $20s when things didn’t look so bleak.

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Pulling Up Stakes: Qualcomm Inc., its spin-off wireless carrier, Leap Wireless International Inc., and Sprint Corp. said they’ve signed definitive agreements with Telefonica Moviles, a subsidiary of Spain’s Telefonica SA, to sell their stakes in Pegaso PCS SA, Mexico’s second-largest wireless carrier, for $87 million in cash.

Telefonica said it is buying 65 percent of Pegaso from existing shareholders, while the remaining 35 percent will continue to be owned by the Burillo Group.

Because of the transaction, Qualcomm said its secured debt in Pegaso companies will be reduced by $200 million.

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Opens For Business: Indicative of the importance of the biotech industry in San Diego, one of the bigger VCs specializing in this sector, Sanderling Ventures of San Mateo opened an office in La Jolla recently. Timothy Wollaeger, former general partner at Kingsbury Associates LP, is the office’s managing director.

Send high-tech finance news to

mallen@sdbj.com.

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