this is an OLD! article from WallStreetJournal(from 1998) but
nonetheless gives a feel of some of Centuras history---
Article 1 of 163
THE WALL STREET JOURNAL / CALIFORNIA
Heard in California
Centura Software Has the Look
Of a Turnaround in the Making
By Mark Veverka
03/04/1998
The Wall Street Journal
Page CA2
(Copyright (c) 1998, Dow Jones & Company, Inc.)
Bottom-feeders may want to nibble on Centura Software .
At a time when the market continues to soar to dizzying heights, finding
promising technology stocks that are cheap isn't easy. But analysts and
investors think this Redwood Shores-based software concern may be an
intriguing turnaround play with at least reasonably good growth
prospects.
It was only three months ago that Centura was burning through cash and
hanging on for dear life. Previous management had implemented a
strategy in 1996 to branch out into a product area called "middleware," a
genre of software designed to connect different systems and equipment.
But the sector quickly became oversaturated and subject to price
competition, and the plan flopped.
Centura found itself teetering on the brink of bankruptcy by the time the
board hired a new management team of turnaround specialists in
November. The company's battered shares were hovering at just over a
dollar, off more than $4 from their 52-week high in March 1997.
But in remarkably short order, according to analysts and investors,
management has stopped the hemorrhaging. Executives discontinued
Centura 's middleware product, known as ForeSite, and renewed the
company's focus on its original database business. They have eliminated
most of the company's debt and, in turn, warded off the threat of
foreclosure by a major noteholder. And they pulled off a private financing
that kept the company from being delisted by the Nasdaq Small Cap
Market.
"Their plan makes a lot of sense," says analyst Larry Perlstein, a principal
at Dataquest in San Jose. The company had neglected its customers, he
says, but now "there's an opportunity to win business back."
Just last month, Centura reported that fourth-quarter operating income
was the highest in five years, soaring to $1.5 million from $600,000 a
year earlier, not counting any extraordinary items. (Among the items was
$500,000 in one-time charges, mostly related to the discontinuation of
ForeSite.)
"There's enough evidence that their financial position is better," says
analyst Don Eller of H.J. Meyer & Co. in New York, who rates
Centura a "buy" (though he cautions that it's still quite a risky
investment). The improvement, he adds, is "more than you could see as
recently as a month ago." His 12-month price target: $4 a share, up
sharply from the current level of nearly $1.50.
Centura , founded in 1984, has 26 offices around the world. The
company provides database systems and software -development tools
for personal computers to more than 100 public -- and private-sector
customers. Centura 's main product is an "embedded" database, which
can be built into a software application to provide data-storage
capability.
As part of its effort to shore up that core business, Centura has been
putting more resources back into customer service, company officials say.
Plus, it is focusing on updating its database products. Just this week,
Centura announced two new products -- one an Internet publishing tool
and the other a database-management system.
One of the biggest hurdles Centura faced in its struggle to right itself was
a $12.2 million debt owed to Computer Associates International, an
Islandia, N.Y., software company. Centura officials say Computer
Associates, which is a customer, had advanced the money to the
company as a business loan.
Last Friday, Centura and an investor group, Newport Beach-based
Crossroads Capital Partners, closed a deal under which a Crossroads
fund purchased the debt from Computer Associates. In turn, Crossroads
immediately began converting the obligation into common shares of
Centura , effectively wiping out the debt. Crossroads now owns about
35% of the company.
In addition, Computer Associates got a five-year warrant to buy 500,000
shares of Centura stock at about $1.90 a share.
The debt problem was particularly thorny because Computer Associates
is preoccupied with its battle to take over El Segundo-based Computer
Sciences. And Centura customers feared that Computer Associates
would simply foreclose on its note to rid itself of the distraction, and
thereby shut down Centura .
"By removing Computer Associates from the capital structure, we
dodged that bullet," says Centura Chief Executive Scott Broomfield,
who was appointed to the top job in January. Since the 1980s, he has
been involved with restructuring a number of small companies in a variety
of industries. He also served as an adviser on overhauls at BankAmerica
and Wells Fargo in the early 1990s. Before that he had been an executive
with Digital Equipment.
"He knows how to do a successful turnaround," says Dennis Simon, a
managing partner of Crossroads, which specializes in investing in
battered, but potentially winning, companies. (Analysts see the fact that
Crossroads chose to convert its newly purchased debt into stock as a
strong sign that a serious investor has faith in the long-term outlook for
Centura shares.)
The problem with Centura , Mr. Simon says, is simply that prior
management strayed from the "meat-and-potato" database and software
-tool business. New management, he adds, "has the right focus."
Another challenge that Mr. Broomfield and his colleagues have overcome
is making sure that Centura didn't get kicked out of the Nasdaq Small
Cap Market. In order to meet Nasdaq requirements, Centura needed
$2 million in tangible net assets.
So last week, Mr. Broomfield undertook a $2.3 million private
placement; he and his top lieutenants chipped in $1 million out of their
own pockets. "When I start adding value to the stockholder, that's when I
get rewarded," Mr. Broomfield says.
To be sure, Centura still has a long way to go before it's securely back
on track. While all of the recent moves have bolstered the company, it
will still take time to fully convince customers that Centura will continue
to service existing products and update its lines.
Furthermore, the company has only about a quarter's worth of cash on
hand, which provides some cushion but not a lot of margin for error,
analysts say. "We're not Pollyannaish," says Crossroads' Mr. Simon. "We
understand the risks."
Even so, he fully expects Mr. Broomfield to succeed in the end. "This is
not a pie-in-the-sky situation," Mr. Simon says. "It's a
blocking-and-tackling turnaround."
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