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Erika Brown, Forbes Magazine, 09.03.01
forbes.com
Gary Bloom left Oracle to prove his mettle at Veritas. He'll need every ounce of skill to do it.
This isn't exactly Gary Bloom's dream job. In November, after 14 years with the mercurial Larry Ellison at Oracle, the 40-year-old Bloom left to run his own show as chief executive of Veritas Software. At the time Veritas was the fourth-most-valuable software firm in the world, its stock value surging on boom times in data storage.
Veritas (nasdaq: VRTS - news - people), based in Mountain View, Calif., produces software that helps companies back up and replicate data, access stored information and share data among myriad devices. It holds first or second place in most of its businesses, and it seemed the ideal safe harbor when Bloom signed on. In April he predicted 45% to 50% sales growth in 2001, up from $1.2 billion last year. He confidently expected $9 billion in revenue in five years.
Then bad things started to happen. Cost-cutting customers stopped buying new storage gear, hurting sales of related software. In July storage titan EMC said its sales this year would fall nearly half a billion dollars short of estimates. Its stock dropped 28% that day and is off 82% from its high of $105. So in that month Bloom cut his growth target to 25%; Veritas' stock price is down 60% since Bloom joined the company. "The economy was the one thing I didn't count on. When I first started I thought Veritas was insulated," he says. But he adds: "What are we going to do, roll over and die? Retreat is not the answer."
It's especially unwise because Veritas must compete with Computer Associates, Tivoli and Legato, as well as with software from hardware makers Sun, Hewlett-Packard, EMC and IBM, once its biggest customers. In July HP bought StorageApps for $350 million. Sun recently acquired two software firms that manage storage networks and handle disaster recovery, areas Bloom wants to own. IBM is developing software to tie storage equipment to its DB2 database. EMC has bought six software firms in a year and brags that 75% of its engineering staff is devoted to software. "Software is growing faster than any other piece of the business," says George Mele, EMC's director of software marketing.
That leaves Veritas with little choice but to play up a key edge: Its software is agnostic—it works with most any brand of storage device, while EMC's, say, works best with EMC gear. Veritas looks and feels the same on a Sun server as it does on an HP machine, letting customers swap data from one system with that of another. "Veritas software gives you the flexibility to quickly change how you balance information across devices and how you replicate it across pieces of hardware," says Morris Taradalsky, engineering chief at Exodus, which hosts Web sites and storage systems for 4,500 corporate clients using equipment from Compaq, EMC and Sun.
Bloom, who majored in computer science at California Polytechnic in San Luis Obispo, built a reputation at Oracle as a methodical but smooth operator who could deliver on Larry Ellison's bravado. At Veritas he has pushed urgency and focus. He imposed a new review system—and then axed the bottom 5% of performers last quarter. He has a hypnotic way of speaking, repeating the same simple phrases until they seep in. His "3-D" growth strategy has become a corporate mantra:"‘We will expand products, platforms and geography.' People remember it, repeat it and live by it," he says.
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By the Numbers
Moore's Law for Storage?
As demand for capacity doubles
each year, storage boxes get
cheaper and stronger.
1.4 terabytes*
Average size of a data warehouse.
540 petabytes**
Worldwide storage consumption
in 2001 (doubling annually).
-36%
Annual decline of capacity cost.
85%
Annual increase of disk density.
*A terabyte is a thousand billion
bytes, or a thousand gigabytes.
**A petabyte is a thousand
terabytes.
Sources: Merrill Lynch;
McKinsey & Co.
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Veritas has partnerships with Hitachi, Sun, Oracle and others, getting access to design details and joint development and marketing efforts that a rival hardware company wouldn't get. This agnosticism is how Oracle gained an advantage over IBM, whose DB2 database was perceived as a threat to other hardware companies. "DB2 was supposed to kill Oracle, but it never got sales cooperation from HP and Sun. Even if hardware companies develop the software, they'll get no cooperation in selling it," Bloom says.
Veritas' direct-sales force generates only 30% of revenue, leaving the lion's share to middleman resellers. Bloom has centralized Veritas' disparate marketing teams, recruited a former Oracle executive to run the group and retained Oracle's public relations firm to pump up brand cachet. Posters line the walls at Veritas, urging workers to recruit their friends. Bloom plans to increase head count by 30% to 6,200 by year-end, at the same time that EMC and others are laying people off. "If you don't invest in and attempt to grow your business, it's a self-fulfilling prophecy that says you won't grow," he says.
Veritas has $1.5 billion in cash and still sports a $16 billion market cap to keep it in the acquisition game. It is considered an innovator in the new market for storage area networks. But Gary Bloom clearly has bigger things in mind. "After being in the shadow of Larry Ellison for many years, I had to break out and prove to myself what my skills were outside of Oracle," he says. With the sorry state of high tech, it may be a while before Bloom can really show the world what he's made of. |
