Jade axing 80 staff to trim costs

By RICHARD WOOD

Christchurch's Jade Software is to cut 80 of its 370-strong workforce as it aims to reduce costs by 20-25 per cent.

The cuts will be across the board, but research and development has been confirmed as an area where staff will go.

An undisclosed amount of further investment is being sought from existing shareholders and related parties to pay for restructuring of the business.

President Sir Gil Simpson will cede majority control of the firm he founded in 1978.

The Christchurch software developer has faced problems selling Jade applications in Britain and the US.

Revenue for the first six months of the year was 71 per cent of that for the same period last year.

Last month, the firm took the radical step of giving its software to developers, to encourage them to create Jade applications.

Simpson said the firm had 42 deal prospects internationally but the time for living in hope was over, and action had to be taken.

Jade's predicament is surprising as its turnover last year of $46.7 million was up on $40.5 million in 2001. This followed radical restructuring involving a capital raising of $12.2 million, since spent.

The firm once earned a steady $60 million a year, largely from its historic cash cow, the Linc development environment. But with Linc revenues dropping it took a punt on exports of its newer Jade PC-based development software. The firm last year anticipated it would be a difficult transition and budgeted $30 million for the process.

Simpson said at the time: "The real growth rate of Jade is very important to us because if it doesn't grow fast enough we can't offset the loss of Linc business."

Simpson said yesterday that the firm had "shallow recurring revenue streams" because Jade was only five years old.

"We depend disproportionately on new business."

He said Jade had had difficulty with the decision cycle times in export markets.

The firm sells into the Health sector in Britain and the National Health Service there has a new procurement process that has held back any orders until next year.

In the United States, anxiety over terrorism has created a climate of lower or delayed IT investment.

Simpson said Jade would not change its product strategy, which is based around the Jade object-oriented language and specialised software applications built from it. International offices would be retained.

"I have no reason to doubt we're in the right market and we have the right products."

Simpson said that IT customers, in choosing Jade, also needed to adapt to Jade's software philosophy. For example, he said, a bank had to shift its thinking from being account-centric to being customer-centric but "there are people who do believe our message".

Simpson said 40 partner firms that wrote software in Jade's language provided 3 to 4 per cent of Jade's revenues and were in a growth phase, supported by their niche small-business markets.

While the biggest cost cuts at Jade will be in staff, the firm has said that other significant savings have been made across marketing, sponsorships, corporate hosting, consulting and contractors.

However, it remains committed to the sponsorship of Jade Stadium in Christchurch.

Simpson confirmed a public listing of Jade once touted for early this year was "still some way off".