Lotus Unveiling of New Software Product Seen Strengthening Its Market Position

Lotus Unveiling of New Software Product Seen Strengthening Its Market Position

By David Wessel
The Wall Street Journal

February 8, 1984

CAMBRIDGE, Mass. -- Lotus Development Corp., a two-year-old company that turned its first product, Lotus 1-2-3, into a big success, is about to introduce a second one that is expected to strengthen the company's already formidable position in the personal computer software market.

The new product, which is expected to be announced next week, adds word-processing, communications and expanded record-keeping functions to Lotus 1-2-3. The original program integrates financial-planning analysis, data-base management and graphics into a single package.

The new product is expected to retail for $695 to $795. Lotus 1-2-3, which was first shipped in January 1983, retails for $495. The company is expected to offer the approximately 190,000 buyers of Lotus 1-2-3 the opportunity to trade in the old product for the new one at a reduced price.

Although some in the industry are referring to the new Lotus product as 4-5-6, sources close to the company say that won't be the name. The new product is to be ready for shipment in June.

"Management recognizes that Lotus must be the one to make 1-2-3 obsolete," said Michele S. Preston, an analyst at L.F. Rothschild, Unterberg, Towbin.

The new software "is going to have a big impact on the word-processing software companies," predicted Richard Rabens, president of Alpha Software Corp., Burlington, Mass., which sells software that complements Lotus 1-2-3. It's also going to have "a whopping impact" on companies that have been imitating Lotus's integrated software, he added.

Lotus 1-2-3 was one of the first commercially successful computer software programs to perform more than one task. Up to now, Lotus's biggest shortcoming has been its lack of word-processing power, prompting some people to buy 1-2-3 and a separate word-processing package, said Esther Dyson, president of Rosen Research Inc., New York.

Lotus, which impressed the industry with its marketing savvy when it introduced 1-2-3, has plenty of money to start its new product. The company has $50 million in cash, L.F. Rothschild estimated.

Lotus could sweep the crowded software market, but there are obstacles. Much depends on the quality of the word-processing, which Lotus has allowed few to sample. Mrs. Dyson says it is too soon to tell how the new Lotus package will be against popular word-processing programs, such as Micropro International Corp.'s WordStar.

Those companies say they aren't worried. "You can't give everybody everything in an integrated package," said Richard Bouchard, vice president, marketing, Soft-Word Systems Inc., which sells MultiMate, a popular word-processing package. Good word-processing software will still find ready buyers among those who don't need to do financial analysis and other things.

Moreover, Lotus's success has drawn a number of competitors. One of the best-financed competitors, Ovation Technologies Inc., Canton, Mass., says its integrated software -- word-processing included -- will be available in April.

For the 1983 nine months, Lotus earned $7.5 million, or 56 cents a share, on revenue of $29.1 million.

Separately, Lotus said it sued Rixon Inc., a Silver Spring, Md.-based data communications company, for $10 million, accusing it of making unauthorized copies of 1-2-3 for internal use. Rixon is owned by Sangamo Weston Inc., Atlanta.

"Software piracy is the theft of intellectual property," said Mitchell Kapor, president of Lotus. "We will . . . pursue all offenders." Rixon had no immediate comment.

Lotus went public last October at $18 a share. Its shares were trading as high as $36 in January, but recently fears of price wars in the personal computer software industry had hurt the stock. Lotus has rebounded and closed yesterday on the national over-the-counter market at $36.