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Parametric woes continue as its rivals race ahead

My favorite CEO quote of the year comes from the chief executive of EchoStar Communications. After EchoStar missed a goal for attracting more subscribers to its Dish Network satellite TV service, Charlie Ergen said, "The CEO needs to do a better job, and the CEO didn't do a very good job this quarter." And EchoStar was a company that had just closed a profitable three months.

Compare that to Dick Harrison, chief executive of Parametric Technology Corp., in Needham. In October, after Harrison's company, Massachusetts' biggest stand-alone software firm, wrapped up its worst year ever, losing almost $100 million, Harrison's quote in the press release began, "We were pleased with our execution this quarter, as we met our revenue targets while implementing an aggressive cost reduction program." Quarterly losses were $38 million.

One has to wonder about Harrison's emotional state should the company lose twice as much this quarter. Thrilled? Stoked? Ecstatic?

I don't have enough space to run through the entire litany of bad news facing PTC. Nearly delisted from Nasdaq for filing an annual report late? Check. Sued by shareholders? Mm-hmm. Sued for $100 million by the biggest distributor of the company's software? Yes. Named to the Calpers list of companies with serious corporate governance issues? You bet. Revenue restatement going back to 1999? Sure.

The company also laid off 310 employees in its last fiscal year, with more to come.

"We will be at somewhere around 3,000 employees at the end of this fiscal year," says Neil Moses, the company's newly appointed chief financial officer. "Today, we're at about 3,280."

PTC is on the verge of being one of those companies, like Wang, CMGI, and Digital Equipment, with more alumni than current employees. They exist more in the past tense than the present.

PTC helped establish the market for computer-aided design software, used by engineers to create digital models for products ranging from fighter planes to lacrosse sticks. But after PTC helped get engineers designing with computers instead of blueprints, other competitors seized on the same opportunity.

Now, PTC is flanked by some competitors who sell more sophisticated, higher-priced modeling software, and others, like Concord-based SolidWorks, selling more basic software for less.

PTC also had a reputation for arrogance and poor customer service, which it has been working to change.

"You can improve that reputation," says L. Stephen Wolfe, the publisher of an industry newsletter called CAD/CAM News. "But you have to wait for your old customers to retire or die before they forget about how you've treated them."

PTC made a smart move in the late 1990s by beginning to expand beyond a single-product strategy, introducing software called Windchill, which helps everyone who has a role in developing a product work more closely with the engineers. Windchill sells for less than PTC's flagship design software, called Pro/Engineer, but the company believes Windchill can be sold to many more employees within a company.

But while Moses describes Windchill as "the growth engine for our business," it was introduced at a time that companies were cutting back on their spending on new software. And PTC isn't alone in trying to foster more collaboration among all of the people who work on new products. Competitors like Dassault Systemes, IBM, and EDS sell software that competes with Windchill.

Moses says the company expects to return to profitability next year. "It is time for us to deliver from a results perspective," he says. PTC's latest product release, an upgrade to Pro/Engineer, has been getting positive reviews.

But PTC today is a company that's elbowing for market share from the middle of a pretty feisty pack of competitors. Some of them, like SolidWorks, have been growing as PTC has been shrinking. Even famed Harvard Business School strategy guru Michael Porter, who serves on PTC's board of directors, hasn't been able to help.

Wolfe, the publisher of CAD/

CAM News, says some industry insiders are asking whether PTC will survive as a standalone company, or be gobbled up. "One thing customers consider when buying software is the stability of the company," he says.

Dick Harrison was handed a difficult job: He took over as CEO just as the economy started sagging, in 2000. But here's my question: How many more losing quarters will PTC endure before the board boots Harrison? And will he then describe himself as "pleased" to be able to pursue other interests and spend more time with his family?

Money magnet At two recent conferences, Safi Bahcall dropped a not-so-subtle hint. His company, Synta Pharmaceuticals of Lexington, is on the verge of announcing another major round of financing.

This past spring, the company -- which is developing drugs to fight tumors, drug-resistant cancers, and auto-immune disorders like rheumatoid arthritis and Crohn's disease -- raised $75 million. Bahcall said this next round, already closed but not yet officially announced, would be a sum "comparable to that."

"The round has already closed," Bahcall says. "It makes us better capitalized than most public biotechs, and it means that we are capitalized in the top third of all biotech companies."

Thus far, none of Synta's money has come from traditional venture capital firms, but rather from wealthy individuals. Venture capitalists, Bahcall observed, can be too focused on short-term results.

Nine Lives StorageNetworks, the publicly held Waltham company that attempted to sell data storage as a service, announced that it would liquidate this summer and return its remaining assets to shareholders. The stock IPO'd at $90 and at one point traded as high as $140; shareholders got just about $1.60 a share as their "rebate" for investing in the company.

StorageNetworks had been built around a market that materialized for a brief moment during the dot-com era, when start-ups wanted someone else to handle their data storage -- but then vanished.

StorageNetworks's founder and former CEO, Peter Bell, recently reemerged at the Cambridge offices of YankeeTek, an early-stage venture capital firm. Bell, a onetime rising star at EMC, is also teaching courses at Boston College and MIT.

The MIT course, which Bell teaches alongside YankeeTek founder Howard Andersen and Ken Morse, head of the MIT Entrepreneurship Center, is called "Technology Sales and Sales Force Management."

"Sales is essential to getting a company off the ground," Bell says, "but none of the business schools seem to teach it."

Bell has been using space at the offices of YankeeTek since earlier this month. He'll help screen potential investments for the small firm, and also do some of his own angel investing through a new firm called Stowe Capital. (Yes, Bell is an avid skier.)

"What I'm investing in are real early companies, started by entrepreneurs I've known," he says. "They're putting together initial teams and prototypes."

Hopefully, he'll impart some hard-won wisdom about building a company that can withstand the wicked ups and downs of the tech sector.

Scott Kirsner is a contributing editor at Fast Company. He can be reached at skirsner@verizon.net.

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