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'The world's biggest software company.' (interview with Michael Perik, Chief Executive Officer of SoftKey) (Interview)

Mergers don't get more complicated than this one: Spinnaker Software (which just wrapped up its own acquisition of Power Up), plus WordStar (whose most recent acquisitions included ZSoft and T/Maker's WriteNow word processor), plus SoftKey, an obscure Canadian publisher whose products range from high-end tax preparation and CASE programs to dozens of quasi-shareware titles that SoftKey distributes through mass-merchandising channels.

When all of these pieces are put together, the result is--if nothing else--a very large company. The combined 1992 revenues of the three firms were $130 million, which would have placed Softkey among the industry's 12 largest independent companies. But to us the really fascinating part of the SoftKey conglomerate is the new company's focus on low-cost consumer and "SOHO" (small office, home office) titles. Clearly, something important is finally happening in this market segment that's worth watching.

SoftKey's Michael Perik, an ex-venture capitalist who will become the chief executive of the new company, dropped by recently. We asked him to talk about his strategy:

Michael, you've said your goal is to create "the world's largest consumer software company." How much of your combined business actually comes from titles priced under $50?

"We're probably talking about 80% to 90%, excluding the $20 million that our Canadian tax business contributes. And $4 million of our tax business comes from tax software for consumers. When I get up in the morning, I'm definitely thinking about consumer software."

Successful business software companies almost always are built on one or two market-leading titles. Your consumer strategy, however, seem to focus more on price leadership.

"The secret isn't just price. What you want in this business is to own the customer, to have a relationship that lets you keep selling more products to the same people. One of the ideas we've looked at--but not yet seriously pursued--is something along the lines of the Book of the Month Club. But that model only works when you reach some kind of critical mass: several million customers and a lot of titles.

"Where I think price does play a role is in expanding the outlets where software is available. We came out with our new line of Titanium Gold software, basically shareware that sells for $5 off a rack. This approach has brought software to a whole group of people who weren't traditional software consumers."

The companies you've acquired have certainly tried to leverage their customer bases and grow the consumer market, but they've still remained only marginally profitable. What else can you do?

"We're very influenced by the idea of getting as many activities as possible under one roof. Right now, we have tech support and development groups and fulfillment operations all over the country. Our basic goal is to cut the number of these facilities in half, and cut the number of overhead people. I'm looking for an aggregate cost reduction in these areas of 30%."

While you're looking at cuts, are you also thinking about dropping the non-consumer business titles that you inherited?

"Clearly, the company's focus is on the consumer end. While I wouldn't get out of a business that's still making money, I'm not determined to prove that we know how to make a buck out of products that aren't doing well. One thing I've learned is that managers always spend too much time worrying about solving problems, when they should be putting their energy into new opportunities."

Michael Perik, chairman, SoftKey, 2700 Matheson Blvd. East, Mississauga, Ontario L4W 4V9; 416/602-5500.
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Article Type:Interview
Date:Aug 29, 1993
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