Investment: Notes sound sweet at Lotus: A chief executive is reaping the benefits of his resolve to stick with spending on product development

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The Independent Online
THREE YEARS ago, the share price of Lotus Development Corporation, the software giant, had sunk to dollars 14, a far cry from its dizzy heights of a few years earlier, when the company's 1-2-3 spreadsheet programme seemed invincible. The stock of Jim Manzi, chief executive, had fallen too.

But despite calls from analysts, industry commentators and even some of his own executives for Mr Manzi to be fired and the plug to be pulled on the huge investment in the Notes product, he stuck to his guns.

Notes - which enables individual users on large networks to work on the same documents, spreadsheets and databases - is now a runaway success, sales of the 1-2-3 programme are soaring, and the stock of both Lotus and Mr Manzi has risen out of all recognition.

Last week, the company's share price stood at dollars 53, the critics had all recanted, and Mr Manzi was paying his first visit to Britain since the dark days three years ago. It was a difficult time, he admitted. ''We were a nine-year-old company - that's ancient in this business - and foundering.'

Industry criticism of Mr Manzi has tended to focus on two things. First, he was not a software visionary. Mr Manzi did not invent Lotus 1-2-3 - he was a former McKinsey management consultant recruited in 1983 to help market the spreadsheet created by Mitch Kapoor, the legendary software guru.

Secondly, he has a reputation for being an abrasive personality who does not suffer fools gladly. One Manzi story concerns a high-profile briefing for Wall Street analysts, where Mr Manzi is said to have mocked them by claiming to have anticipated all their questions and rattling off a series of yesses, noes and no comments.

And at the company's nadir, pointed questions were asked about the appropriateness of a chief executive who managed to lose so many key subordinates so regularly.

Mr Manzi appears to have successfully rebutted both charges. Within Lotus, the emphasis on groupware - the market for which has been created by Notes - is very much Manzi-inspired.

At one time, he was almost the only senior voice in the company prepared to back the concept. Now he has seen the whole industry, including Microsoft, scramble to fall in behind his vision. The fact that Microsoft's Bill Gates has traditionally been seen as the more visionary of the two rivals adds to the irony.

The abrasiveness, too, appears to have been moderated. Mr Manzi went back to his former employers, McKinsey, for a mentor to act as a behind-the- scenes adviser on the finer points of performing the chief executive's role. He has subsequently been able to persuade a number of senior people - some, chief executives of their own businesses - to join him.

Nevertheless, there is little chance of Mr Manzi joining the sweetness-and-light brigade. Discussing Microsoft's moves into the groupware marketplace, vitriol pours forth - especially with respect to its Information Exchange groupware architecture that Mr Gates is due to unveil in Seattle. His high-profile speech will be transmitted around the world by satellite on Tuesday.

'It's just a version of Microsoft Mail,' Mr Manzi said. 'A first-generation storage and forwarding system sitting on top of a first-generation operating system.' There are those in the business community who argue that one should not even mention competitors by name, let alone rubbish them. Mr Manzi is not among them.

Is he worried about the impact of Information Exchange on Notes sales? 'It's competing more with their own Microsoft Mail than with Lotus Notes,' he said last week. 'Microsoft are saying that their product is what Notes should have been. My short answer is that that is nonsense.'

Lotus's position would seem to be a strong one. Earlier this year it announced that AT & T, the communications company, would be installing Notes on its telecommunications network, allowing users in different companies, whose computer systems were on separate networks, to interface as though they were all on one Notes network. This would provide an ideal platform for the much-hyped 'virtual corporation' concept. The share price soared for a while, and the company has been inundated with inquiries.

Although Notes is important to Lotus - it brings in about 30 per cent of revenue - Mr Manzi aims to avoid repeating the mistake of the 1980s of having too many eggs in one basket. Heavy investments have been made in developing the 1- 2-3 spreadsheet and the Freelance drawing package. New versions of both are due out later this year.

Typically, Mr Manzi cannot resist another sideswipe at Microsoft, explaining that these days Lotus competes more on product usability than on features. Software is already too feature-laden, he believes.

'The latest 150 features added to the typical product will appeal to about 0.1 per cent of the users,' he said. The Lotus Freelance package, he boasted, had fewer features than its Microsoft competitor - but was actually seen by users as having many more.

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