Deadline misses deadline: Atex's new front-end, pictured above, is running about a year behind schedule in beta testing.

Products and marketplace: How Atex got into trouble

No matter how you cut it, Danny Chapchal is in a world of hurt.

The chief executive of Atex Publishing Systems Corp. -- based in Bedford, Mass., with operations in 12 countries -- put together the group of investors that bought the company from Eastman Kodak Co. (see The Cole Papers, December 1992).

Chapchal, a British national with a history in publishing systems, is no lout. He reorganized the company, cut costs and essentially turned around a decade of losses (estimates set them at $10 million a year) incurred under Kodak.

But it wasn't enough.

The announcement in early December that Sysdeco Group AS of Norway was making a bid to acquire Atex in a stock swap followed a lean spring and summer, where cash just did not come into the company at the rate Chapchal had predicted.

"During the first year, we had a good year. At the end of the day, we came out quite happy," Chapchal said in a mid-December interview. "The second year hasn't been quite so good. We had a pretty fraught year."

The lack of cash has kept Chapchal jumping. In late summer, he arranged a new infusion of capital from his existing investors. More recently, he's had to field inquiries from those who detected Atex's woes and had come sniffing around (Atex customers report that recently the company has asked for payment in advance for some products and services).

"When somebody unsought-after pokes their nose in the door, you talk, because that's the nature of business," Chapchal said. Atex fielded "two or three" inquiries in the days around October's Ifra conference in Munich, he said.

In the wake of the Sysdeco announcement, waves of reports have swept through the newspaper and systems supplier businesses.

One wave: The deal fell through -- either Atex or Sysdeco "pulled the plug," take your pick.

A second wave: Kodak and a major Atex customer, using codicils of contracts drawn up in the early '90s, scuttled the deal.

A third wave: A New York investment banking firm put together a package to buy out certain investors in a deal better than Sysdeco's.

Atex management refused to comment on any of the reports. As we went to press, Mike Akillian, Atex's director of communications and public affairs, said, "Discussions [with Sysdeco] are still under way. Negotiations are proceeding."

In early December, Chapchal was giving the Sysdeco deal only "upwards of 70 percent likely to happen." He could envision only one reason the Sysdeco deal wouldn't go through: "The baggage that each brings with him. Each has a user base."

Then, as though to soften his earlier assessment, Chapchal said, "At the moment, it's a bit of a love-in. So far, I don't see any reason why it shouldn't happen."

Chapchal did say, though, that there was a "Plan B," which would include "a massive financial restructuring," and that the alternative plan would set up the company "quite well."

What happened?
Whether Sysdeco merges Atex with its German newspaper system supplier Comtec and SyPress Oy of Finland (see sidebar) or Atex gets other financing, the question remains:

What happened?

A proper answer is framed by two things: the newspaper systems marketplace and Atex's products.

Chapchal bought Atex on the heels of one of the worst recessions to hit North American newspapers. Atex customers, an ever-loyal group, had bided their time in the '80s, waiting for Kodak to develop a next-generation publishing system that the company had started to promote in 1984 at ANPA/Tec in Atlanta.

It was dubbed TPE -- Total Publishing Environment.

Only in the last days of Kodak's stewardship, then under the direction of industry veteran Brian Lacey, did the folly of TPE become apparent, and Atex stepped back from it.

First Lacey, then Chapchal and his management team, broke the functions of TPE down into discrete components, presenting those functions on industry-standard devices. The research and development team struggled mightily to provide services such as composition and wire collection on IBM RS/6000 servers, as well as developing software to run Atex terminal editing software on DOS and Windows-based personal computers.

But for existing customers, these components did not offer a path off the J11 -- a minicomputer based on the Digital Equipment Corp. PDP-11 that was developed in the '70s. And potential customers did not find purchasing the J11 an attractive idea.

A new client/server-based editorial system, Deadline, was under development, but far from ready. So, when the Chapchal team took over Atex, there wasn't much to sell to existing customers -- and even less to sell to new customers.

A compelling set of products might have broken open the wallets of recession-scared publishers, but the 1992 Atex product line wasn't it. Chapchal & Co. had to scramble their forces on a variety of fronts. They had to: