Making a comeback: System Integrators Inc. unveiled its new graphical user interface to the classic Coyote text editor.

System Integrators again finds change is a constant

RENO, Nev. -- Long-battered System Integrators Inc. was justifiably in high spirits at the America West conference, held here Oct. 21-23.

SII had much to celebrate: some new graphical user interfaces, a longtime alliance with the newly hot Tandem Computers Inc., escape from an uncomfortable partnership and the immediate prospect of a new equity holder (read: new owner).

The Sacramento-based publishing systems supplier was to have announced on Oct. 31 (after our deadline) that an investment firm that specializes in software companies was acquiring a majority interest in the company. Though SII officials refused to name the new majority owner, sources indicate it was to be Platinum Equity Holdings of Los Angeles.

"This is like the cavalry coming in at the last minute," Frank Washington, SII's chief executive for the last 14 months, said in a phone conversation before America West. Washington said he has been focused on this event "the entire time I've been here."

In addition to having a new majority owner, SII announced at the IFRA European newspaper trade show in mid-October that it had ended its marketing agreement with Cybergraphic Systems Pty. Ltd. of Melbourne, Australia. The original agreement (see The Cole Papers, May 1996) had SII marketing Cybergraphic's next-generation systems in the Americas, Europe, the Middle East and South Africa; it was modified after Washington's arrival at SII to include the United Kingdom.

The relationship never jelled.

"It has been one of the more poorly kept secrets that the arrangement wasn't working," said Washington. Cybergraphic issued a one-line press release and refused further comment.

Insiders and industry observers indicated that the SII research and development team -- cut back severely by Washington -- was still wedded to its Tandem-based System/66 concept, while the Cybergraphic engineers were talking about Windows NT running on Alpha servers from Digital Equipment Corp.

Ironically, SII's next generation system probably will end up on Windows NT anyway, as Tandem of Cupertino, Calif. -- which was recently acquired by Compaq Computers of Houston, Texas -- has been developing a method for NT to have many of the fault-tolerant aspects for which Tandem has been so famous.

So what will SII sell in the future?

The company still hasn't decided how to work out the server end of the equation, but it is comfortable in showing a graphical user interface for its standard-bearing workstation application, the Coyote. Called Coyote/3 XE and Coyote/3 XA (for editorial and advertising), these 32-bit Windows applications provide a graphical user interface to the character-based interface of the Coyote/3.

Coyote/3 is a software implementation of the classic proprietary workstation which has been popular among existing SII customers.

The XE and XA products are written in Visual Basic, Active-X and Java to provide context-sensitive menus and multiple screens -- the environment is no longer limited to only two screens.

This is not SII's first attempt to deliver a graphical user interface. The company started developing a product under the OS/2 operating system in 1988 that was eventually marketed under the name MTX. But MTX didn't follow any of the precepts that made the Coyote popular, and it failed.

"MTX forgot the past," said Al Marshall, SII's director of sales and marketing. "XE and XA incorporate the Coyote's features."

The new products are still in the prototype stage -- along with the company's newest cut at a pagination terminal, which is called Coyote/3 Layout. Though currently linked to the System/66 environment, Marshall said the new products would also work on the next generation system that SII develops.

The XE and XA applications will be add-on modules to the company's popular Coyote/3 Windows application; Coyote/3 allows Intel-based personal computers to function like a traditional Coyote workstation.

SII executives said XE and XA would support the full Coyote functionality, including the ability to run Gloss, the company's proprietary macro scripting technology. Existing customers have thousands -- perhaps millions -- of development hours invested in Gloss code.

SII also demonstrated a browser-based interface that would allow remote reporters or advertising order entry personnel to access the system via a web-based client such as Netscape Navigator or Microsoft Internet Explorer. The interface was still in early development, but the demonstrations here showed it as a good proof of concept.

The server technology of the next-generation SII system, though, is still in doubt.

"We bet on Java and Windows clients and that has been a good direction," said Marshall. "Tandem has been working on proposals for doing [the database] for us. That may not be the option we pick, and we're looking at other options as well."

New owner
SII, founded in 1974, has been in turmoil since its 1989 leveraged buyout, when it ended three years as a publicly held company. More than $56.2 million in debt was issued to take the company private and it has spent the last eight years attempting to rid itself of that debt, including a 15-month period of Chapter 11 bankruptcy protection.

Following its exit from Chapter 11, SII was owned by four parties: Bank of America, Chase Manhattan Bank, the New York investment bank Cerberus Partners L.P. and SII employees. Though as a result of the bankruptcy reorganization the debt was substantially reduced, SII still carried a sizable amount on its balance sheet, somewhere in the neighborhood of $30 million.

Though the new owners took great pains to tell customers and the industry that they did not control the company (a board of directors that was picked with the cooperation of the bankruptcy judge was running the business), the company suffered through the loss of three chief executives in less than a year before Washington's arrival in 1996.

A Sacramento-based lawyer and entrepreneur, Washington initially took on the SII challenge by talking about moving the company into new markets; shortly thereafter he focused his strategy on the Cybergraphic alliance.

Though Washington would neither "confirm nor deny" that Platinum Equity Holdings was the company that planned to acquire the majority stake in SII that would also abolish its debt, he did offer some background on the company that would be SII's new owner.

"Their trademark has been buying software companies," said Washington. "They tend to focus on companies in vertical niches that have a mission-critical application."

Platinum's web page offers this description of a company it might acquire: "As a parent corporation for a number of vertically-positioned technology enterprises, our acquisitions typically share common characteristics with currently owned businesses."

The web page lists seven "representative investments," all of which are software companies, though two provide peripheral hardware as well.

When reached by telephone on Oct. 28, Tom Gores, the president and chief executive of Platinum Equity Holdings, refused to comment on any acquisition of SII.

Washington said the new owner would displace "a majority" of the existing owners. Observers took that to mean that Bank of America and Chase Manhattan would be selling their pieces of SII to Platinum, while Cerberus would remain a minority owner.

Washington said that the new owner is "prejudiced toward keeping existing management" and denied that he is leaving SII.

"I can't tell you how much of a personal investment I have made," Washington said. "It would take a pretty severe set of circumstances to get me out of here before I got a return on that investment."

-- dmc

System Integrators Inc., (916) 929-9481, e-mail: sii@sii.com.

From THE COLE PAPERS, November 1997, Copyright © 1997, All Rights Reserved.