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Citing Declining Sales, Accelrys Plans to Phase Out 'Legacy' Software Products

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Accelrys is embarking on a strategy to phase out several of its “legacy” life science software lines over the next two years in hopes of winning over customers to its Discovery Studio 2.0 platform, CEO Mark Emkjer told BioInform this week. 
 
The disclosure comes after a full year of tepid sales for the firm. Last week, Accelrys reported $20.1 million in revenues for its first fiscal quarter ended June 30 — a half-percent increase over the comparable period of 2006. The company said that growth in its Pipeline Pilot workflow product line was offset by continued erosion in its legacy products, marking the fourth consecutive quarter in which the firm reported this pattern.
 
In a conference call to discuss the financial results, Emkjer said that the company’s “major challenge continues to be the legacy, early-stage discovery products, which declined in the recent quarter at a faster rate than we had anticipated.”
 
This trend is in line with pharma’s emphasis on downstream steps in the R&D pipeline, he said. “Even though there has been an overall increase in discovery and development investment, a disproportionate amount of the funding continues to move in the development area only,” he said.
 
In a follow-up interview with BioInform, Emkjer said the company is planning a two-year phase-out of the legacy product line, which includes all of the company’s life science software offerings except Discovery Studio 2.
 
“These are products [Accelrys] acquired back in 1999 and 2000,” such as Quanta, Cerius2, and InsightII, he said, though he noted that the underlying technology for those products would remain intact as part of the [new] Discovery Studio platform. “We are not getting rid of the science; we are integrating all that science … and putting it into a new visualization environment,” said Emkjer.
 
Emkjer said that Accelrys will begin shipping Discovery Studio 2.0, which will include components of the legacy software packages, on September 30. The upgraded software replaces the company’s current offering, Discovery Studio 1.7.
 
“All the science resides under that platform,” he said. “Old products like Cerius2 and Quanta will go away over the next couple years, and much of the science we’ve brought into the new Discovery Studio.”
 
Even so, some customers aren’t as open to converting to Discovery Studio as the company might like.
 
This week, a concerned biochemistry professor at Rutgers University posted a notice on the Protein Data Bank mailing list decrying how the company was pushing his department away from InsightII towards Discovery Studio 2.0 by doubling its price for the InsightII license.
 
In an interview with BioInform, the professor, Peter Kahn, said he wouldn’t have minded the change if he’d been given fair warning, perhaps a year. “I could have hired students to help,” he said, in reference to the mountain of data that has to be migrated to the new platform.
 
“We can't afford that and will have to switch to other software unless the company changes its policy. We have a lot of InsightII-specific image files … which are used in the structural biology tutorials the students do, and reworking them and the tutorial manual would be a huge task,” he wrote in the PDB posting.
 
Kahn told BioInform that it would be very difficult for him to rewrite his tutorials for Discovery Studio before the fall.
 

“Old products like Cerius2 and Quanta will go away over the next couple years, and much of the science we’ve brought into the new Discovery Studio.”

Emkjer said he is aware of problems like this, and said the company is doing what it can to address them. Even so, Emkjer said, customers must make way for the newer, integrated products, which are an integral part of the firm’s future growth strategy.
 
Reiterating previous comments, Emkjer said in last week’s call that the company expects the release of Discovery Studio 2.0 and Materials Studio 4.2 “to stabilize our legacy revenue stream in the ensuing quarters ahead.”
 
He also confirmed previous statements that he is seeking to build up the company via prospective mergers and acquisitions, though he declined to discuss further details. During the conference call, he said he’d prefer to buy an expensive product that will prove itself in the marketplace rather than something “on the cheap.”
 
As an example, he pointed to SciTegic, which the company acquired in 2004, and how “it’s more than tripled its size in three years.”
 
Emkjer said that legacy products currently make up 30 percent of the company’s life science product portfolio, and that he expects this to fall to 15 percent a year from now.
 
“This is a normal transition,” Emkjer said. “This is my fourth software company, and every seven to 10 years, you typically rewrite entire systems.”

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