MetaCreations switches horses

Creations normally take about a week, give or take a day, but in the case of MetaCreations, around half the staff are being given two weeks notice of a reverse creation. The company has decided to do a radical restructuring by stopping its professional graphics business and putting all its eggs into what it calls its e-commerce visualisation solutions, better known as MetaStream for the streaming and display of interactive 3D images. The news and profit warning sent the stock price down from a high of $9.625 at the beginning of December to $5.6875 at one point yesterday, a drop of some 40 per cent. A loss of $38 to $42 million is estimated for the current quarter, but the cash balance is expected to be in the $36 to $38 million range at the end of the year (it was $46 million at the end of 1998). MetaCreations has been something of a red-ink company, with 1998 revenue down 38 per cent increasing net losses over the past three years, reaching $20 million on $43 million revenue last year. In its April proxy filing, the management controlled 20.5 per cent of the company. Nonetheless it was a surprise move, since in October MetaCreations announced in its Q3 results that the graphics products produced twice the revenue of the visualisation business. On the other hand, its graphics business was flat year-on-year, with the visualisation business growing quickly. Not surprisingly, there has been some criticism of the move from graphics software users, with some hoping that Apple would acquire the company before Microsoft gets hungry (components from the MetaStream viewer are included in Windows 98SE), although Computer Associates must also be seen as a contender, since MetaStream.com is a joint venture with Computer Associates (20 per cent), and a vehicle for the visualisation products. Alliant Partners have been given the job of disposing of the graphics business carcass, which should not prove to be a turkey as it is widely used. Adobe appears to be the favourite vulture, which would probably be a good fit to its business. KPT Vector Effects, updated less than a month ago, is a plug-in to Adobe Illustrator. If ever there were a sign of the lure of the Internet boom, it was seen when MetaStream.com decided in November to move its headquarters from California to New York. CA vp Sandeep Divekar said he expected the market for to more than double each year, and that "two of the hottest areas are Web site differentiation and front-to-back office differentiation" and that MetaStream would help "to exploit the synergies between state-of-the-art e-visualisations and superior database technology." In what appears to be a board-room coup, Gary Lauer is departing to join "another firm" but he will retain his job as chairman. Mark Zimmer, who was running MetaCreations graphics business, is the new CEO. He was previously CEO and founder of Fractal Design which merged with MetaTools to form to form MetaCreations in 1997. Acquisitions have included Canoma, Specular, Real Time Geometry and Ray Dream. Lauer attributed the poor 1998 performance to a failure to integrate its business after the merger and acquisitions, and to a lack of marketing focus. Repositioning the company was foreseen in March in Lauer's report to shareholders, but at that time it was envisaged that the company "would continue to serve the loyal customers [for] 2D and 3D graphics software." How times change.. Whether the 3D streaming and virtual product merchandising market will be the pot of gold that Forrester Research forecasts - $6 billion this year rising to $45 billion in 2003 - remains to be seen. As to whether the move will be seen as an act of chainsaw corporate suicide or as a metacreation may be known in heavenly circles, but earthlings must look through the dark glass for the time being. ®