BEA Systems' Bashful Best Hope


By Jim Kerstetter Alfred Chuang is a painfully shy man who finds himself adjusting to the most public of jobs. As chief executive of BEA Systems, a billion-dollar Internet software company, it's his duty to assure Wall Street investors that things are copacetic. When an exec at an old-line company hesitates to sign a multimillion dollar contract, he's the guy who parachutes in, soothes nerves, and seals the deal. And when thousands of employees and customers gather for company-sponsored shindigs, Chuang is the one who's supposed to inspire the troops.

Pretty daunting tasks for an admitted introvert who fell in love with computer science because "you stare at a glass tube, and you don't talk to anyone." Chuang often uses that quip to let people know that, yes, he's one of those programming nerds -- and he's proud of it.

So why isn't Chuang hiding out in the lab? One of the founders of BEA, Chuang took over the role of CEO from William Coleman, another founder. Coleman wanted to be more involved in strategy and less in the day-to-day operations. But Chuang finds that his new role suits him fine. "I'm having a lot of fun," he says of running the 3,100-employee company. "It's my dream come true."

BIG BLUE'S CHALLENGE. Some dream. BEA has taken it on the chin along with the rest of tech. The economy is in that dubious zone somewhere between recession and recovery, corporate spending on technology still hasn't recovered, and a major competitive threat from IBM is hitting BEA head-on. On Apr. 30, Chuang's company closed out its third straight disappointing quarter. Net profits plunged 81%, to $3.9 million. Shares of the San Jose (Calif.) company are trading at $11, a long way from their high of $90 high in late 2000. For the full year, BEA expects revenues to be about flat.

Meanwhile, the competition is taking its toll. BEA makes Web application servers, which act like traffic cops for Internet software. For years, BEA flat-out dominated the market, but no longer. Even though analysts expect its revenues to grow by nearly 20% in fiscal 2004, AMR Research says IBM will take the lead in the applications-server market this year. Big Blue's share is expected to jump 5%, to 31%, while BEA's will dip about a percentage point, to 26%. The main reason: IBM's software is cheaper.

So Chuang has been hitting the road, meeting with investors, customers, and the press. His message: Sure, things look a little tight now, but when tech spending picks up, BEA will be positioned as one of the companies that thrives among the giants. How? By including extras like software for internal company portals and by training BEA's sales force -- long accustomed to working with hard-core programmers -- to deal with top execs at companies that are potential customers.

STRATEGIC MOVE. Chuang is also trying to convince customers that BEA won't try to lock them into buying more hardware or consulting services than they need, an industry practice that has left a bad taste in the mouths of information-technology buyers. "We just have to keep leading and changing the game, something we've done since the beginning of the company," says Chuang. Many Wall Street analysts, impressed by the shy man's earnest message of independence, say Chuang is coming out of his shell.

While he may be quiet, Chuang has had a strong influence in shaping BEA. It was Chuang who, in 1998, wanted to buy a little Net software company called WebLogic. At the time, BEA relied almost exclusively on the sale of middleware called Tuxedo and still hadn't broken $100 million in revenues.

Chuang saw how WebLogic could get them to the $1 billion mark. WebLogic made Web application servers that Chuang believed could become the foundation for complex e-business systems. All other business software, ranging from customer management to procurement, would be built on top of them. "The value became apparent. And then they began to sell like hotcakes," says Robert B. Carter, chief information officer at Federal Express and a longtime BEA customer.

FERRARI FAN. Today, application servers account for more than half of BEA's software revenues. That success has allowed Chuang to indulge his hobby of collecting Ferraris. He has a dozen, all meticulously maintained. He's sharing his enthusiasm -- and in one case, his collection -- with employees. Last year, he gave Mark Mszansk, vice-president and general manager of U.S. Eastern Operations at BEA, a Ferrari as a reward for beating his sales quota by 50%.

In taking center stage, Chuang, 40, has come a long way since he, Coleman, and Edward Scott founded BEA in 1995. When they opened for business in a tiny office in gritty East Palo Alto, Calif., they figured Coleman would be the chief exec, the man with the big ideas and great contacts all over Corporate America. Scott, now retired, was the sales guy. And Chuang, who rose through the ranks as an information-systems specialist at Sun Microsystems, would be the tech guru, the guy who spotted technology trends and made sure BEA stayed ahead of them.

A father of two, Chuang was born in Hong Kong to a wealthy family. He left at 13 to attend St. Andrew's, an exclusive prep school near Toronto, and he later attended the University of San Francisco. It was there that -- much to the chagrin of parents who wanted him to go into law or medicine -- he fell in love with computers. "I couldn't go into medicine," says Chuang. "To be a doctor you'd have to deal with people."

STANDUP GUY. After graduating from USF in 1982, he earned a master's in computer science at the University of California and was well on his may to a doctorate when the economic realities of academia hit him. "I went for an interview for an assistant professor job at the University of Iowa," remembers Chuang. "Then I realized you make about $21,000 per year."

Not long after, he took a job with Sun, where he met Coleman. Chuang quickly rose through the executive ranks but had difficulty dealing with people. Desperate to get more comfortable, he took standup comedy classes at a small Silicon Valley comedy club for nearly a year. "I think that was maybe the best thing I did for my career," he says. He admires the moxie of comedians who put it all on the line every night, ready to be booed if they're not funny.

Still, perhaps Chuang's greatest challenge -- other than fighting off rough and tumble competition -- is overcoming the belief that his mentor, Coleman, is still calling the shots. "I think maybe the perception for a long time was that I was sort of like Alfred's big brother," says Coleman. "I don't think anyone would say that now." Kerstetter covers software from BusinessWeek's San Mateo bureau


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