Excalibur Wants to Lead the Charge

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Excalibur Wants to Lead the Charge

By Bob Starzynski
Staff Writer

Excalibur Technologies Corp. could eclipse its two biggest competitors by emerging stronger from its software market shakeout.

Two years ago, Excalibur, based in Vienna, Va., was riding high by providing text retrieval software products to large companies and the federal government. But increased popularity in the Internet stole the text searching thunder from Excalibur and competitors Verity Inc., Sunnyvale, Calif., and Fulcrum Technologies, Ottawa, Ontario. Text retrieval went from being a cutting-edge, exclusive technology to a tool that is accessible through numerous search engines.

In December 1995, Excalibur's stock traded as high as $37.50 on the Nasdaq National Market. After a long, slow slide, the stock bottomed out under $5 this past April, where it stayed for more than three months. Verity was hit just as hard, falling from more than $20 a year ago to a 52-week low of $4.38 on Oct. 28.

While Verity and Fulcrum have not come out of their slump, Excalibur is showing signs of life. Since July, its stock price has progressed north of $10 and new technologies are taking shape for the 17-year-old company.

Excalibur photo Patrick Condo, president and CEO of Excalibur

Knowledge retrieval is a new generation for text retrieval. Instead of entering a key word to search a database, you can enter a thought or topic. Knowledge retrievalware will correct spelling errors made in a query and search for key words that indirectly relate. Although the casual Internet user is content with Yahoo! generating 5,000 matches for a query, a government researcher wants to avoid unnecessary wastes of time. Excalibur and its rivals had to move to more elaborate technologies because they were starting to get beaten at their own game.

According to analysts, Excalibur is moving ahead of Verity and Fulcrum because it has developed knowledge retrieval software faster and better than the other two. Back in the text-retrieval days, the two competitors were bigger and badder than Excalibur.

"They are in the strongest position of the three, and they are getting good market reception," said Karen Shegda, a Delran, N.J.-based analyst with Datapro, a division of the Gartner Group.

"They offer far superior retrieving capabilities," said Nathaniel Palmer, an industry consultant with the Delphi Group in Boston. "And there is a change in the market back to more sophisticated models."

Larger companies, like Redmond, Wash.-based Microsoft, are getting into text retrieval and are doing it cheaper than Excalibur and its competitors. Palmer said that if the smaller companies providing retrieval software do not keep raising the bar, they will eventually get squashed by the giants.

Not that any of the three players is doing extremely well.

Since the bottom fell out of the text retrieval market earlier this year, all of them have seen revenue decreases and widening losses. Excalibur's most recent quarterly revenue, at $5.2 million, is more than 10 percent below similar figures earlier this year. The company's losses in the past two quarters ($3.2 million and $4.6 million) are more than twice what they were earlier this year.

But the company is still faring better than the others.

Verity, which announced Oct. 29 that it will go through a restructuring and lay off 15 percent of its work force, actually made $200,000 on sales of $11.6 million in a quarter one year ago. In its most recent quarter, the company lost $9.8 million on sales of $5.3 million - less than half the sales.

Fulcrum has come out and said that it is in dire need of cash and is actively seeking additional financing. Shegda said that the company has streamlined its work force and may be looking for a buyer.

Regardless, Excalibur's new retrievalware products and efforts into applying similar technology to searching for images have attracted the Wall Street attention that has been missing in that market all year. Shegda said that the company still needs to cut costs to bring profitability.

But the 180-person company continues to look at the bigger picture. "Profitability has not been a priority for us," said Mark Demers, a spokesman for the company.

On Oct. 14, Excalibur announced that Kip Quackenbush, a former Oracle Corp. director, joined the company as vice president of business development. Gordon Short, Quackenbush's predecessor, only held the position for eight months before leaving to pursue other interests.

"We have to keep looking for good partners," Condo said.

The company wants to maintain its current 70/30 split between commercial and government sales, but commercial partnerships will be a priority. Demers said that Quackenbush is expected to bring in some strong alliances for Excalibur with companies like Sony, Discovery and Oracle. Results from that effort could come as soon as next quarter, he said.