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Tarantella: New and Improved
Tarantella has emerged from recent difficulties re-focused, re-energized, and ready for Bear (Paw).
by Kevin Newcomb, Thin Planet
June 2004

Since its beginnings in 1999 as a division of Unix developer SCO, Tarantella has always seemed to be more of a promising prospect than a proven big-league software provider. The company has had its share of financial struggles, growing pains, and an identity crisis or two thrown in for good measure. But with a new slate of executives, a fresh $19 million private investment, and a re-branded product line, the company is focused, re-energized and ready to fulfill its potential.

"Anybody who may have been in doubt in the past will clearly understand what we're doing here and how we're adding immense value for our customers. At the same time, people need to know that Tarantella is here to stay," Max Herrmann, Tarantella's director of Marketing, told Thin Planet. "We have people with tremendous passion in the new management team, we've seen a significant investment in the company, and we'll continue to add value to our products going forward."

The company gained traction in the server-based computing arena not by directly challenging Citrix, but by going after "low-hanging fruit". It developed its product line to address the needs of very large enterprise customers with specific challenges to providing access to applications within their organization: heterogeneous environment, geographically distributed, complex network and security environments, or large amounts of individual users.

But the economic downturn had an effect on Tarantella, with several promised buys held off when purchasing departments had to throw on the brakes indefinitely to weather the rough times. In October 2002, the company announced a restructuring initiative that included a 20-percent workforce reduction, a company-wide incentive-based compensation plan, closure of some facilities, and the realignment of its sales force.

In June 2003, facing the imminent threat of NASDAQ delisting, Tarantella acquired promising startup New Moon Systems, whose Canaveral iQ product was taking on Citrix in Microsoft environments with high-end features and low-end prices. The Windows-only offering was a strong complement to Tarantella's Unix/Linux-based offering.

Tarantella's troubles persisted, and in August 2003, the company initiated a review of revenue recognition practices that would lead to a restatement of revenues, delayed SEC filings, and eventual delisting by NASDAQ in October.

A New Beginning
In late 2003 and early 2004, the company underwent an executive house-cleaning, and announced a $19 million private investment.

The revitalized company then followed with a string of product and company acquisitions, including collaboration software provider Caststream in March, and Xerox's mDoc portable document management technology for PDAs and cell phones.

The changes brought immediate results, according to new Chief Marketing Officer Steve Bannerman, formerly the founder and CEO of Caststream. "Last quarter, we closed the third-largest deal in our company's history, and we were only able to do that because we strengthened our balance sheet and that customer was no longer concerned that we would go away after a year, so they did a three-year deal with us," he told Thin Planet.

Showing customers some evidence of longevity would help Tarantella reach its goal of signing long-term deals with large customers, especially those where the company already had a foothold, Bannerman said.

"The perception of uncertainty about the company persists, and that's not a trivial perception to change. It requires a lot of hard work and consistent messaging. There's some evidence that's beginning to show the shift in the trend," he said. "We've go this tremendous customer list of 12,000 customers, many of whom are household names, who have bought a little bit from us. Our strategy is to go back and mine those customers to buy a significant amount more. They feel a lot more comfortable about buying from us because we've strengthened our company and we've strengthened our balance sheet."

Secure Global Desktop
In May, Tarantella embarked on the first phase of its new product strategy with a rebranding of its product line. The Enterprise 3 product became Secure Global Desktop Enterprise Edition, and the New Moon Canaveral iQ product became Secure Global Desktop Terminal Services Edition.

"This is a three-phased transition. The first phase was the new branding initiative, the creation of a single family where the brand names are descriptive, and customers can look at 'Secure Global Desktop Terminal Services Edition' and understand what that product does, as opposed to 'New Moon Canaveral iQ from Tarantella', where they don't really know automatically what it does," Bannerman said.

In addition to having more descriptive names, the company is working hard to clarify the way the products relate to each other, and what needs they fulfill for customers.

"We want it to become intuitive to customers to understand when they need to move up the chain. For instance, for a Microsoft-centric organization deploying applications primarily behind a firewall, the Terminal Services Edition is a great product. Those are the types of customers who were previously considering just using Terminal Services, and now they have a great entry level product that's easy to buy, easy to own, and easy to use," Bannerman said.

Later on, they may want to deploy thin clients, or deploy applications running on Linux, they may want to migrate their environment to be not just PC-centric. This is the point in time when they need to migrate up from the Terminal Services Edition to the Enterprise Edition, he said.

The next phase of the strategy will be to announce new features for the family members that take the best of each and bring them together. That means bringing things like industry-standard security and heterogeneous support for cross-platform clients from the Enterprise Edition into the Terminal Services Edition, and applying the ease of use and ease of installation of the Terminal Services product to the higher-end enterprise edition.

The third phase of our strategy is to implement what Bannerman calls a 'platform for innovation'. This platform should allow Tarantella to take the common threads across all of its products -- like security and cross-platform functionality -- and apply them not just to new features of current products, but to implement entirely new products on top of this platform. This will also be aided by the Caststream and mDoc acquisitions, he said.

"We see the ability to take these products, build them into our product family, and extend the things that people do with our products today. Today, you have a desktop device, and you're interacting with an application using that device, but it's a one-to-one interaction; you don't know about the people around you accessing their applications on their device. We want them to be able to know about each other, collaborate with each other, and do that on a wide array of different types of devices. This platform for innovation will help us drive that vision."

Again, instead of trying to go head-to-head with Citrix, Tarantella is carving its own niche, this time as a valuable tool to be used with Microsoft Terminal Services, even when the much-rumored "Bear Paw" release comes out with some of the same features Tarantella's Terminal Services Edition offers.

"We're sure Microsoft is going to do exciting things for the market, and so will we," Herrmann said. "But if you need certain features like app publishing seamless windows, or load balancing, and you want to do it with RDP, you don't have to wait for Bear Paw. You can get an excellent deal today."

Citrix is basically trying to protect their revenue stream, and not realizing that add-on products for Terminal Services will fast become commodities, he said.

"Customers will expect them to have base functionality, they'll expect them to be easy to install, easy to buy, and not break the bank. Rather than trying to fight a market trend, we're aligning with a market trend. Our customers need to understand that we will do whatever it takes to add value on top of Microsoft, as opposed to trying to fight what Microsoft is doing," Herrmann said.

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