Programmer's Paradise

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Programmer's Paradise

1157 Shrewsbury Avenue
Shrewsbury, New Jersey 07702-4321
U.S.A.
Telephone: (732) 389-8950
Toll Free: (800) 445-7899
Fax: (732) 389-0010
Web site: http://www.programmersparadise.com

Public Company
Incorporated:
1982 as Voyager Software Corporation
Employees: 116
Sales: $137.7 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: PROG
NAIC: 423430 Computer and Computer Peripheral Equipment and Software Merchant Wholesalers

Programmer's Paradise, Inc., is a New Jersey-based marketer of technical and general business application software and personal computer (PC) hardware and components aimed at technology professionals, including web designers, software engineers and development managers, systems integrators, and technical support specialists. Represented publishers and manufacturers include Adobe, Borland, Computer Associates, IBM, and Quest. Programmer's Paradise markets its wares through catalogs and web sites tailored to specific audiences, e-mail and direct mail materials, as well as in industry magazines and at national trade shows. In addition to the Programmer's Paradise division, Programmer's Paradise, Inc., operates two other divisions. Lifeboat Distribution is a wholesaler geared toward helping emerging software publishing companies. The newest division, TechXtend, has been established to provide solutions and onsite services to IT professionals, focusing on services such as backup, disaster recovery, and server consolidation. Programmer's Paradise maintains offices in Shrewsbury, New Jersey; Hauppauge, New York; and Mississauga, Ontario, Canada. Programmer's Paradise is a public company listed on the NASDAQ.

COMPANY FOUNDED IN 1982

Programmer's Paradise was incorporated in 1982 as Voyager Software Corporation and started out as a wholesaler and reseller of educational software. Backed by the venture capital firm of Hudson Technologies and other investors, the company expanded in 1986 when it acquired Lifeboat Associates, which had been founded a decade earlier to publish software and act as a wholesale distributor. In that same year, Voyager launched a business called Programmer's Paradise to market technical software through catalogs. Voyager also added Science & Engineering Software, a unit that distributed scientific and technical engineering software packages. The company did not perform especially well, generating revenues of less than $7 million, and in 1988 Hudson Technologies recruited a new president and chief executive officer, Roger Paradis.

Paradis possessed a broad range of experience. He graduated from the U.S. Naval Academy in 1957, earning an undergraduate degree in engineering and the equivalent of a master's degree in physics. He then completed a four-and-one-half-year stint in the Navy, serving aboard a Poseidon nuclear submarine. He then enrolled at Harvard Business School, receiving an M.B.A. in 1974. Paradis went to work for AT&T as the telecommunications giant was becoming more involved in computers, soon becoming one of the youngest division managers in the history of the corporation. He then struck out on his own in 1980 to found a high-technology consulting business, Tetrion Consulting Group, and later in the decade cofounded Skantek Corp., a company that used fiber-optic technology to scan and print engineering drawings. Prior to joining Voyager, Paradis headed the New Jersey venture capital firm of Amerinex Corp. and helped turn around several companies involved in computer software, component, and system fields.

Shortly after Paradis took charge, Voyager acquired a fourth company, Corsoft, a value-added software reseller founded five years earlier that boasted major customers such as AT&T and Bell Labs. It was supposed to be merged with Lifeboat, Programmer's Paradise, and Science & Engineering under the Magellan Software name and compete against Corporate Software and Egghead Discount Software, the leading software resellers in the United States. The Magellan name, however, was already being used by another company and Lotus Development had trademarked it for a desktop search engine program. As a result, Voyager retained its name.

Voyager grew steadily in the early 1990s as a three-division company that focused on the software needs of corporate technology professionals. Lifeboat acted as the distributor, with Corsoft as the corporate reseller and Programmer's Paradise as the mail-order operation. In 1992 Voyager completed a minor acquisition, paying $200,000 for South Mountain Software, Inc. A year later, Voyager entered the European marketplace when it acquired a 67 percent stake in software distributor Lifeboat Associates Italia S.R.L., and over the course of the next several months purchased the remaining shares. Voyager added to its European business in June 1994 by acquiring the German software reseller ISP*D International Software Partners GmbH and a subsidiary, with operations in both Germany and Austria. In that same year, Voyager launched a catalog operation in the United Kingdom. By the end of 1994 Voyager's revenues topped $70 million, a tenfold increase in just six years, to go with a net profit of more than $1 million.

NAME CHANGE IN 1995

In May 1995 Voyager changed its name to Programmer's Paradise, Inc., and prepared to make an initial public offering (IPO) of stock, which was completed in July of that year when nearly 2.2 million shares of stock were sold at $10 a share. Some of the proceeds were used to establish the first web site for Programmer's Paradise in November 1995. Although the general public had not yet embraced the Internet in mass numbers, the target market for Programmer's Paradise was early adopters of new technology, so that an Internet presence was important in the company's ability to maintain growth. The online catalog was then supplemented in May 1996 with e-commerce capability. A software-downloading option became available in the summer through an agreement with Cybersource, the leading electronic distributor of software, to use its technology on the back end of the web site. A second site, Programmer's SuperShop, was added to the fold in July 1996 after Programmer's Paradise paid $11 million for its chief U.S. catalog competitor, The Software Developer's Company, Inc., known for its catalog The Programmer's Supershop. In a related move, the company also launched a new catalog in 1996, Internet Paradise, geared toward Internet developers.

While it staked out online space in the mid-1900s, Programmer's Paradise continued to increase its international footprint. In December 1995 it beefed up its U.K. subsidiary with the acquisition of Systematika Ltd., a major technical software reseller in England and publisher of the well established catalog System Science. Several weeks later, Programmer's Paradise established ISP*F International Software Partners France S.A., a Paris-based corporate reseller of PC software. Then, in September 1997, Programmer's Paradise acquired Logic-soft Holding B.V. to sell software in Belgium, The Netherlands, and Luxembourg. Earlier in 1997 Programmer's Paradise also expanded into Canada by establishing Programmer's Paradise Canada to produce catalogs specifically tailored for the Canadian market.

COMPANY PERSPECTIVES

At Programmer's Paradise, our business focuses on pleasing technology professionals!

Revenues increased at a steady clip in the mid-1900s, reaching $93.3 million in 1995, $127.6 million in 1996, and $176.2 million in 1997. Net income in 1997 totaled nearly $4 million. After ten years at the helm, Paradis resigned in July 1998, a move that the company insisted had nothing to do with quarterly projections that failed to hit the mark. A spokesperson said he was "leaving to pursue other interests," and in a statement Paradis echoed the rationale, maintaining he had "a desire to do some other things that I need some time to do." He also said he would stay on as a consultant to help with what he hoped would be "a seamless and very effective transition" to a new management team. In any event, he was replaced by 61-year-old William H. Willett, who had been on the board for the past year and was named as both CEO and chairman of the board. Willett had three decades worth of marketing and sales experience, including stints at Time Inc. and Avon Products Inc., where he served as president of the catalog division. He came to Programmer's Paradise after serving as the CEO of Colorado Prime, a direct-to-home grocery venture.

A major part of Willett's mandate was to aggressively build up the company's Internet business, and the results of 1998 reflected this emphasis. While sales in general increased 33 percent to $234 million, Internet sales surged almost 500 percent to nearly $3 million. In 1999 that amount increased to around $15 million. As a result of the Internet, catalogs, which were the mainstay of Programmer's Paradise, began to change their function. Although catalog sales continued to grow both domestically and internationally, increasingly the catalogs served as banner advertising for the company's web sites, drawing customers to the web sites where they could order a shrink-wrapped copy of a software package or download it electronically. The web sites also served as a repository for information not available in the catalogs. Because the web sites were so important to the future of the company, Programmer's Paradise stopped having outside firms do the development work. Instead, employees were added to take the work in-house. Ironically, at a time when virtually any stock related to the Internet was a Wall Street darling, Programmer's Paradise, which actually had considerable Internet sales and was profitable, was not viewed as an Internet stock and its share price was little higher than its IPO level. As nettlesome as this neglect may have seemed at the time, Programmer's Paradise also avoided the devastation that would visit the Internet sector when the dot-com bubble burst.

SELLING THE EUROPEAN OPERATIONS IN 2000

Internet sales increased 275 percent in 1999, but overall Programmer's Paradise experienced a modest increase in revenues of just 4 percent to $244 million. The primary culprit was the concern over Year 2000 (Y2K) readiness, prompting many firms to postpone systems changes and the purchase of new software. Of more importance was a drop-off in European sales in 2000, as revenues declined from $163.4 million in 1999 to $127.9 million in 2000. In the meantime, the North American business improved 10 percent, or nearly $8 million, to $88.6 million. Programmer's Paradise, as a result, decided to shed its European operations, selling them to Germany's PC-Ware Information Technologies AG in January 2001 for $12.8 million.

A North America-only business, Programmer's Paradise experienced a negligible increase in revenues to $89.5 million in 2001, due in large measure to a decision to discontinue negotiating Microsoft Select and Enterprise volume licensing agreements for new customers, a business that monopolized too much time for too little profit. This shift in focus resulted in staff cuts and a loss of revenues. More important to the longer-term health of Programmer's Paradise was the troubled U.S. economy, especially in the technology sector. Although Programmer's Paradise may have avoided the difficulties experienced by pure-play Internet companies, it still had to contend with the reluctance of corporate customers to upgrade their information technology during a period of economic uncertainty. The full effects of poor business conditions would be felt in 2002 and 2003, when Programmer's Paradise reported sales of $65.2 million and $65.6 million, respectively. The company was only marginally profitable during this period, earning $28,000 in 2002 and $966,000 in 2003. Softening the blow was the fact that the company had no debt and plenty of cash on hand.

Corporate spending finally picked up in the second half of 2003, leading to an increase in sales for the year to $103.6 million, accompanied by a healthy $6.3 million net profit. Business continued to build in 2005, when Programmer's Paradise recorded sales of $137.6 million. Net income dipped to $2.7 million, but this decline was in fact an accounting matter, resulting from a $4.1 million reversal of a deferred tax valuation allowance.

KEY DATES

1982:
The company is founded as Voyager Software Corporation.
1988:
Roger Paradis is named CEO.
1995:
The company is taken public.
1998:
Paradis resigns.
2001:
The European operations are sold.

Major changes were in store for 2006. At the beginning of the year, Willett turned over the CEO position to 34-year-old Simon F. Nynens, while staying on as chairman. A certified public accountant and a graduate of the Advanced Management Program at Harvard Busi-ness School, Nynens had been with Programmer's Paradise for eight years, starting with the European operations before becoming chief financial officer in 2002. Then, in May 2006, the company announced that it intended to change its name to Wayside Technology Group, Inc., as part of an effort to pursue distinct market segments. Programmer's Paradise would revert once again to division status and focus on serving the needs of the software development community. Lifeboat would operate as a wholesale division devoted to distributing the products of emerging software publishing companies as well as difficult-to-source hardware lines and accessories. A third division called TechXtend was established to provide information technology organizations with solutions in areas such as business continuity, backup, disaster recovery, and server consolidation. In a press statement, Nynens explained the reason behind the changes: "The re-naming of the company will provide us with greater flexibility to continue to build on our strong brands while we launch new divisions focused on consultative services."

PRINCIPAL SUBSIDIARIES

Programmer's Paradise Catalogs, Inc.; Programmer's Paradise.com, Inc.; Programmer's Paradise, (Canada) Inc.; International Software Partners, Inc.; Corsoft, Inc.; Lifeboat Distribution, Inc.

PRINCIPAL DIVISIONS

Programmer's Paradise; Lifeboat Distribution; TechXtend.

PRINCIPAL COMPETITORS

Cyberian Outpost, Inc.; Insight Enterprises, Inc.; PC Mall, Inc.

FURTHER READING

Brown, Lauren, "Four Firms Merge, Form Software Reseller Aiming to Compete at the Top," PC Week, July 25, 1988, p. 115.

Cho, Joshua, "Paradise in Canada," New Canaan, October 1997, p. 12.

Cotlier, Moira, "Programmer's Bids Adieu to Europe," Catalog Age, January 2001, p. 14.

Fazzi, Raymond, "CEO Resigns from New Jersey-Based

Technical Software Seller," Asbury Park Press (N.J.), July 15, 1998.

Fitzgerald, Beth, "Geeks Get the Goods Via the Middleman," Star Ledger (Newark, N.J.), June 7, 1999, p. 63.

, "Programmers Find Paradise by the Computer Screen's Light," Star Ledger (Newark, N.J.), March 18, 1999, p. 33.

Frye, Lori, "Roger Paradis Chmn. and CEO of Programmer's Paradise," Dow Jones Investor Network, August 27, 1996.

Oberndorf, Shannon, "Programmer's Paradise," Catalog Age, September 1, 1997, p. 57.

Taft, Darryl K., "Programmer's Paradise to Acquire Chief Competitor," Computer Reseller News, June 10, 1996, p. 103.