Major Surgery

Our theme for 1992 was “focus.” This would prove to be an ironic choice, because at the start of the year we were falling apart, and by mid-year the company would become “unleashed,” extending itself in many different directions.

After finishing 1991 with very high sales, our expectations were for sales to continue upward as they had with every other new WordPerfect release. To our dismay, however, January sales were very low, and February sales were only slightly better. This was a problem the company had not faced before.

We were also disappointed by the lukewarm WPwin reviews. The reviewers complained that the product was a little slow and a little buggy, and they were right. Long gone were the days when I could take a WordPerfect review home and be certain I would enjoy reading it.

We needed to get a cleaner and faster version of WPwin out the door, but it would take some time. Microsoft was heavily promoting DDE (dynamic data exchange), which was a set of specifications they defined that allowed different Windows programs to exchange information. In theory, if we wrote our program to support Microsoft’s specifications, a WPwin document could give and receive information to and from other programs. Instead of releasing another version of WPwin right away, the programmers wanted to delay the release so the new feature could be included in the product.

A low point for the company occurred in late January at Demo 92, an annual industry conference hosted by Stewart Alsop where software companies showed off their new products. Devin Durrant, our marketing director for WordPerfect for Windows, had been invited to participate in a product shoot-out with Microsoft Word for Windows and Amí Pro from Lotus. At my suggestion, Devin used a lot of his time to stress our file compatibility across different computer platforms. The other demonstrators used their time to show off their flashiest features. Alan, Clive, Duff, and I were all there to see Devin get ripped apart by the other presenters as well as by the audience.

On our way home from Palm Springs, where the conference was held, our plane was prevented from landing in Salt Lake City due to fog, and we were forced to go all the way back to Ontario, California. Duff, Clive, and I decided to rent a car and drive home rather than wait around for the fog to lift. The eleven hour ride through the darkness was over in what seemed like a couple of hours. After getting beaten so badly in the shoot-out, we were ready to try to figure out how we were going to hold things together. We had four thousand employees and ten million customers around the world, and we felt like they were counting on us to come up with the right decisions and strategies. I have a hard time putting into words how exciting it was to feel like we were capable of finding solutions to impossible problems. We were in a battle to the death with Microsoft, and we were hurt, but we were three friends who together could accomplish almost anything.

By February we had figured out why our sales were so slow, and our future did not look nearly as bleak. Our unusually high October 1991 sales were the result of our distributors ordering too much of our DOS product, thinking we would have trouble shipping it once the Windows version was ready. Our unusually high November sales were due to our distributors ordering too much WordPerfect for Windows, afraid we would have to ration the product as we had with WordPerfect 5.0 and 5.1 for DOS. As it turned out, we had no trouble delivering product, and our distributors were left with larger inventories than they needed. Although our sell-through (the actual sales made to customers) was good considering the lukewarm reviews, it was not nearly good enough to drain off the oversupply immediately.

Once we realized why our sales were higher than they should have been in October and November of 1991, it was fairly easy to predict that sales would improve quickly. At the rate distributor inventories were shrinking, we could expect our sales to return to normal levels by the end of March or early April 1992. It was unfortunate for our IPO plans that the first quarter was so disappointing, but we had no reason to panic.

Early in the year we met with our accountants from Price Waterhouse to learn what we needed to do to prepare for the IPO. They suggested changes to our management team, changes to our accounting and reporting methods, changes to our salaries and benefits, and more. Although we were not ready to adopt all their suggestions, we could see the need to reorganize. Our business was split into about fourteen different corporations and one partnership. Our plan was to consolidate most of the branches of the business into one corporation before going ahead with the IPO.

Our first step was to take SoftCopy, a manufacturing corporation owned by the three of us on the Board, and split it into two parts. The part that produced our software was merged into WordPerfect Corporation. The other part, which did work for many of our competitors, survived as a smaller company at a new location. One effect of the change was to increase our US employee count by 500 employees, raising it up to almost 3,300. Another effect was to increase my stock in WPCorp from .2% to 1% in exchange for the 20% share I had owned in the manufacturing company.

In February, Bruce sent Alan and me another memo. Bruce had gone to a software store in the local mall and left upset, because the shelf space devoted to our products was much less than the space reserved for Microsoft and Lotus products. He asked if our marketing was as good as we thought it was. He asked again if the three of us were capable of leading the company. In my reply, I told him plainly that I was good at what I did and mentioned that some of our problems might have more to do with our products than our marketing.

In March Duff, Clive, and I went to a Software Publishers’ Association conference in Seattle. The three of us spent more time discussing a new sales program for large accounts than we did attending the meetings. Duff was convinced we needed to have an option in the program to sell directly to large customers. Selling direct was something I wanted very much to avoid. From 1980 until 1988 we had sold direct to large corporations, to governments, and to schools. The result was a lot of unhappy dealers, who were convinced we were stealing their business, and a bunch of slow paying customers. I believed that it was more important to keep our thousands of dealers happy and motivated to sell our products than it was for us to try to sell direct to a few accounts. With only about 250 reps in the US and Canada, I did not see how we could handle enough of the accounts to make a direct program worth the bad feelings we were bound to create.

Duff was adamant that we needed to establish direct relationships with our customers. He felt so strongly about the subject that he had actually written down his arguments on paper in what sounded a lot like a legal brief. He was sure we were missing opportunities and offending some customers with our unwillingness to establish a closer relationship.

We were close to Egghead’s headquarters, so when I saw how difficult it would be to change his mind, I rented a car and took him out to talk to one of our real dealers. As luck would have it, Egghead’s president and two of its vice presidents gave us a couple of hours, so Duff could explain what he wanted to do. They listened politely to his arguments and then explained what they were doing to sell our products. Duff was impressed by what they said, but would not change his mind. Our customers were telling us they wanted to buy directly from us, and Duff did not want to turn them down.

If I would have been a little smarter, I might have realized that Duff must have been talking to Alan. Alan and I had disagreed earlier about how much technical support we should offer the customer, and I suspect he also disagreed with my insistence that we not sell directly to large accounts. I can think of no other explanation for Duff’s maintaining his position when I was against it so much.

While it would have been easier to always give the customers what they wanted, I had a hard time believing “the customer is always right.” In fact, I had come to the conclusion that the person who coined the phrase had actually meant to say, “the customer always gripes,” for I had seen many occasions when the customer was definitely wrong. Some customers did not want to pay a fair price. Some asked for more than their fair share of service and support. Some even lied to us to try to get part or all of their money back.

In this case, Duff and Alan were listening to customers who said they needed to buy product directly from us in order to develop a closer and better relationship with us. For years I had listened to the same plea, and in almost every case the customer was interested in establishing a direct relationship only so they could attempt to negotiate a better price and ask for additional services. I frankly wanted to use our dealers as a protection from these negotiations and to insulate us from the individual pleas for pricing relief. I knew we were too willing to please to hold the line when a client asked us for something.

I had recently visited a large financial company in New York City. While I was there they threatened to use another word processor unless we were willing to provide them with a part-time network specialist. They were going through some support budget cuts, and they expected us to make up for their losses. I did my best to explain our “off the shelf” way of doing business, but they were not impressed. They wanted help and they wanted it immediately. The quality of our product did not matter if we were not willing to give in to their demands.

This was not an unusual circumstance. As large corporations made the transition from the full-service old world to the self-service new world, they were desperately trying to find a way to extract the same level of service from their vendors, even though they were paying much lower prices. They acted like spoiled rich people who were trying to save money on their vacation by going to a two-star resort instead of the five-star resort they were used to. In my mind I could see them sitting in their boats in the middle of a lake, yelling at the top of their lungs, “Where is my drink, where is my lunch, where is my magazine, and who is going to row my boat?” I imagined myself there as the manager of the resort politely yelling back to them, asking them to row their boat to the shore so I could explain where they needed to go to get what they wanted. Of course, they were not likely to pick up their oars, but I certainly was not going to swim out to their boat and row it for them. It would be foolish to give in to their demands and offer them five-star service at a two-star price.

I do not mean to say that customers should be ignored or treated shabbily. I sincerely believe in being cordial, fair, and honest with them. Their requests, comments, concerns, and needs should always be carefully considered and used as a valuable source of information. Their demands should, however, be kept in perspective. Sometimes they may not know what they want, sometimes they may change their minds, and sometimes they are not willing to pay for all that they want.

Though I say customers are not always right, I do believe they deserve good value for their money and the best service possible within the limits of what is profitable. When a customer asks for more than this, however, I do not think it is right to give in. It is not fair to other customers to offer a higher level of service to those companies that complain the most.

The Monday after we returned from Seattle was Monday, March 23, 1992, the day Bruce and Alan told me about their plan to expand the Board and change my duties. We spent close to three hours in that meeting, much of the time discussing our differences. I felt as if the company were in a boxing match with Microsoft, who, in hitting us with their Windows strategy, had delivered a very hard blow. I thought we had been staggered by the punch. We needed to cover up and conserve our strength, so we would have the resources to come out fighting in the next round with WordPerfect 6.0. Bruce and Alan agreed that we were in trouble, but disagreed with my conservative strategy. They wanted to retaliate immediately, thinking we already had good products and that what we needed was to counterpunch with a more aggressive and expensive approach to marketing.

They were ready to consider acquisitions, bundles, and strategic alliances, but I wanted to keep things simple. They were ready to hire technical reps to go to customer sites to help them install and use our products, but I wanted to keep our hands off of our customers’ networks, for fear we would become entangled in their support problems. They were ready to sell directly to customers, but I wanted to use our dealers. Bruce wanted a new image, but I was happy with the one we had. After all the struggles which resulted from pre-announcing our Windows product, I wanted to forever avoid the practice, but they wanted to tell the world what was coming right away. I wanted to define and teach correct principles and maintain a flat organization, but they wanted to use a more democratic approach and bring in a few experienced people from outside the company.

As I talked with them, I never considered going along with what they wanted me to do. For right or wrong, I had confidence in my decisions and ideas. I could not have run the business for all those years without it. I cared too much for the company and held on to my opinions too strongly to accept a passive role in its future.

After the meeting in Bruce’s office, I went back to work as if nothing had happened. When Bruce and Alan did not talk to me the next day, I was not very concerned. I was still absorbed in my day to day work, feeling like nothing much was going to happen. Duff came into my office near the end of the day on Tuesday to say he was not sure what they would do. He thought they were frozen in place, not wanting me to leave, but not wanting to back down. It was probably a mistake, but I told Duff I did not think they had the courage to run the company without me.

Up until Wednesday morning, when Bruce and Alan came into my office to tell me they were taking me up on my offer to leave for six months, I never for a moment considered they would let me go. I had always put their interests and the interests of the company ahead of my own, and I had always given them my best. As what they said sunk in, all I wanted to do was get out of there without them seeing me shed any tears. I did manage to thank them both and wish them well before I left.

That afternoon my departure and the new members of the Board of Directors were announced to the directors and vice presidents in the company. As the news spread throughout the company, some people were reportedly dancing in the aisles, while others were calling me with their condolences. By the next afternoon, I could see that I would not have to wait six months to find out if Alan and Bruce wanted me back to run their company. The organization had changed so much in three days that I knew they would never try to undo all they had done.

The realization that almost all of my friends and many of my neighbors and relatives worked for the company caused me to reconsider my “sabbatical.” I felt lonely and friendless. I did not mind giving up the money, because I had plenty, but giving up the daily association with my friends was an incredibly high price to pay to defend my business philosophy.

In a weak moment on Thursday afternoon, I went back to talk to Bruce and Alan and beg them for a job. The three of us met for an hour late Thursday afternoon, and I told them I was willing to do anything they wanted me to do. They seemed relieved and happy to have me back on their terms. No announcement would have to be made to the press, and the three of us could still be friends. We decided it would be better if I did not come into the office right away, so that the new Board members could have some time to feel comfortable in their new positions. I had no problem with that. I was ready to take some time off.

My wife was relieved to hear I was going back, because she had been afraid that my leaving the company might be hard on her relationship with her family. My oldest daughter, Wendy, was furious with me, however. She accused me of standing up for my principles only until I had to live with the consequences, and she was right.

The next morning I got a call at home from Spencer Katt, the rumor columnist for PC Week. He had heard I was leaving WordPerfect Corporation and wanted to hear my side of the story. I told him the rumor was false. My job description was changing, but I was staying with the company.

After I hung up, I got a call from Alan. He was sorry, but an announcement of my resignation had just been released to the press. Apparently, after I left the previous day, Bruce had called John Lewis, one of the new Board members, with the news that I was staying. John got very red in the face at hearing the news, and said something like, “You own the company, so I guess you don’t have to consult your new Board if you don’t want to.” Early the next morning Bruce and Alan called a Board meeting to discuss their decision to let me return. By the time the meeting ended, Duff had voiced his opinion that I would not be happy coming back with a different role, and the new Board had decided I should not return. Although I am not sure Duff had my best interests in mind, he was right in what he said. I would have been miserable witnessing the transformation of the company up close.

Throughout the weekend our phone never stopped ringing. Whenever the press called, I told them that my departure was a mutual decision. I was repeating the same story the people at WPCorp were giving out to help make the transition as painless as possible. I still owned 1% of the company and hoped that it would continue to do well. My kids were not as good at controlling their comments, however. When the Salt Lake Tribune called to ask if ours was the home of the Pete Peterson who worked at WordPerfect, my daughter Ellen burst into tears and told them I had been fired from my job.

My littlest children, David and Julie, shed a few tears. All they understood was that their dad was out of work, and they assumed that meant we would soon be out of money. They were too little to understand that interest income was as good as a salary. My middle son, Joseph, seemed to take the news without much concern, but Sam and Wendy were very angry that I had been asked to go after working so hard for so many years.

The most inconvenient call came at 2:00 on Sunday morning. Someone from the Associated Press phoned to ask if I was the Pete Peterson who had resigned from WordPerfect Corporation. The reporter had been calling all the Petersons in the Provo/Orem phone book, trying to locate the right one. Since my real name is Willard, he must have awakened a lot of families before dialing our number. He asked whether I could give him an interview right then, or whether I would be willing to make an appointment for later that morning. I asked for a 9:00 a.m. appointment and then spent the rest of the night wishing I had talked right then, so I could have gone back to sleep.

The next few months were hard to get through. I experienced all the emotions that are typical for those who lose their jobs. I went through the normal periods of denial, sadness, depression, anger, and resignation. It was hard for me to lose my WordPerfect identity with its semi-celebrity status. I missed the lunches and the tennis matches in the late afternoon, when we worked through all our important problems. I missed battling with Microsoft. I found out that retiring at age 43 is not as attractive as most people imagine.

Soon after I left, Bruce and Alan met with all the employees to explain what was happening in the company. They made a big point of talking about the new WordPerfect, which was now a “WordPerfect unleashed,” and hinted that I had been the person responsible for holding the company back. Now that I was gone, the company was free to become more aggressive and to experiment with more ideas.

In June extravagant press conferences were held on both coasts to introduce the new, unleashed version of WordPerfect. Their new WISE (WordPerfect Information Systems Environment) product strategy was introduced, and almost all of the upcoming products were pre-announced. Possible alliances were mentioned. Acquisitions were suggested.

The company reorganization took place throughout the summer. An executive committee was formed. A new management layer was created for senior vice presidents. A new vice president was hired to supervise the manufacturing department. More attorneys were hired. A new vice president was brought in from Europe to run the marketing department. A new director of MIS was hired. Dan Campbell was hired away from Price Waterhouse to be the chief financial officer and help with the IPO, and he brought a few more accountants with him. Over the next year WPCorp would grow by more than 800 employees, even though its sales would reportedly increase only slightly.

Not all of the changes which created this larger, unleashed version of WordPerfect Corporation had to do with the size and shape of the organization. More and longer meetings and longer workdays were the norm. Paperwork, which included detailed business plans from all marketing units and field reps, increased. Technical reps were hired to help large accounts with their problems. Large accounts were offered a direct purchase program. By the end of a year WPCorp would acquire three companies and announce an alliance with Borland, the self-proclaimed barbarians of the industry.

As all these changes were taking place, Bruce and Alan were paying me to be a consultant for the company. The consulting agreement, which was to run for two or three years, was not very satisfying for me. I made the mistake of thinking they wanted my advice, so I would tried to give it to them. Whenever I sent them a report, however, they would wonder how it was I knew so much. Rather than act on my words of counsel, they looked for ways to plug their information leaks. Soon they disconnected me from the company network and then from the company phone system. A few of my old friends were given lectures on confidentiality. It finally became clear to me that Bruce and Alan did not want my help. The consulting fee was hush money, and my only responsibilities were to keep quiet and not cause trouble.

In December Dan Campbell dropped by my house to explain some of the accounting changes which were coming to prepare for the IPO. As I listened, it became clear to me that my share of the company was going to be diluted, so I offered to sell out. Even if selling my stock before the IPO meant receiving less money, I was ready to end the relationship and get on with my life. I am sure Alan and Bruce felt the same way. On Christmas Eve I signed the agreements which returned my stock to them and terminated all our business relationships.

Go to Chapter 15