- The Washington Times - Tuesday, June 5, 2001

MicroStrategy's loss has been EGrail's gain.

While one of the region's most visible software companies has laid off more than 800 people over the past year, EGrail Inc., a small Bethesda software firm, has opened its doors to them.

EGrail's 75-member work force includes 11 former employees of MicroStrategy Inc., four of whom were laid off by the Vienna software company.

"There's definitely a MicroStrategy influence here," observed EGrail President and Chief Executive Officer Joe Payne, who took over the privately held company on March 7.

Mr. Payne, 36, was the third person to leave MicroStrategy and join EGrail, which develops content management software. The software lets workers update Web pages without having to master a programming language such as HTML.

Even though the MicroStrategy influence is among EGrail's distinguishing features now, Chief Technical Officer Albert Brown hopes the company he helped start in 1997 can build a reputation by standing out in an increasingly crowded field of companies writing content-management software.

About 30 U.S. firms market the software, and corporate customers spent $500 million on it in 1999, said Mark Gilbert, research director at Gartner Group, a technology research firm in Stamford, Conn.

Redmond, Wash.-based Microsoft Corp. jumped into the market on April 30 when it bought NCompass Labs Inc., an EGrail competitor in Vancouver, British Columbia. Microsoft's presence could make it even harder for companies in the fractured software market to survive, Mr. Gilbert said.

"This is going to be a tough space and we are going to see some people go out of business or merge," Mr. Gilbert said.

EGrail remains focused on adding customers and finding a second round of venture capital. It has secured one round of private equity investment worth $5 million.

EGrail's workers are crammed into a Bethesda building that has been home to an art gallery and a Chinese restaurant. Mr. Payne works on the second floor of the two-story building in a space the size of a small bedroom. It has bare walls and a neglected feel.

Mr. Payne who was not laid off at MicroStrategy was a vice president and chief marketing officer at his former employer. It is an oft-repeated story that his new office at EGrail does not measure up to his former MicroStrategy office.

But Mr. Payne and his colleagues send a clear message that they are more interested in building EGrail's foundation than in decorating the walls around them.

EGrail and MicroStrategy differ more than in their outward appearances. MicroStrategy is struggling to regain its luster after suffering through a difficult 2000.

EGrail barely has a past.

Mr. Payne and his former MicroStrategy colleagues have started over and are more interested in helping a young company grow than in restoring one hobbled by falling revenue, layoffs and a Securities and Exchange Commission investigation into its accounting practices that led to fines against three employees.

"There's an energy and a buzz here," Mr. Payne said.

Ray Tacoma and Michael Quint are among the 11 who have left MicroStrategy and now work at EGrail.

Mr. Tacoma, 51, headed MicroStrategy's North American sales office and helped boost sales from $23 million to $223 million during his first four years there. EGrail hired him two months ago, hoping he could duplicate that achievement.

Mr. Quint, 29, worked in MicroStrategy's public relations office under Mr. Payne and started at EGrail in March. He said that Mr. Payne's reputation draws people to the Bethesda software company. But Mr. Payne stresses he does not actively recruit MicroStrategy employees because he has an agreement with his former employer not to do so for one year.

If they come to EGrail of their own volition, however, Mr. Payne is free to hire them.

"We have gotten literally hundreds of resumes from people at MicroStrategy who want to work here," said Mr. Quint, who heads EGrail's public relations effort.

An aura of good feeling exists at EGrail, but there are potential hurdles. Companies are expected to spend up to $4 billion by 2003 on content management software from firms such as EGrail and industry leader Interwoven Corp., but spending on the expensive software has begun to slow, Mr. Gilbert said.

As a result, shares in EGrail competitors Interwoven and Vignette Corp. have fallen. Interwoven, based in California's Silicon Valley, closed yesterday at $19 a share on the Nasdaq Stock Market, down 71 percent from its high last year of $65.43 a share. Vignette, based in Austin, Texas, closed yesterday at $8.90 a share, down 91 percent from last year's high of $99 a share.

"The market is in a funk right now. It's a scary time for a lot of these companies," Mr. Gilbert said.

If EGrail is afraid, it hides it well.

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