Mathsoft, Inc. Case Study

Harvard Business School        9-593-094[pic 1][pic 2]

Rev. July 18, 1994

MathSoft, Inc. (A)

Introduction

In early April 1989, David Blohm, president and CEO of MathSoft, Inc., was reviewing the company’s  financial  results  for  the  third  quarter,  ended  March  31,  1989.        Like last year, there appeared to be some seasonality in the company’s sales. Revenues  had  reached  $824,000  in  the second quarter and then fallen back to $681,000 in the third. This year, however, the pattern was distressing because the sales decline resulted from slower sales of the company’s core software product, Mathcad. In addition, the market introduction of MathStation, a new, high-end software package for engineering workstations, was faring poorly. Even if the field  salespeople  met  their current fourth quarter sales projections, MathStation revenues in fiscal year (FY) 1989 would total

only $185,000—less than 25% of the $790,000 target.

Blohm was also troubled by the company’s marketing and sales expenses, which had mushroomed   to  exceed   total  third  quarter  revenues by  $69,000.        When product development,

administrative, and overhead expenses were subtracted, MathSoft now was operating at a quarterly burn rate of more than $700,000. Given the company’s current cash position, Blohm projected that MathSoft would exhaust its funding within five months.

Blohm knew that attempting to raise additional capital would be futile as long as MathSoft’s investors were worried by the company’s marketing and product development programs. Though MathSoft’s venture capitalists acknowledged the importance of investing in marketing and sales to launch new products, they were unhappy with the amount of money allocated to advertising. They wanted to see more product development effort and a greater proportion of revenues from new products.

The allocation of MathSoft’s marketing resources to advertising,  telemarketing,  and  field sales was also generating friction between the marketing and sales vice presidents. To support the market launch of MathStation, the board had approved  the sales  vice  president’s request to expand the field sales organization from 7 to 14 people. The large increase in field sales was intended to reposition MathSoft as a high-tech software company, capable of introducing a stream of specialized, high-end software packages for engineers and scientists. In spite of these changes, however, very few MathStation sales had materialized.

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This case was prepared by Gordon Swartz, doctoral candidate, under the supervision of  Prof.  V. Kasturi  Rangan as  the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Some names have been disguised, and data which are not publicly available have been modified and are not useful for research purposes.

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