High-Tech High-Wire Artist

Netegrity CFO Regina Sommer talks about making the switch to a technology company during troubled times.
Jennifer CaplanMay 24, 2002

Regina Sommer, CFO of security-software provider Netegrity, made her career leap into high tech during the industry’s dark ages. That would be around 1995, when “the Internet was something very few people knew about,” she recalls.

But after nine years at PricewaterhouseCoopers and a stint as vice president of finance at Lifetime Corp., a home health-care provider, she felt ready for the big move. At Lifetime, after all, she’d developed some mean M&A skills working on more than 40 acquisitions of small agencies in a four-year period and helping out in the integration work when the company was acquired by Olsten Corp., the temp giant.

Sommer’s transition to tech came when she joined Open Market, a 20-person E-commerce software start-up, as the company’s CFO. During her tenure the company went public, as did many other tech fledglings. By 1999, four years after she had joined the company, Open Market had burgeoned to 500 employees and $70 million in revenues. “Those four years felt more like 10,” she recalls.

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Still, the toil and sweat didn’t lead to tears about tech in general. In late 1999 Sommer took over as finance chief at Revenio, a privately held customer-relationship-management software vendor. “I really thought that CRM had the potential to be the next hot thing in the software space,” explains Sommer.

That initial optimism, however, was dampened a year later as companies abruptly shut their IT spending spigots. “If [CRM] was ever a must-have technology, it clearly went to a nice-to-have one that people were not going to spend money on in the short term,” says Sommer. When it became clear to her that Revenio’s prospects looked dim, she felt it was time to hit the road again.

In January, Sommer landed the top finance post at Netegrity amid difficult circumstances. She succeeded James Hayden, who died in one of the jets that crashed into the World Trade Center on September 11. Sommer’s few months in office since then have been far from easy.

She found Netegrity in a complex situation, as the company endeavored to expand its technology reach while the economy was in the doldrums. The Waltham, Mass.-based company posted a $2.8 million first-quarter net loss, citing a lackluster corporate spending environment. It posted $22 million in revenues in Q1, down from $26 million a year earlier. The company’s share price has dropped more than 50 percent since the start of the year.

Sommer recently talked with about making the transition into high tech, taking professional risks, managing in tough economic times, and staying ahead of fierce competition.

You went from the home health-care sector to high tech. Was that a difficult leap to make?

The switch couldn’t have been more dramatic. I spent the first couple years of my career focusing on income taxes and on merger and integration work in an industry that moves at a much slower pace than high tech. It is also one that is fundamentally about people and staffing. When I joined Open Market, our first office was in the basement of a cruddy little building in Cambridge [Massachusetts]. When I walked in the door, there were wires hanging from the ceiling and 20 people jammed into a very little space. The CEO’s assistant had been paying the bills before I arrived; that was our whole accounting system when I got there.

That sounds like a big professional risk.

Yes, it certainly was. One of the big lessons I have learned is that to land those really exciting professional opportunities, you need to be willing to take some big risks along the way. I left Olsten without having a job and took a couple of months off to do a job search. I came across many people who said that given my background, I would never get a job in technology. But I pushed hard.

Describe the due-diligence process you went through before accepting the Netegrity post.

I really saw Netegrity as the best growth opportunity in the Boston area. I was also familiar with the Internet security sector because Open Market had explored this issue before focusing on E-commerce back in 1995. I also focused very heavily on the management team. These start-ups are very exhilarating, but they also require a lot of tough work. You want to be surrounded by people who are motivated and have a very strong sense of purpose.

It was also very important for me to join a company that was strong financially and was a market leader. Netegrity is at the forefront of this market and has more than $100 million in the bank. I saw this as a real opportunity to help build a company that can become a $500 million to billion-dollar business.

You joined Netegrity during a troubling time, not long after James Hayden had lost his life and just as the company was expanding strategically. That must have been a hard transition.

Netegrity had been missing a very respected and revered leader for about three months before I got here. I definitely felt some of the effects of that when I came in. There were decisions that needed to be made but that had been festering for some time. It was challenging to come into a new environment with a lot of decision-making demands. Having been at two software companies before, however, made it a lot easier for me to get up to speed. I also came in at the beginning of the fiscal year, when the year-end audit and budget processes were being done. That certainly helped me get to know the business pretty quickly. I had also done very extensive due diligence before joining. I think I was in here seven times for interviews, and I did plenty of reference checks. So I haven’t faced any major challenges that I didn’t expect.

Netegrity incurred a $2.8 million loss in Q1, and the losses could very well continue into coming quarters if things don’t pick up soon. Do you worry that such a trend might put your job in jeopardy?

No. Our most recent results came in as expected, so we certainly have not taken any bullets from the investment community for not delivering. The loss that we had in Q1 was according to plan and reflected the costs associated with the acquisition [of DataChannel, a provider of enterprise portal solutions] we did in December. On the other hand, our stock price has been hit pretty hard, along with other companies in the market. It is definitely tough to be at a company that, although it’s solid and has a strong potential for growth, is still being affected by the economy.

Have you considered at what point a depressed stock price might begin to affect your company operationally?

Yes, this is something I think about. I try to stay focused on making sure that the market is not arbitrarily discounting us just because people don’t have the right information. After having been at Open Market through the heyday of the Internet boom, I know a thing or two about stock-price volatility. I have learned that there is virtually no control a company can have of its stock price, and that the only thing you can really do is make sure that investors know as much as possible. You also have to be able to stay focused on the long term.

How do you deal with risks that could have significant adverse effects on your business, but over which you have very little control? For instance, if a big enterprise-resource-planning vendor chooses to bundle a competing security product with other E-commerce applications, the demand for your product could suffer.

We have acknowledged that that is indeed where the real competition is going to come from. IBM, for example, is looking to get into the Netegrity space. They look at it as a huge opportunity and have said that they are going to come after us. We have an advantage in the sense that this is our whole business and it would only be a pretty small piece of theirs. Our goal is to stay very focused on delivering and staying ahead.

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