Hoping to stem mounting losses, John H. Harland Co. has reorganized, merging its compliance software subsidiary, Denver-based Formation Technologies, into its other operations.
Formation, which produces the Pedestal series, lost its name in the May reorganization, becoming a part of the Atlanta-based check printer's financial-markets division.
"Formation and the other companies under Harland were doing themselves a disservice by not doing this," said Robin H. Smith, Formation's most recent president, who is now a Harland senior vice president. "There were 18 organizations carrying their own identity and not leveraging the identity of Harland."
Mr. Smith will be relocating to Atlanta from Formation's headquarters in Denver.
Formation has been profitable since its creation in 1983, but has had a series of leaders since 1994, when Harland bought the software company.
Within months Formation's founder, Gaylord Layton, stepped down. Mr. Smith has run the company since last summer.
Harland is hoping the reorganization, announced in early May, will boost its stock price, which had dropped almost 50% in 12 months. Harland's net income dropped to $8.4 million in the first quarter, from $12.7 million in the year-earlier period. The company lost nearly $3 million in the fourth quarter of 1995.
But investors sent the stock price higher immediately after the reorganization was announced. Analysts said the value isn't likely to rise much more until investors see results.
Robert McAree, an analyst with Monness, Crespi, & Hardt in New York, said Harland's stock price was about $22 in late April, before the restructuring announcement. After the announcement, the stock briefly approached $30 per share before dropping back to about $26.
"People expected a little rise after the moves," Mr. McAree said. "It showed they were focussing on the future and taking steps to make things right. But many people are still sitting on the fence, looking at them and saying: Prove it to me now."
Mr. Smith said this won't be a problem. He said Harland expects to save $75 million a year through 2,500 layoffs. The layoffs reflect combining the check-printing operation and three of five Harland affiliates into a single financial-markets unit; consolidating 40 printing plants into seven regional facilities; and outsourcing customer service and data entry.
Mr. Smith runs the new financial markets division of which Harland was made a part. It will continue to produce Pedestal, which automates everything from a bank's compliance with Truth-in-Savings to a customer thank-you note. Geopublisher, which collects and analyzes data for the Community Reinvestment and Home Mortgage Disclosure acts, will still be produced, as will other Formation products.
"Formation still exists in terms of the compliance services and software it provides," Mr. Smith said.
Formation was the big winner in the reorganization, according to Mr. Smith. The company lost no employees in the layoffs, he said. In fact it gained salespeople, he said, because now all 200 Harland representatives will sell compliance software products. Previously Formation had to rely on fewer than 10 salesmen, he said.
Formation's budget also is getting a boost, with increases for research and development on new compliance software that will focus on loan- application and home banking products.
The additional funds will also allow the company to raise its national profile and improve its customer service operations, Mr. Smith said.
