Current state of NI - interesting thread on reddit

Discussion in 'MASCHINE Area' started by muitosabao, Jul 9, 2019.

  1. muitosabao

    muitosabao NI Product Owner

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    https://www.reddit.com/r/NativeInst...nancial_analysis_of_native_instruments_xpost/
    The ex-employee reviews (if true) are particularly worrying and kind of emphasyses what a lot of us feel/fear.
     
    Last edited: Jul 9, 2019
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  2. certifiedbeatz

    certifiedbeatz NI Product Owner

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    I didn't find this but to make it easier to read i copied and past what was posted.. true or not sounds like alot going on here..

    First, I checked the most recent reviews from Glassdoor.com. Here’s a few samples of the comments left by ex-employees over the last 3 months.

    • "all innovative projects got cancelled. The management is a complete mess. Roadmap and OKRs change on a weekly basis."
    • "A company on the path of abrupt shrinkage (600+ employees in 2018 to less then 400 employees in 2019)"
    • "Mass layoffs the last 2 years (30 people in USA in 2018; 20 people in Germany in 2019)"
    • "Constant cancellation of projects some being cancelled right before the release with the losses measured in many millions of euros - which is then compensated by cutting down the costs on personnel by means of mass layoffs."
    • "Hiring of executive individuals the only function of who is to make the decision on firing, layoff and project cancellations."
    • "Bureaucracy, bureaucracy and - because it seems so beautiful - even more bureaucracy. Up to 40% of my time was spent in meetings."
    • "Massive technical debt; you touch one thing and 10 other things break."
    • "No clear product road maps"
    • "My prediction is that in a small amount of years time the company will collapse"
    That sounds bad. Obviously ex-employee reviews aren’t the most unbiased source though. Every company with a few hundred employees will have disappointed ones who have been fired. A few bad reviews out of several hundred employees shouldn’t be taken too seriously. I was also excited to see more frequent releases and better customer engagement on their forums with the last few versions of TP3, so I have hope.

    Review like those on Glassdoor are only a signal and possibly a weak one at that. The financial health of a company is a more fundamental indicator to it’s health and behavior.

    So how’s NI doing financially? NI is a private company, meaning they don’t need to post details about their financials on the stock market. That said, they do operate out of Germany, so I checked the German Federal Register for their company financials and was able to find them (thank you Democratic Socialism! You can check it here and do your own analysis: https://www.bundesanzeiger.de/ebanzwww/wexsservlet. The website has an English option and you can use Google Translate on the financial reports.)

    From what I can gather NI has two legal entities. An operating company (NI GmbH) and a holding company (NI Holding GmbH). Traditionally the profit from the operating company went to the holding company each year, so the holding company acts as a kind of financial and legal protection for NI’s ongoing money over time. Think of it like their long term piggy bank.

    Both companies last filing was reported on Dec 31, 2017 (so after the cash injection) so I compiled financials for both companies from 2017 back to about 2013.

    For the most recent year they filed (Jan 1, 2017 to December 31, 2017), the operating company (what we would think of as NI who makes the software, etc) generated €68 million in sales and about €19 million in “other operating income”, for a total revenue of €88.2 million. They also had €84.6 million in expenses which means that they barely broke even in 2017 and only made €3.6 million in profit. For comparison, NI reported almost €10 million in overall profit in 2016. They did €5 million in 2015, €18 million in 2014, €16 million in 2013, and so on. So 2017 was down a lot from previous years.

    Some profit is better than none though; at least they didn’t lose money. Sales are down but not dramatically so and “other operating income” is actually up a healthy amount (€19 million in 2017 vs €14 million in 2015).

    As an aside, NI spent €23 million on “general administrative costs” in 2017 which is usually staff salary. That’s more than they spent in 2016 and 2015 by about €3 million. This also correlates with the reported hirings they kicked off in 2017 to boost the company. Bookmark that figure though; I’ll come back to it below

    From a financial perspective the company isn’t doing great, but also not that bad on the face of it. It’s not like they’ve got big loans to the bank, can’t pay employees, and are operating a loss. So that’s great news for us NI fans out there.

    What about the holding company? We know that they received €50 million investment back in October, 2017 from an investment firm called EMH. That was almost two years ago.

    While the amount of profit delivered to the holding company is clear from NI’s financials, the holding company may have other assets other than just the operating company. So the numbers aren’t one-to-one. It’s also not clear if the holding company is the sole owner of the operating company. By the looks of it I’d say there are other shareholders in NI other than the holding but I could be wrong. In any case, that muddies the water a little further.

    That said, we can still tell a few interesting things about the holding company side of things. First, the holding company’s bank balance went up by nearly €28 million in 2017, which would make sense if that’s the first transfer of the EMH investment.

    Second, the operating company did not transfer all of the profit back to the holding company in 2017, unlike all previous years I looked at back to 2012. NI made €3.6 million in profit in 2017 and also increased its staff expenses by around €2.5 million the same year. They gave €300,000 to the holding company as a profit transfer agreement, leaving around €500 to €600k to play with.

    What does that mean, if anything? I just want to emphasize at this point that I know nothing about NI and am just speculating here. So don’t jump to conclusions! I could be totally wrong.

    One positive hypothesis is that in 2017 the NI board, presumably in the form of the holding company, agreed to defer profit transfer and let NI reinvest more staff and developers. We’ve seen from NI’s own press releases that they doubled the size of the Traktor development team in 2017. Between then and now they’ve been busy, totally redesigning their hardware (Maschine Mk3, S4 and S2 Mk3, new Komplete keyboards and sample libraries, TP3, Traktor DJ 2, Massive X, and more). €3 million is not a small sum to play with when the average developer salary in Berlin is around €50,000 a year. Throw in marketing, project managers, etc. and that buys you 60 new employees; quite a healthy team (or project budget depending on what you spend it on).

    Another hypothesis is that the €50 million wasn’t for the operating company at all, but was intended intended for the holding company. There could be a lot of reasons why the holding company would want to bank this cash, but without more detail it’s pure guess work. They could use it to buy another company. They could use it to buy out existing shareholders in an effort to clear the decks and bring in new talent. They could use it to pay off shareholders and free up more cash for NI to operate (remember that €3 million from before).

    There’s a lot of reasons and we really can’t tell. All financials I looked at are from 2017, so we won’t know more about how they did in 2018 until around Jan or Feb of next year when they publish their 2018 numbers.

    Conclusion:

    Let’s guess what might happen in 2019. If the changes made in 2017 paid off, then 2018 should be a good year financially and we’d expect to see continued innovation and development from NI. That would be a great thing.

    If, however, those changes didn’t perform as well as hoped then 2019 will be a bad year. Whoever in management was behind the plans from 2017/2018 will have a lot of explaining to do and new strategies will have to be developed. We’ve been hearing reports of entire teams being fired in 2019 and the Glassdoor reviews are terrible. If those indicators are to be believed, then 2018 might not have worked out as planned and now the holding company and the management are trying to course correct. This could also include things like mergers, acquisitions, or sale of all or part of the company in more dire circumstances.

    The good news is that the company isn’t bleeding money. They’re still profitable on operating revenue alone (from what it looks like) and the holding company still has plenty of money in the bank. So whatever is going on inside NI isn’t being driven by financial panic. That doesn’t mean they’re doing great from a product perspective, but at least the numbers still add up.

    Finally, it also suggests that even if 2018 and 2019 aren’t great years for NI from a financial perspective, they’ll still be with us for a while. I think that’s a great thing. We might not see crazy new innovations and awesome breakthroughs (which would be sad) but at least they aren’t going away (which would be even more sad). It just means they’ll spend more time fighting amongst themselves, leading to slower product updates, more employee attrition, and strategic wandering.

    If they are contemplating a big change, which doesn’t seem to make sense given their relative financial health, then it’s a decision that isn’t being driven by financial motivation alone and would be more about the strategic fit for whatever new product lines they’re thinking of, company they’re thinking of buying or merging with, whatever new leadership team they appoint, or whatever they end up doing.

    I suspect & hope that we’ll see more good news from NI in the coming months. Fingers crossed for NI’s continues spiritual rebirth.

    FINAL CAVEAT:

    Just to repeat what I said at the beginning, I know nothing about the insides of NI. All of this is pure guesswork and I could be 100% wrong on any number of things. I spent the afternoon doing this because I want NI to succeed, I started getting worried something was rotting from the inside, and wanted to find out more. I feel reassured they’re not about to go out of business or rush into a fire sale, which is great news. All we can do is wait and see for 2019 and hope that 2018 was a better year for them. In the mean time, don’t panic. :)

    Thanks for reading this far.
     
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  3. JesterMgee

    JesterMgee NI Product Owner

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    1,886
    Let me know when the movie is released, lots to digest there. Interesting read and would confirm a lot of the issues that we see but of course not easy to confirm all the points but we do see this kind of thing happening more and more as companies grow bigger than they can manage themselves.

    I've heard myself that it's far more difficult to action simple changes because of the layers of management that need to approve everything and higher up the chain they have no understanding of what the features mean, just want to know what the cost of development would be and the return on investment.

    That's the world we live in tho, everything is done for the bottom line and only benefits the few at the very top.
     
    Last edited: Jul 9, 2019
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  4. Slappz

    Slappz NI Product Owner

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    339
    certifiedbeatz I'm not sure posting Internet "theories" are helping your cause here, but that's about the only thing I'll say on this subject matter. Most companies don't like their dirty laundry aired out in the open like that, and especially right on there front doorstep.
    Besides, this is more like why don't you tell us something we don't know. lol
     
  5. tempsperdu

    tempsperdu NI Product Owner

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    1,692
    How is it that the only people not asking about Automation Curves in Maschine are NI??.......It's a hard life being the Future of Sound when you haven't been allowed out of the noughties................................:D
     
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  6. basehead617

    basehead617 NI Product Owner

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    329
    Sounds like the company is in pretty good financial shape to me..
     
  7. hubcapbrian

    hubcapbrian New Member

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    11
    That sounds like pretty much every tech company I worked at over a 36 year period. Those are typical employee water cooler complaints, many of which I had myself at different jobs.
     
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  8. raphaël_

    raphaël_ NI Product Owner

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    30
    anybody surprised?
     
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  9. lwj|localspace

    lwj|localspace NI Product Owner

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    382
    This lines up with what I've been theorizing.. sure, you'll find a lot of reviews like that on Glassdoor. If a company is doing fine, it doesn't matter.. if a company starts faltering publicly.. there's maybe truth to it? To me a tech company is only as good as the innovation that takes place there... no innovation, no road forward. Sad.
     
  10. telecode101

    telecode101 NI Product Owner

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    428
    :p:p:p:p ha ha ha ,, sounds like where i work ... :)

    One tip I can give you about work life, if you hang out with people that predict doom and gloom, you will always be thinking doom and gloom.

    I guess it would be good to also try to compare how NI is doing to other companies like Steinberg/Yamaha and so on. NI should be a much smaller company with less fincncial reserves and they should be a much more agile company that creates more innovative products to Stein.. are they doing that? Thats the right question to ask me thinks.
     
  11. D-One

    D-One Moderator Moderator

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    7,211
    Very speculative post but I enjoyed reading it and learned a couple of things.
    I was thinking exactly the same thing the whole time I read the post / glassdoor reviews, not to diminish those complaints at all but it feels like everyone who works for any kind of company has a similar conversations all the time.
     
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  12. lwj|localspace

    lwj|localspace NI Product Owner

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    382
    This is very true.. take it from Alex Jones, whaha

    But in this case I think it's legit, because the stories/rumours from the inside match with what I observe on the outside. The direction is confused, nobody knows what to expect next.. there's no communication on this, making you fear that NI themselves don't know.

    The product line up is a confusing mess of different ecosystems and strands that seem completely abandoned. Most of the 'new' products are repacked old ones, or just 'content' masquerading as an instrument, or one-offs that seem more like a devs personal hobby project (mod and crush pack, trk-01). Delivering an actual new, big product like Massive X is problematic, see the delays and the rough state it released in. This lines up with the rumours about mass-firings, leadership changes and all of that. That means other people come in, take over, implement their vision (or lack of it)..

    Looking at Yamaha and Steinberg isn't a great comparison. They're both dinosaurs as well... and Yamaha is well.. Yamaha, they make a lot of farm equipment and great motorbikes, so... You have to look at the products that are directly vying for the buyers' wallets with NI's products. And there they're simply being outclassed and outmaneuvred by much smaller companies who don't have NI's huge overhead, layers of management and marketing. NI is a huge lumbering dinosaur compared to U-he or Unfiltered Audio.. who are tiny and can focus on development, invest earnings right back into new products and actively respond to what their user base is doing. NI is simply too large for that. Some customer rep or product manager has to kick it upstairs first, hope management picks it up and that it fits in their predefined strategy and then wait for the idea to maybe trickle back down so it can be designed by comittee into something that hardly resembles the original idea and arrives to market too late to have an impact. This isn't NI's fault.. it's just a result of size, having too many conflicting priorities and competing in too many markets with too many different products. You don't want to become the size of company where there's water coolers for the lazy to hang around and complain ;)

    If they'd stuck with their old more iterative approach: making the best most innovative 'instrument' plug-ins and expanding things like Reaktor, Battery to their full potential.. they won't be so big now, but they'd be really succesful. They'd be a master of that trade, not a jack of all of them. They wouldn't have a million and one products to manage or a fractured, dissatisfied user base that's impossible to keep happy.

    Of course, all entirely speculative.. but I've learned to trust my gut over experts on these things.
    That's not a message of doom and gloom, it's just how things work.. especially in tech. The only thing that matters is what you're going to about it personally. Are you gonna stick with Maschine and wait it out.. NI does still seem committed to Maschine as some kind of priority and they can turn it around. Or hop off the bandwagon and move on?
     
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  13. kaotik78

    kaotik78 NI Product Owner

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    286
    Sadly that is the primary focus of any company make money first and who cares about the product quality as long as we are making money. Course the post is speculative so aindo hope people consider that first, though everyone’s individual experiences with NI will vary so there could be some truth to some of the claims. The fix one thing and 10 things break I can certainly see being a reality working in development myself.

    “We fixed automation... yes but now you broke song mode...”
     
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  14. D-One

    D-One Moderator Moderator

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    7,211
    It's hard to imagine a big company that can sell low-quality products and still be successful long term tho, unless the products are really, really cheap compared to the competition in the same market.
     
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  15. kaotik78

    kaotik78 NI Product Owner

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    286
    Hard to imagine but probably not impossible. As for being really really cheap like out of the box in week or month broken, perhaps especially if a company fails to make good on warranty claims or do right by consumers of their products, otherwise word gets out and yes, the company will eventually fail as people will stop consuming their goods and services.

    I think mainly that companies want to make money first and if they can do that and release a product that can at least last for a warranty period great and if they can use sub par parts that don’t last as long but still meet the minimum requirements even better.

    I can hear “they don’t make em like they used to” now in my head...
     
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  16. tempsperdu

    tempsperdu NI Product Owner

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    1,692
    It's OK herding in users with low end prices but to keep them you have to inspire them and keep them interested. Arguably perhaps the best way of doing this is not by ensuring you have an untrustworthy reputation and are either promising things you renege on or not fixing /developing things you already have which are advertised in a manner that makes them appear to do far more than they actually do........ in theory :D
     
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  17. telecode101

    telecode101 NI Product Owner

    Messages:
    428

    I don't think the product line up is confusing. They have hardware sales (interfaces, keyboards, controllers), they have VST sales (Komplete stuff e.t.c.) , then they have the stuff geared for EDM DJ stuff (Traktor etc)...

    I don't think one can compare NI to Uhe.. they are tiny company that make basically a few VSTs. Perhaps compare to Arturia might be a better comparison. NI seem to interact with their customers a lot more and better than Arturia. NI also seem to make better hardware that lasts longer . Just my own personal observation and experience..
     
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  18. lwj|localspace

    lwj|localspace NI Product Owner

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    382
    Exactly my point.. I'd say the smaller companies have the advantage here.. especially in the long run. NI is too big and broad, which leads to watered down products, designed by comittee. And to being too top heavy: all those marketing, sales, customer support teams, a big fancy office in a trendy capital, shareholders, stakeholders, deals and obligations, CEO, COO, CTO, CCO, CDO. All that **** needs to get funded before one cent goes toward development... which then has to be spread out across an ever expanding universe of products. That's why a couple of guys in a sweaty office in generic business parc outpace big 'ol NI.

    I think the line-up is confusing.
    A lot of the stuff in Komplete is never gonna be used by many users. I come for the synths so I don't care about a lot of what's in Kontakt. A Kontakt user is gonna be like that with Reaktor. A Maschine user might get it mainly for the expansions.. and so on. Then a lot of it is tucked away in Kontakt, Reaktor or Guitar Rig. Some of it isn't. And it's unclear where it's going... what's the vision for Maschine? What's the future for Kontakt? Are we gonna see more Reaktor Blocks? Will that stay open or will it be torn out of Reaktor and 'sold separately'.. Block Base, Blocks Primes, Block Expansions? What am I buying into with the meagre few cents that are left of my money once all those CxO's and shareholders have had their share?
     
  19. Mystic38

    Mystic38 NI Product Owner

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    2,281
    thanks certifiedbeatz for the post..

    At the end of the day as a long time Maschine user nothing there comes as anything of a surprise...
     
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  20. macchinista

    macchinista NI Product Owner

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    327
    • "Massive technical debt; you touch one thing and 10 other things break."
    • "No clear product road maps
    I think those two are very painfully obvious by now to all Maschine users.

    Too many changes over the last few years in terms of personell. It seems like they nominate "product managers du jour" who are then tossed like the soup of the day before.

    Something is clearly not working somewhere in the hierarchy. Hope these new fancy hires who were recently announced can fix some of that.
     
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