Daily Archives: October 11, 2006

Google Office Slowly Comes Into View

Earlier today, Google unwrapped the beta version of its Google Docs & Spreadsheets, integrating its formerly separate spreadsheet and word processing applications.

While Google has gone a long way toward applying a uniform user interface and delivering a unified document repository, Rafe Needleman notes on his Web 2.0 blog at CNET’s News.com that some further refinement remains to be done:

Google is also bringing the user interfaces and the feature sets of the two applications closer together. Both look very similar, and both have similar common functions, like import and export. But it’s clear that the Google apps were built by separate teams. Little differences give it away: The collaboration function is a separate page in Docs, but a right-hand panel in Spreadsheets. Spreadsheets also has a built-in chat feature to compliment its real-time group editing capability. Docs has no chat (although it does have group editing). On the other hand, Docs lets you see a list of all the revisions other users have made; Spreadsheets does not.

Most importantly, although you can see all your files in one place, the two applications aren’t really integrated. You cannot embed a spreadsheet into a document, for example. That’s lame.

Still, Needleman says the potential and the promise in Google’s progress toward a true software-as-service suite of Microsoft Office-like programs. Like everything Google does, this initiative is a work in progress, but it’s one that’s heading in the right direction and could pick up a lot of adherents.

In addition to the services’ rough edges and required refinements that Needleman suggests, Google also is missing some application services that would round out a full office suite. Om Malik notes that the pieces are coming into view, with GCalendar, GMail, Docs & Spreadsheet, and GTalk (which could provide unified, embedded presence across all Google’s Office applications) already on the board. He says, rightly, that a database application and a presentation application, similar to PowerPoint, are missing.

Google clearly has put some thought into the offline dilemma — when you’re not on the Internet, web-based applications won’t be available — with ZDNet’s Garrett Rogers discovering that "Google is working on a solution that will allow you to install Writely (now Google Docs) on your local machine." He also learns, through some code digging, that Google Docs also will integrate with SalesForce.com in some way, and that Google has provided built-in "skinning" of the product so that it can be offered as a customized, hosted solution.

I am wondering whether Google is considering releasing its Office applications on an appliance, perhaps in conjunction with its enterprise-search appliances, to provide business customers with added choice.

Google is on the right track here, and the evolution of its Google Office bears watching, especially up in Redmond, where Microsoft is sure to recognize that Google could begin chipping away at its Office franchise from below, account by account, in the SME and SOHO markets.

Three Private-Equity Firms Competing with 3Com for Ownership of H3C

I thought I had seen a report on this subject today on CNBC, but I couldn’t find confirmation of it online until now.

Anyway, the Wall Street Journal reports this evening that three US-based private-equity firms are competing to buy H-3C, the joint venture between U.S. networking-systems company 3Com Corp. and Chinese telecommunications-equipment maker Huawei Technologies Co.

As some of you will recall, I provided a post earlier today about 3Com’s desire to buy the remainder of H-3C.

Apparently, it was Huawei that invited the private-equity firms to the table, setting up a competition with 3Com for majority ownership of the joint venture. The private-equity firms are Silver Lake Partners, Bain Capital Inc., and Texas Pacific Group, and their offers range from $1 billion to $1.5 billion, which would appear to be more than 3Com had been preparing to offer.

3Com now owns 51% of the venture, which 3Com and Huawei set up in November 2003. Under the terms of a mutual agreement, 3Com and Huawei each has the right, starting Nov. 15, to launch a bid process to buy the other’s equity interest in the venture.

3Com already has signaled its intention to buy the remainder of the company it doesn’t already own. According to sources cited in tonight’s Wall Street Journal article, Huawei wishes to retain from 20% to 30% of the joint venture.

Huawei is based Shenzhen, and is China’s largest telecommunications-equipment maker, with sales of $8.2 billion in 2005. It began its rise by offering cheap knockoffs of routers, switches, and wireless base stations, among other networking products, but it increasingly has improved the quality of its products, which is still sells at a discount to offerings from vendors such as Cisco, Alcatel, Nortel, and others.

The Wall Street Journal’s sources expect the sale to of H3-C to close by year end, and, given the involvement of private-equity firms, they presume the deal will materialize as a leveraged buyout (LBO).

It could be that Huawei is merely positioning to get a better deal from 3Com. As the Journal reports, LBOs in China traditionally have been difficult to bring to fruition because of the difficulty in gaining management control, which makes bank loans to finance acquisitions harder to arrange.

Investors React Positively to Changes at McAfee, Takeover Possible

Shares in McAfee Inc. rose today on news that its CEO and its president were leaving the company and that its stock-options investigation discovered accounting problems that will necessitate financial restatements of as much as $150 million over a ten-year period.

The view of analysts and investors is that the conclusion of McAfee’s internal investigation into stock-option irregularities will allow the company to focus entirely on its business and might pave the way for the company to be sold, either to a private-equity firm or to a large public company looking to acquire a significant presence in the computer-security market.

Hewlett-Packard has been mentioned as a possible buyer of McAfee, but HP also has been cited in connection with a possible takeover of Check Point, a well-established vendor of network firewalls and VPNs.

As reported by the Associated Press, JP Morgan analyst Sterling Auty wrote in an investor note that a possible acquisition of McAfee is “the main reason for support to the stock.”

As noted here earlier today, rumors have swirled for the past couple months that McAfee might be acquired by a private-equity firm. If the for-sale sign is posted outside McAfee’s headquarters, there is a possibility that a competing bid from a publicly listed company will emerge as a counter bid to any private proposal.

3Com, Rumored to be Going Private, Wants All of H3C Joint Venture

Eric Benhamou, 3Com’s chairman, said yesterday in Barcelona that his company wants to become the sole owner of Huawei- 3Com, a joint venture based in Hong Kong that manufactures routers and switches and sells equipment made by 3Com in China and Japan.

The joint venture with Chinese networking powerhouse Huawei accounted for more than half of 3Com’s sales in the quarter ended Sept. 1.

3Com formed the venture with Huawei in November 2003 to enter China. In February, 3Com spent $28 million to buy an additional 2 percent and become the majority shareholder, advancing its share of H3C (as the joint venture is called) from 49 to 51 percent.

In explaining 3Com’s rationale for wanting to own all of H3C, Benhamou said:

It’s a strategic asset, and typically you want to own that. We plan to make significant investments to create the linkage into 3Com’s sales and distribution, so we want to make sure we own it or are on our way to own it.

Benhamou admitted that a gradual approach to increased ownership of joint venture might be a more practical course for 3Com to follow than a sudden buyout of Huawei’s remaining stake.

While 3Com announced its intention to take full control of H3C, rumors circulated that company might be acquired by a private-equity firm. According to a report on Forbes.com, the most persistent rumor has it that an unnamed private equity group is willing to pay $7 per share for 3Com, which current trades at just over $5 per share.

Except for the H3C joint venture, 3Com’s product portfolio is a dog’s breakfast. Growth prospects for 3Com are limited, and any private buyout would have to be predicated on the assumption (or the assurance) that 3Com could gain practically full control over the H3C joint venture.

IBM Cuts 400 Engineering Jobs in USA; Positions Might Resurface in India

IBM reportedly is laying off about 400 U.S.-based engineers developing components for IBM’s line of BladeCenter servers—one of the company’s best-selling hardware products.

According to a report by Paul McDougall of InformationWeek, the cuts are taking place at IBM engineering facilities around the country, including sites located in Austin, Texas; Burlington, Vt.; San Jose, California; Raleigh, N.C.; and Rochester, Minn.

Another report suggests that 100 jobs will be lost in Austin, Texas; 99 jobs will be lost in Poughkeepsie, Endicott, and Fishkill, N.Y.; 74 positions in Rochester, Minn; 43 in Tucson, Ariz.; 35 in Raleigh, N.C.; 16 in Burlington, Vt.; and about a dozen at other locations across the country.

Speculation already is circulating that many of the jobs will be moved to India, where IBM will spend more than $6 billion over the next three years developing a technology workforce that is meant to do far more than work in call and contact centers and provide low-level programming.

Is Microsoft a Consumer-Market Failure?

It’s a controversial screed, more than a little tendentious in tone, but there’s substance amid the zealous fervor of Daniel Eran’s post regarding Microsoft’s alleged inability to provide products and solutions that consumers truly want.

Here’s an excerpt from Eran’s piece:

. . . Microsoft hasn’t ever earned significant profits in the consumer hardware business, nor has its executives proven any business acumen in delivering what consumers want in hardware or creative entertainment, excluding, of course, Microsoft’s impressive and highly sophisticated keyboard and mouse division.

In fact, Microsoft only earns a tiny fraction of its revenues from sales to consumers; the majority of its revenues do not result from buyers choosing a Microsoft product, but from corporations and individuals buying a PC and being instantly bound in a End User License Agreement.

For my part, as I’ve mentioned previously, I believe Microsoft slowly is recognizing that it will see more revenue growth, greater profitability, and better overall business prospects in enterprise and SME markets during the next few years than it will in consumer markets.

Microsoft understands business customers better than it understands consumers, and it can more effectively leverage its Windows and Office assets in business environments than in the home or in mobile applications.

McAfee Sheds Its CEO and Its President; Possible Precursor to Bigger Changes Ahead

Numerous reports were published today regarding major executive changes at McAfee Inc.

The company’s chairman and CEO George Samenuk and its president Kevin Weiss are departing after the security-software vendor found accounting discrepancies in its stock-options grants. As a result of those discrepancies, McAfee said it will need to restate past financial statements by around $100 million to $150 million to account for additional charges for stock-based compensation expenses over a 10-year period.

Officially, Weiss was fired while Samenuk will retire.

Dale Fuller, who joined McAfee’s board of directors in January, will take over as interim CEO and president. Fuller previously served as president and CEO of Borland Software Corp. He also served as a senior executive in Apple Computer’s Powerbook division and in NEC’s portable computer division.

Also appointed as non-executive chairman of the board was Charles Robel, who joined McAfee’s board in June and was formerly chief operating officer at venture capital company Hummer Winblad Venture Partners.

The shakeup today could be perceived not only as housecleaning related to stock-option backdating irregularities at McAfee, but also as a potential precursor to McAfee being taken private. There were rumors all summer that McAfee, or at least some of McAfee’s board members, had been considering a leveraged buyout proposal.