Daily Archives: July 5, 2006

Check Point Shopping as Stock Hits 52-Week Low

Israeli security-software vendor Check Point Software Technologies Ltd. saw its stock hit a 52-week low today after a Deutsche Bank market analyst panned the company’s stock, suggesting that Check Point’s competitive position was weakening relative to other major network-security players.

For a while now, Check Point’s stock has languished as its business outlook has deteriorated and its strategic direction has lost focus. A few months ago, Check Point attempted to acquire intrusion-prevention company Sourcefire for approximately $225 million. The proposed acquisition drew the scrutiny of the Committee on Foreign Investment in the United States(CFIUS), a panel composed of representatives from a dozen government agencies mandated to investigate the national-security implications of foreign investments in U.S. companies. Check Point rescinded its acquisition bid a week before CFIUS was scheduled to release a report that allegedly would have prevented the deal from being consummated.

Without the Sourcefire acquisition, Check Point’s stock has continued to flounder as its growth prospects have dimmed. Rumors are circulating that Check Point will make an announcement regarding an acquisition on or before July 18, when it is scheduled to report its second-quarter financial results. It’s an understandable move, but Check Point must take care to ensure that it picks a clear leader in a fast-growing segment of the security market, and that it also selects a company based outside the USA or one that is involved in a technological area less contentious than the one inhabited by Sourcefire and its Snort open-source intrusion-prevention software.

Wikipedia Draws Reuters’ Scrutiny in Wake of Kenneth Lay’s Death

Kenneth Lay, disgraced former CEO of the infamous Enron Corporation (but simply “Kenny Boy” to George W. Bush), apparently died today of a heart attack while vacationing near Aspen, Colorado. We might never know the exact details about how Lay perished, and conspiracy theories are rife as to whether he actually died today or, conversely, whether he was given some assistance in shuffling off this mortal coil. The fact is, we might never know the truth about what happened to Lay, and the official explanation, given his age and the stress he incurred in his recent trial and conviction for various instances of fraud and other fiduciary crimes against shareholders and Enron employees, seems more than plausible.

What I find interesting about Lay’s passing, however, is the reaction of Reuters to the initial reports of Lay’s death on Wikipedia. Evidently, as one might expect given the nature of Wikipedia, the story there changed, minute by minute, as more details surfaced publicly and as Wikipedia contributors raced to post the latest news or their own interpretations of what was transpiring. In the end, however, the self-editing mechanisms of Wikipedia restored factual order, and the official story, insofar as it is complete before an autopsy has been performed on the decedent’s body, is now clearly in evidence at the online encyclopedia.

What Reuters implicitly suggests is Wikipedia’s weakness — it’s dynamic authoring system and the lack of rigid editorial version control — is what I see as a strength. Reuters took issue with Wikipedia’s attempts to keep pace with confusing, sometimes conflicting, details as news broke of Lay’s sudden demise. But there’s nothing wrong with what Wikipedia’s contributors attempted to do. It happens all the time on CNN, and Reuters doesn’t seem to take offense at the factual fluidity inherent in live television news coverage. Breaking news often is a moving target, with important details and facts only coming to light hours, days, or months after a major event has taken place. Wikipedia allows for various perspectives and viewpoints to be presented, sure, sometimes in real time, but that provides more social benefit than harm. Debate and discourse on the forum eventually separate the wheat from the chaff, and matters usually are resolved, accurately and satisfactorily, in due course. It’s not perfect, but it’s not as bad as Reuters would have you believe.

Suit Against Google Prompts Questions

As reported by OUT-LAW.com on The Register, Google is being sued by a parenting website that claims it lost 70 percent of its traffic after Google dropped its site ranking to zero. The site, Kinderstart.com, claims that it was downgraded because it offers a search capability on its site, causing Google to perceive it as competitor.

What follows is an excerpt of Kinderstart’s class-action lawsuit against Google:

“As the world’s most widely used and increasingly ubiquitous search engine, millions of Websites of persons, businesses and organizations in the United States are not accessible, seen or heard by a multitude of persons, businesses and organizations as users if the electronic link or connection is severed by [Google].

“Further, many of these Websites that are improperly and/or unlawfully severed from connection through the search engine, are in the very same competitive markets as Defendant. Such violations, individually and together, warrant declaratory and injunctive relief as well as monetary damages according to proof under applicable law based on injuries to Plaintiffs’ person, property, and businesses.”

What’s interesting, though, is Google’s defense. Google has argued that its rankings are opinions, protected by the US constitution’s first amendment regarding freedom of speech. Essentially, Kinderstart wanted Google to divulge how it ranks pages; Google demurred, saying through its legal representatives, Silicon Valley legal empire Wilson Sonsini Goodrich & Rosati, only that its ranking methodology combines mathematical algorithms with subjective judgments on website quality.

The judge handling the case seems disinclined to compel Google to disclose its approach to ranking sites. I sympathize with the judge’s position, but only to a point. Google should not be forced to reveal information regarding its patented intellectual property or its technical algorithms, but it seems that it could and should tell the court what subjective criteria it uses in making determinations about the quality of websites.

As Google’s market share in search grows, it becomes an increasingly powerful industry player. It should be open and transparent regarding the qualitative and subjective criteria it employs in ascribing ratings to third-party websites. Otherwise, suspicion might grow that Google, like Microsoft before it in the pre-web software era, is inclined to indulge in anti-competitive practices to protect and extend its market juggernaut. It is neither in Google’s interests nor in the interests of the industry at large for that suspicion to propagate.

Are Google Recruiters Prowling Microsoft’s Campus?

In an article on the increasingly fierce and sometimes unscrupulous competition among recruiters for programming and other technology talent, Seattle Times columnist Brier Dudley tells a perhaps apocryphal tale about Google recruiters physically sneaking into buildings on Microsoft’s Redmond campus to hawk jobs from office to office.

Here’s an excerpt:

“A friend in Microsoft’s Office group told me recruiters working on behalf of Google are sneaking into buildings on Microsoft’s Redmond campus or being let in by friends. Then they dangle jobs door to door until security shoos them out.

That may be a suburban legend, but recruiters say they wouldn’t be surprised if the story’s true.”

I am not about to be as sanguine as Mr. Dudley regarding the authenticity of this story. Can anybody at Microsoft tell me whether this sort of thing actually has been happening? It seems too aggressive, too brazen, even for the do-no-evil crowd at Google.

A Tech IPO . . . in Norway

Technology IPOs have been few and far between in North America ever since the bubble burst early in this millennium and left behind the market equivalent of a nuclear winter. On the rare occasions when VCs now deign to invest in early-stage companies, they do so on the increasingly desperate assumption that an exit will materialize in the form of an acquisition by an established player.

The problem is, even established players, the giants of the industry, don’t make acquisitions as they did before the boom turned to bust. They actually perform rigorous due diligence now, and they decide to pass on acquisitions far more often than they decide to buy. It’s a new era, and the shareholding executives who run most of the big players these days are careful about parting with their equity in a time of slower growth and modest expectations.

On this day, though, a technology IPO has occurred — not in North America, mind you, but in Norway. Shares in Trolltech, a Norwegian firm that develops embedded Linux software for cell phones, set-top boxes, and other devices, made their debut today. Trolltech shares gained about 10 percent on the day, with many investors taking a favorable view of the 170-employee company’s prospects in an embedded Linux market with seemingly robust growth prospects.

A few years ago, you wouldn’t have imagined that a technology IPO in Norway would be a newsworthy event. Times have changed. Now, in this Era of Reduced Expectations — extending from the market bust of 2001 (which stayed with us for years and continues to hover oppressively like a brutal hangover) all the way through to the fiduciary penitence of the regulations associated with Sarbanes-Oxley (SOX) — a technology IPO is a rare event, especially here in North America.