Monthly Archives: October 2007

Facebook’s International Ad Choice

Whenever you see a report such as this one, published today in the Wall Street Journal, you should ask yourself who the source might be and why he or she might be providing the information.

So, let’s consider the story. According to "people familiar with the matter," Facebook Inc. is close to choosing between Google Inc. and Microsoft Corp. to sell ads for the social networking service outside the U.S. What’s more, "these people say," in a related negotiation, the winner of the international ad sales partnership is expected to buy a minority stake in Facebook as part of a financing round.

What else? Well, there’s this:

Microsoft and Google are both pressing hard this week to land the deal, with top executives including Microsoft Vice President Hank Vigil and Google Vice President Tim Armstrong traveling to Facebook’s Palo Alto, Calif., headquarters for negotiations. A Facebook decision could come as early as Wednesday. The New York Post earlier reported that a Facebook deal announcement was expected within the next day or two.

The authors of the story also write that the companies involved have discussed a Facebook in the range of $15 billion. They’ve "discussed" it, mind you, not agreed to it.

And that’s the piece to this puzzle. Reading between the lines, it would seem that Facebook, or an investment banker associated with the company, is the source of this story. The objective of leaking this information to the Wall Street Journal is to put pressure on either Microsoft or Google (or both) to either acquiesce to Facebook’s valuation demand or to provide commensurate value by cutting a sweet advertising deal.

Facebook is not exactly naive in its dealing with the news media and the blogosphere. As pointed out elsewhere in the Wall Street Journal today, "every time a news story surfaces about someone buying or investing in Facebook, the social-networking site’s valuation climbs."

It’s amazing how that works, isn’t it?


Oracle Finds Company Willing to be Bought

BEA might be playing hard to get, at least at Oracle’s current offer price of $17 per share, but other companies are still willing to join Larry Ellison’s expanding stable of enterprise-software assets. 

Today came news that Oracle has acquired Interlace Systems, a developer of operational-planning software. Terms of the deal were not disclosed.

The acquisition makes sense as an incremental bolt-on offering to Oracle’s current enterprise performance-management software.

BEA Counters Oracle, Letter for Letter

As I had anticipated earlier this afternoon, Alfred Chuang and his board at BEA unambiguously rebuffed the public ultimatum that Oracle issued earlier today regarding its increasingly bellicose bid to acquire one of few remaining enterprise-software companies it doesn’t already own.

The BEA missive is a well-worded, concise rejoinder to Oracle’s hostile overture. Essentially, the BEA reply states that the $17-per-share takeover proposal from Oracle undervalues the company. It also says that BEA’s board of directors is fulfilling its fiduciary obligations by ensuring that it receives fair value for BEA as a corporate asset.

BEA also implicitly rebukes Oracle for its wildly entertaining, carnival-like approach to deal negotiation:

BEA’s Board has not indicated that it would be opposed to a transaction that appropriately reflects BEA’s value, reached through a reasonable process. To the contrary, the Board is keenly aware of its fiduciary duties to shareholders and is acting accordingly. Indeed, BEA presented to Oracle standard and customary terms under which BEA would share information regarding a potential transaction, assuming Oracle were to propose a reasonable price, but Oracle has rejected
such a process.

If Oracle is genuinely interested in acquiring BEA, you are fully capable of proposing a reasonable price to the BEA Board or taking any offer you wish directly to BEA shareholders.

Unless Larry Ellison goes ballistic with rage, I fear this is the last installment of the public imbroglio between the boards of Oracle and BEA. The action will occur behind the scenes henceforth.

Oracle Issues Takeover Ultimatum to BEA’s Board

In a calculated move that intensifies the friction between the boards of directors of the two companies, Oracle sent a public letter to BEA’s board today threatening to rescind its $17-per-share takeover offer by Sunday unless BEA agrees to tentatively accept the proposal and put it to a shareholder vote.

Oracle’s is using a classic tactic from the threadbare playbook of  hostile takeovers. As you will recall, Oracle knows a thing or two about hostile takeovers, having successfully executed one in its protracted staredown of the board of directors at PeopleSoft.

Despite Oracle’s protestations that it has no intention of waging a prolonged battle of attrition to acquire BEA, one has to wonder. Oracle might not want to take that long, ugly path — who does? — but it might tolerate such as course of action if Larry Ellison and his lieutenants are convinced BEA is of strategic importance and cannot be allowed to fall into other’s hands.

Oracle clearly feels there’s a weakness in the solidarity of the BEA board that it can exploit. Perhaps that’s true, but from this vantage point I think CEO and Chairman Alfred S. Chuang has enough support to dig in his heels and resist Oracle’s bully-boy gambit.

So, presuming that BEA’s board does not capitulate by Sunday, what happens next? Will Oracle walk away? In the short term, I don’t think it has a choice in the matter. Oracle would lose credibility if it continued to pursue BEA after having its ultimatum rejected. Larry Ellison wouldn’t want to look weak.

Still, in the unlikely event that BEA should find another suitor, now or a few months from now, don’t be surprised to see Oracle make a counterbid.

Symantec Could Announce Vontu Acquisition Tomorrow

Unless the deal has fallen through over valuation, it’s increasingly likely that Symantec will announce its long-rumored acquisition of data-leakage prevention specialist Vontu tomorrow.

Symantec is slated to hold its second-quarter earnings conference call at the close of stock trading tomorrow. That would be as good at time as any to spring the news of its Vontu acquisition on the world.

Not many observers would be surprised. Rumors are premature reports of an acquisition announcement have been prolific during the past week or so, with several technology-related publications and websites taking positions on when the deal would go down.

Readers of this site — yes, all two of you — might recall that I mentioned talk of a Symantec acquisition of Vontu last year. The companies have been getting closer, technologically and otherwise, for some time. Symantec might have made this deal earlier, but it balked at the asking price Vontu and its agents had demanded.

Apparently things have changed. Recent reports have suggested that Symantec will pay up to $350 million for the privately held Vontu, which is said to have revenues of about $30 million.

Perhaps the ongoing consolidation in the space gave Symantec some buyer’s leverage.

Dell’s Channel Challenge

As news broke yesterday that Dell products — a limited selection of notebook and desktop PCs as well as monitors, printers, and ink cartridges — would be sold as of November 11 in 1,400 Staples Inc. stores across America, I wondered again how long Dell could manage to both sell its products directly online and through channel partners.

Yes, not all Dell products are available in the stores of its retail partners. Some Dell notebooks and desktops can only be ordered directly from the company. Moreover, Dell is trying hard to position this move as part of a strategy to provide its products wherever and whenever customers wish to buy them.

But the seismic shifts in the PC market, which has seen fast growth in emerging national markets such as China and India and a sharp preference for notebooks over desktops nearly everywhere, makes it difficult for Dell to walk this channel-conflict tightrope.

Staples definitely sees a competitive dynamic in its relationship with Dell, as the following excerpt from a Wall Street Journal story makes evident: 

For Staples, the agreement is part of a long-running "Easy Button" marketing effort that aims to simplify shopping for its customers, Staples merchandizing head Jevin Eagle said. "Our customers will be able to touch and feel the products (as opposed to viewing them on a computer screen) before buying a Dell product and they’ll be able to get it on the same day."

There’s the rub for Dell. It’s new channel partners will not only be selling its products as competitive offerings to other PCs and peripherals already available at retail, but they’ll also be selling Dell products in competition against Dell itself.

Increasingly, no matter what Dell says, it will be in channel conflict with its retail partners. There are ways to resolve such conflict, of course, and it will be interesting to see how authoritatively and quickly Dell takes action.

Startup Uses Receiver Reputation to Combat Spam

I can see receiver reputation emerging as a new front in spam mitigation, but I wonder about whether false positives would limit its adoption in large companies and in certain industries.

While there’s nothing in the article that says so, you’d have to think the executives who run this company have filed the relevant patents. It will be interesting to see how major anti-spam players — Symantec, Cisco, McAfee, and Secure Computing — respond if this approach proves effective.

Dreary Days in Telco-Gear Land

I knew the Alcatel-Lucent merger would be a disaster, and I was right. I’m not always right, as previous posts on this blog will attest, but I was on the money when it came to that particular French-American telecommunications-equipment train wreck. It was like shooting virtual fish in a Second Life barrel.

In addition to company-specific issues — and nobody can tell me that Patricia Russo has a strategic handle on what Alcatel-Lucent should be doing and where it to be going — the entire telecommunications-equipment market is in a profound funk. Wireless operators, in particular, are disinclined to spend money on major infrastructure upgrades, as echoed by this BusinessWeek article.

As it turns out, there’s good reason for the wireless operators’ reluctance to purchase new gear. There really is no need for sweeping overhauls because subscribers aren’t interested in doing much more than they are already doing with their cell phones on operators’ networks.

But whose fault might that be? The telco community, in its self-imposed obliviousness, would like to blame it on the subscribers themselves, allegedly bereft of the imagination to envision the transformative power of bandwidth-intensive data and rich-media applications.

The truth is, the telecommunications community itself, and the wireless operators especially, have hurt themselves with atavistic business models and convoluted pricing structures that serve only to dissuade their clientele from trying new services. A little marketing creativity and enlightened self-interest on the part of the telecommunications industry could have led to a greater adoption rate for revenue-generating, higher-margin services. Instead, the wireless operators chose to scare off customers with prohibitive pricing and confusing service packages.

Telecommunications-equipment vendors are paying some of the price for those decisions now. It’s hard to feel sorry for them, though. They should have seen this mess coming and pursued contingency plans accordingly. 

HP Unlikely to Challenge Oracle for BEA

I tend to agree with the analyst consensus regarding BEA’s ultimate fate.

It’s unlikely Oracle will have to raise its current offer price of $17 per share. It’s even more unlikely that another suitor will enter the picture, for the reasons mentioned by several analysts in a post by Eric Savitz of Barron’s.

The only possible white knight" that could emerge for BEA shareholders is HP, and I’m not sure HP wants to overpay for an application-server play, even given the strategic implications of letting Oracle take one of the last significant independent middleware players off the software board.