Daily Archives: August 20, 2009

Tibco CEO Kills Rumors of Acquisition by SAP

The rumors from Germany about SAP taking an acquisitive run at Tibco evidently were nothing more than empty talk.

Last week, Tibco CEO Vivek Ranadive told Reuters, in no uncertain terms, that his company is not looking to be acquired and that he would prefer to see Tibco, which he founded in 1985, remain independent.

Rumors about Tibco being acquired circulate from time to time, and the company’s shares seem to pop every time they make an appearance.

Oracle Gets US Approval for Sun Acquisition, Waits on Europe

Reuters reports this afternoon that Oracle Corporation won unrestricted US antitrust approval to buy computer maker Sun Microsystems.

Oracle wants to close all facets of the transaction by the end of this month. I don’t see how that can happen, though, because the takeover requires approval by the European Commission, which has said it will decide Sept. 3 whether to clear the acquisition or launch a detailed investigation that could extend well into the fall.

Originally announced in April, the deal has been held up by regulatory concerns about Oracle’s licensing plans for Sun’s Java programming language and about its ultimate plans for the open-source MySQL database.

Regulators apparently were concerned that Oracle might make licensing of Java more restrictive, punishing customers as well as competitors. With regard to MySQL, concerns relate to whether Oracle will de-emphasize it or phase it out altogether in deference to its proprietary database franchise.

While Oracle has been running the regulatory steeplechase, Sun’s hardware customers have been relentlessly wooed by HP and IBM, which have both enjoyed notable successes seducing Sun customers into their camps.

Unjustified Attack on Facebook “Mercenaries”

Sarah Lacy seems perplexed and indignant that current and former Facebook employees would sell their common stock to Russian investment group Digital Sky Technologies. The Russian investors planned the share buyback when they put down $200 million in exchange for preferred shares of Facebook earlier this year.

In aggregate, with preferred and common shares taken together, Digital Sky Technologies will own about 3.5 percent of Facebook. The terms of the stock buyback value Facebook at about $6.5 billion.

Let’s get back to Lacy’s criticisms, though. I don’t want to take any of what she said out of context, so allow me to excerpt directly from the BusinessWeek column in question. “The Mercenaries in Facebook’s Midst“:

And yet a flood of employees rushed to sell their stock for a price that values the company at just $6.5 billion, never mind that the buyers of those shares are the very ones who invested in Facebook at a $10 billion valuation the month before the tender offer was made. In May, Facebook said a Russian company called Digital Sky Technologies would buy at least $100 million of Facebook common stock from current or former employees.

I’m pretty certain that a few years from now, when Facebook does go public, I’ll be writing about the $100 million deal that gave Russian investors a chunk of Facebook on the cheap, and the boneheaded employees who gave up too soon.

I seriously question whether Facebook will IPO for anything close to $10 billion. Facebook still hasn’t figured out how to fully monetize its assets without alienating its subscribers. At the end of the day, let’s remember, Facebook is nothing without subscribers, those people willing to trade their personal, private information for the right to frequent and socialize on Facebook.

But Facebook must exploit them — that is, it must market and sell their personal, private data to advertisers and others, sometimes explicitly and sometimes not so explicitly — to make money for itself and its investors. Tricky, that. It’s a difficult dilemma. I wouldn’t want to be counting Facebook’s money before it’s been made.

But it’s Lacy’s next statement that’s truly provocative:

But in the meantime, I have a more immediate concern: What has happened to the startup work ethic in Silicon Valley? Time was, the region was teeming with believers—be it believers in a company or believers in the sometimes naive, lottery-ticket hope that options would make them billionaires. People who work at the most highly valued startup in Silicon Valley and rush to sell for a smaller valuation—just as an IPO is starting to look likely—aren’t believers. They are mercenaries. What’s next? Giving up options altogether for a bigger paycheck? . . . .

. . . . Silicon Valley was founded on the belief that stock options were worth something—and that something was a big windfall at an exit, when the whole company watched that ticker crawl across the Nasdaq for the first time, calculated their paper net worth, and popped open the champagne. Does it always work out? Of course not. But that is why it’s considered high risk, high reward. How has this gotten so lost on people? Are we just so jaded that we can’t believe in promises anymore, even at a company like Facebook?

In the above excerpts, Lacy repeatedly invokes the words “belief,” “believe,” and “believer(s)” Those are words typically more associated with faith, religion, and even cults than with the hard-headed world of business. In business, trust and belief must be earned, by employee and employer alike. When one joins a company, one doesn’t usually consent to treat the founder as if he’s Jim Jones or L. Ron Hubbard.

It should be obvious: Businesses exist to make money. Their primary purpose, marketing palaver aside, is to make money. They are investment vehicles, not churches. Everybody who joins a company, which is a business, needs to enter it with his or her eyes wide open.

When one joins a company, one is making an investment — of time, of opportunity, of value. The employee isn’t the only one benefiting from the exchange. The employer benefits, too.

Everybody in that exchange is looking out, first and foremost, for number one. That’s just the way it is. Sometimes, in the spirit of enlightened self-interest, employers and employees strike arrangements that provide sustained mutual benefit. But those arrangements need to be predicated on logic, reason, and, yes, calculation, not on misplaced religious fanaticism.

Finally, have you noticed that Lacy’s observations in the above excerpt are rooted in nostalgia?

She’s talking in the past tense about a Silicon Valley that doesn’t exist anymore. Stock options in startup companies might have been worth something — even something potentially substantial — back in 1999 or 2000, but they’ve been worth less and less in fewer and fewer circumstances as the years have advanced. We’ve reached a point now where the economy has cratered, IPOs are as rare as unicorns, and the prospect of lucrative exits has diminished greatly.

People, the employees at Facebook and other companies, aren’t jaded, Sarah. They’re living in the real world, the way it is today. They can’t afford to live in Silicon Valley’s past. They have to do what’s right for them today, in a tough economy, in a world that bears scant resemblance to the halcyon days of weekly IPOs, bursting beer fridges, and champagne Fridays.

If you ask me, the Facebook employees who took the Russians’ money and sold a portion of their Facebook equity made rational, well-reasoned decisions. They looked at what was offered, considered their options, and chose to sell some shares for a certain gain rather than to keep them for a future payoff that might be better, might be worse, or might never come at all.

They’re employees at Faceboook, after all, insiders who presumably have some insight into what the company is doing and how it is doing.

I don’t begrudge them their choice. It doesn’t make them mercenaries. It makes them realists.

Thoughts on the Apple-Palm “Poaching” Controversy

I don’t know whether I would describe it as a tempest in a teapot, but I definitely think the red-hot controversy over a story published today by Bloomberg suggests that we’re in a slow news cycle.

I’ll recap quickly, and then make a few points.

Like a good reporter should, Connie Guglielmo gets right to the point in her opening paragraphs:

Former Palm Inc. Chief Executive Officer Ed Colligan rejected a proposal from Apple Inc.’s Steve Jobs to refrain from hiring each other’s employees two years ago, calling it wrong and “likely illegal,” according to their communications.

Colligan, who stepped down as CEO in June, discussed the matter with Jobs in August 2007, as the mobile-phone war heated up, according to the communications. Apple had introduced the iPhone two months earlier, just as Palm hired a former Apple executive, Jon Rubinstein, to develop new smart phones. Jobs, Apple’s CEO, told Colligan he was concerned that Rubinstein was recruiting Apple employees. “We must do whatever we can to stop this,” Jobs said in the communications.

This development builds on and feeds into reports in June indicating that the US Justice Department has begun investigating possible collusion in the hiring practices among technology companies.

Now, I’ll make a few observations and, as always, you can make of them what you will.

First, it’s pretty obvious that Ed Culligan was the source of the salient disclosure that formed the basis for Guglielmo’s story. Culligan comes off looking better than Jobs in the correspondence cited in the article, and Jobs isn’t exactly known for his openness and willingness to share with the press.

So, if you’re a curious sort, you have to ask: What’s Culligan’s motivation here? What does he hope to achieve? Is it simply that he’s continuing a vendetta with Jobs, or is something else at play? I would imagine he still has a whopping number of Palm shares, and that it would be in his interest to distract Apple as Palm fights for its commercial life in the savagely competitive smartphone market.

There are multiple possibilities as to what’s driving Culligan, lots of potential intrigue.

My second observation is that the alleged non-poaching collusion between and among technology companies is, well, pervasive. Anybody who’s worked at a senior level in the technology industry knows that.

Here’s how the dynamic typically works, though there are variations on the theme:

A senior staff member leaves a company to found a startup or join a competitor. He then hires another high-ranking staff member from his former firm, often a member of the team he led. Seeking to staunch a potential domino effect of personnel defections, the raided firm unambiguously conveys its displeasure to the raiding entity, seeking to find a rapprochement that protects it from further personnel losses while mollifying its rival.

Typically, they come to an understanding, if not a formal agreement. The understanding might look something like this: If you, upstart company, refrain from raiding our staff, we won’t take you to court on some pretext or conduct reciprocal on your staff. Employees, of course, can leave either firm of their own volition — they have the right to do so, after all — but poaching is considered bad form and shall be off limits.

Is it ethically wrong? Perhaps so. Is it illegal? I have no idea. Does it happen? It is endemic to the technology industry, and it’s said to be widespread in many other industries, too.

That’s why I can’t believe otherwise jaded observers are feigning surprise or shock. This isn’t exactly a new development, and it isn’t a recondite practice exercised by only a few Silicon Valley companies. This is a widespread practice, considered a form of self-defense by companies whose employees are raided.

Now I have one other observation to make, and then I’ll retreat to the shadows again.

It’s about Steve Jobs and Apple. In many ways, I think Jobs and Apple are reminiscent of the Nixon Administration.

No, I’m not referring corrupt practices, because I haven’t seen compelling, definitive evidence that Apple has broken the law in this particular matter or in others. Instead, I am referring to the intense paranoia that Jobs and his top lieutenants evince. I seem that as paranoid, and not in a good way, because their fear and loathing is out of proportion to the real-world threats they face.

Take Palm, for instance. Jobs clearly perceived Palm as a serious competitive threat, back in 2007 and probably even today.

Well, I just don’t see it, not to the degree that Jobs does. I could just as easily envision Palm going out of business in the next two years as seeing it emerge as a meaningful number-three player behind Apple and RIM in the most lucrative realm of the smartphone market.

Jobs overreacted to Palm and probably overreacts to much else besides. He probably wastes cycles on imaginary demons. He must have a lot of cycles, though, because that particular peccadillo doesn’t seem to have cost him or his company much benefit.

My cavil takes nothing away from Jobs’ manifold accomplishments. Moreover, it’s quite possible that the paranoia is part of the whole Jobs package, an essential ingredient in his recurring and remarkable business successes.