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Bought by WHOM?

Posted on Thursday, Aug 4th 2005

Epiphany has been acquired. Finally. By a rather large, little-known Chicago company called SSA (Nasdaq: SSAG). Now, who is SSA?

Here are some financial data:

Market Cap: $916 Million

                                                2004        2003           2002       2001
Annual Sales ($ mil.)                     636        296          160      136
Annual Net Income ($ mil.)            18           52           1         (41)

And here is some History:

Roger Covey founded System Software Associates (SSA) in 1981. Offering products for IBM’s AS/400 computers, SSA went public in 1987.

In 1995 the company bought Softwright, a provider of business object technology and systems in Europe. In 2000 an investment group headed by Gores Technology bought SSA.

In 2002 the company acquired Computer Associates’ interBiz product line, which includes applications for supply chain and human resources management. Later that year SSA also acquired Infinium Software for about $100 million.

In 2003 General Atlantic Partners invested $75 million in the company, joining majority-investor Cerberus Capital Management. Also that year SSA embarked on a string of acquisitions, purchasing Ironside Technologies, Elevon, Baan, and EXE Technologies.

So if you are wondering how all that growth happened between 2001 and 2004, the explanation is in the acquisitions, and it looks like Epiphany joins along in that stream.

The belle has finally been asked to dance!

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Saluting the “very” small enterprise

Posted on Wednesday, Aug 3rd 2005

A few weekends back, we were loitering through the street fair stalls at the Fillmore Street Jazz Festival in San Francisco. While buying a piece of handmade soap, we watched the vendor whip out a little mobile payment terminal to swipe the credit card. Struck with curiousity, we asked to see the nifty little device: a Way Systems Mobile Transaction Terminal (MTT).

It turns out, we were scheduled to have dinner with the founders of the company soon after, so I got to hear their story first-hand. The CEO, Will Graylin began his career with nearly six years of service as a U.S. Navy Nuclear Submarine officer and was the first Chinese immigrant to serve as an officer in this program. Well, he also has a couple of degrees from MIT, and so forth, but this Nuclear Submarine background is what VCs found compelling during their financing road-show! Damien Balsan, the other founder, worked at Gemplus before, and was a big deal sales guy in Latin America. One of his ancestors was Madamoiselle Coco Chanel’s lover in Paris. Conversation at dinner was most entertaining!

Anyway, Way Systems has an extremely simple value proposition, to be able to process credit card transactions using cell-phones! Millions of mobile merchants – from Pizza delivery boys to Avon door-to-door reps to taxis to plumbers to massage therapists – can now become networked!

Bill Melton, founder of Cybercash and Verifone, is on the Board, lending credibility and guidance. This is, indeed, “Way Cool” and an elegant little company to watch!

Resurrection of the Living Deads

Posted on Tuesday, Aug 2nd 2005

There have been a few deals this year that make a lot of sense for the shareholders, but make very little sense for the acquiring private equity firm, despite the discounts: Broadvision’s acquisition by Vector Capital is one such. The second one is Golden Gate Capital’s acquisition of Blue Martini, presumably to merge with Ecometry, one of their other portfolio companies.

Both Broadvision and Blue Martini, as independent companies, belong in the ranks of the living dead. Blue Martini’s chance was to merge with Retek, which did not happen, and instead, Retek got bought by Oracle. Broadvision’s chance doesn’t exist, unless I am missing something big!

Make no mistake, both companies needed to go private. Sustaining the costs of being a public company for many of these sub-$100 Million concerns are rather unappetizing.

Nonetheless, it makes me wonder what Golden Gate Capital or Vector Capital have been thinking, or is it that skill-gap I wrote about earlier in display here? To make these two deals turn into anything that produces reasonable return, a very serious surgery will be required. I have a hard time believing that the two investment firms under discussion have the capacity for that sophisticated surgical procedures!

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Memory: The Next Frontier

Posted on Tuesday, Aug 2nd 2005

I recently read an article on the market opportunity of Universal Memory: ‘Universal’ memory market to hit $75 billion in 2019, says iSuppli

$75 Billion sounds like a very large number, of the scale that we don’t see often any more in the venture circles …

“There is no single semiconductor memory technology today that has all the desired attributes, which on top of speed, density and non-volatility include: low-cost of manufacture, low switching energy and scalability to nanometer-scale dimension.

Products in various stages of commercialization that include at least some of the attributes include: Ovonic Unified Memory (OUM), Magneto-Resistive RAM (MRAM), Ferroelectric RAM (FRAM) and Nanotube RAM (NRAM), iSuppli said. But the rewards for a winning technology are likely to be immense with the memory market set to double from $46.8 billion posted in 2004 to $95.4 billion by 2019, iSuppli said.”

The assumption is, whoever will crack this code will pretty much pick up 80% of the memory market.

Cypress, Freescale, IBM and Infineon have MRAM initiatives at various stages on maturity. A smaller company called NVE (NVEC) develops and sells devices using “spintronics,” a nanotechnology which utilizes electron spin rather than electron charge to acquire, store and transmit information. NVE is a licensor of spintronic MRAM, and lists Motorola, Cypress and Agilent as licensees.

Another small company Micromem has focused the last 5 years on the development of an MRAM memory. The memory will be suitable for various applications including Radio Frequency Identification (RFID) tags. The company’s first market objective will be the RFID sector.

Nantero, which focuses on NRAM describes its vision: NRAM will be considerably faster and denser than DRAM, have substantially lower power consumption than DRAM or flash, be as portable as flash memory, and be highly resistant to environmental forces (heat, cold, magnetism). And as a nonvolatile chip, it will provide permanent data storage even without power. Possible uses include the enabling of instant-on computers, which boot and reboot instantly, as well as high-density portable memory – MP3 players with 1000s of songs, PDAs with 10 gigabytes of memory, high-speed network servers and much more.

By the way, were talking of times long after Bill Gates made his famous pronouncement, that nobody would ever need more than 640 KB of RAM. It seems, there is no end to the ever-increasing memory needs of our generation!

Microsoft offers Home Work Help

Posted on Thursday, Jul 28th 2005

Okay, so it is encouraging that Microsoft has decided to “make some money off students”, because if they have, then some interesting and useful products and services, which are otherwise unfundable in the traditional venture capital model, will now get attention.

Here is an article from today’s WSJ:

In many American households, homework is a big problem. Teachers often load up students with far more of it than I recall from my own prehistoric school career. And parents, squeezed for time by dual careers and rusty because of rapidly changing curricula, find it is hard to help.

Also, today’s students often have so many after-school activities that even with the best work ethic, it is a struggle to get through hours of homework and still get enough sleep before the absurdly early start time at many high schools.

Taking note of this daily homework battle, Microsoft has decided to help — or at least to see whether it can make some money by addressing the problem. The software colossus has just introduced Microsoft Student 2006, designed to make it easier for middle-school and high-school students to attack homework efficiently by gathering homework resources in one place on the computer.

According to Walt Mossberg’s review, the software is poorly done, not user friendly, … blah blah blah …

That’s okay. Microsoft just needs to hire IDEO to clean the usability up, and do a few other attentive and creative things to enhance the product quality … For now, I am simply pleased to see the Microsoft thinks that this is a worthwhile segment to invest a tiny portion of its truckloads of sitting cash!

Yahoo! starts beefing up

Posted on Thursday, Jul 28th 2005

Yahoo is wooing IBM technical talent, reports the New York Times.

Beginning in the mid-1990’s, the researchers at I.B.M. spent several years developing an Internet search engine, called Clever, employing a series of algorithms to improve the quality of the retrieval results. While that project has concluded, the I.B.M. researchers have continued other work in the field.

Prabhakar Raghavan joined Yahoo last week as head of research. Prabhakar Raghavan, a computer scientist who once led the Clever effort, joined Yahoo last week as head of research. He left I.B.M. in 2000 to become a vice president and chief scientist at Verity, a maker of search and retrieval software for corporations; he was later named chief technical officer.

Yahoo said that another search-technology researcher, Andrew Tomkins, had recently been landed from I.B.M., and that negotiations were under way with several others there. Yahoo executives said they expected more hiring.

In an effort to compete with the hype-prone Google and it myth about extraordinary innovation absorption capacity, Yahoo is now doing its own army building in the technology realm.

The other area, however, where Yahoo stands to gain a great deal of mileage by cleaning up, is Usability. It looks like that opportunity is not going unnoticed, either:

So far, Google has received much of the attention for its ability to consume impressive numbers of new Ph.D.’s to fuel its research projects. But Yahoo has recently joined in the arms race and is hiring high-profile researchers, including Larry Tesler, an Apple Computer veteran who recently went to work at Yahoo’s headquarters here. Mr. Tesler, a pioneer in user-interface design, is focusing on the usability of Yahoo software.

Between Yahoo and Google, I still like the former, despite the latter’s sky-high stock prices and current halo-effect. Long time back, Microsoft won against IBM and Apple (and many others) with a Fast-Second strategy. Yahoo may not be at the fore-front of innovation anymore, but some of the properties they have – especially My Yahoo! , Yahoo! Groups, and HotJobs – could be interesting leverages, IF they spend the cycles to figure out how to take those to their true potential.

Now, with the focus on better technology and usability, they can, if they augment Product Marketing next.

Perspective on Time

Posted on Wednesday, Jul 27th 2005

Last week, I was in Jerusalem for a day. My guide, Mishi, was a knowledgeable man with a Masters degree in comparative religion. As we walked through the streets of the old city, he walked me through 10,000 years of history – religious and political – and led me through the sites and monuments that stand as testimony to that colorful past.

Judaesm, Christianity, Islam – three monotheistic religions hold Jerusalem as their source, hence the place is full of pilgrims. A Christian mother holds her new born against the stone on which Jesus was laid after the crucification, and weeps. Facing the Western Wall, numerous solemn Jewish faces pray earnestly, waiting for the arrival of the Messiah. At the Mosque of Omar, Mishi points out the spot where Mohammed stopped and disembarked from his horse on the way to his conference with God.

I had to stop and think for a moment, and put in perspective our frustrations – we the children of the Internet generation – our search for The Next Big Thing! The Internet is really only a 10-year old phenomenon. It has touched lives in massive ways. And yet, it will take a long time yet, before the full impact of the Internet gets woven into the fabric of society and business. Remember, the Telephone was invented in 1875-1876 by Alexander Graham Bell, and yet, even today, remote villages in developing nations have only just started reaping its benefits.

Perhaps a sacrilegious analogy (not my intent), but the way we pray and search for the Next Big Thing, is a bit like waiting for the arrival of the Messiah! The Christian Messiah, Jesus, came 2005 years back. The Jews do not even accept Jesus as the Messiah. They have had a much longer wait.

Should our horizon be expanded somewhat, beyond the 10-15 years, that we have recently become accustomed to?

The Personalization Potential of Konfabulator

Posted on Monday, Jul 25th 2005

Yahoo acquires Konfabulator.

“Hoping to pave a new path to its popular Web site, Yahoo Inc. has acquired Konfabulator, a tiny software maker that provides a computer platform for monitoring the weather, stock prices and a wealth of other customized information without opening a Web browser.

The acquisition, for an undisclosed price, gives Yahoo access to a toolbox of mini-applications – known as widgets – that have built a cult following since Palo Alto, Calif.-based Konfabulator first introduced them for Apple Computer Inc.’s Macintosh in 2002.”

Good move by Yahoo.

Om and I were talking this weekend about the next set of trends. Om wrote Did Silicon Valley build its own 747? and I commented: To derive the next big thing, Silicon Valley would need to change its traditional “solution in search of a problem” mode of innovation, and switch to understanding the applications that people are interested in … in response.

Yahoo! Konfabulator should pay a lot of attention to what widgets people want, because mosquito conditions in a certain area, I am afraid, is not exactly a killer app. However, finding the right clothes from the private desktop of big, fat women may well be one!