Technology

Andrew Hill With SAP deal, Ariba’s 13-year headstart pays off

May 23, 2012 2:14 pm by Andrew Hill

Investors with long-ish memories will recall that Ariba, the business-to-business ecommerce network that SAP has just agreed to buy, was a dotcom IPO star of 1999: its stock surged 291 per cent on its debut, giving it a market capitalisation of $3.7bn – only just short of the $4.3bn that the German enterprise software company has agreed to pay for it 13 years later. Those were the days, Facebook investors may ruefully reflect.

Ariba had much further to go in the short period before the dotcom bubble deflated in 2000 – at one point it was worth a heady $30bn. But its longevity, before finally being snapped up by one of the companies it successfully challenged, demonstrates the durability of its underlying offering. Ariba’s early potential was obviously hugely overrated at the peak of the internet boom, but it grew into that original valuation.

Cloud-based software-as-a-service (SaaS) is quite the thing, with companies like Salesforce.com and Netsuite angling to provide solutions that simplify customer and supplier relations and allow enterprises, large and small, to concentrate on their core business. At a Netsuite customer conference I attended in San Francisco last week, SAP was one of the competitors that Netsuite claimed was lagging behind. By buying its way into the cloud, the German company has made a bid to close the gap that Ariba and other web-based B2B companies started to open up 13 years ago.

 

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Posted in Business, Technology |
From FT.com May 21, 2012

Dustin Moskovitz, an early employee of Facebook, is worth $5bn, give or take the odd million, after last week’s initial public offering. He could now apply his technological knowhow and abundant new wealth to solving the world’s loftiest organisational problems. Instead, he and his partners are hunkered down in a dark ground-floor office in San Francisco’s Mission district working out how to liberate office workers and middle managers from the tyranny of lengthening to-do lists, overflowing email and meetings about meetings. Dilbert, meet Dustin.

Posted in Business, Management, Media, Technology |

Andrew Hill Why Waterstones is undaunted by Amazon

May 21, 2012 5:25 pm by Andrew Hill

There were some interesting foretastes of Monday’s deal between Amazon and the big UK bookstore chain Waterstones in comments made by the latter’s managing director, James Daunt, at the FT a few weeks ago.

Mr Daunt – who had previously called the etailer a “ruthless, moneymaking devil” – spoke at a roundtable in early May to launch the Financial Times and Goldman Sachs Business Book of the Year Award. You can listen to a podcast of his initial interview in which he pointed out that all bookshops had to find ways to make the environment for book-buying attractive again. He added:

The largest of us face the additional challenge of how do we become a relevant part of this new digital world, in which, clearly, a substantial part of the reading that our customers engage in is going to take place.

 

The Amazon deal - under which Waterstones’ stores will sell Kindle reading devices as well as ebooks, alongside the physical product – clearly answers that rhetorical question (even if it doesn’t entirely explain the speed of Mr Daunt’s conversion from devil-hater to devil-worshipper).

The more interesting comment came at the end of the ensuing discussion with publishers and agents, who pointed out that in some respects (for example, in its publishing venture), Amazon was still rather dependent on traditional publishing models.

Mr Daunt added that on the rare occasions when Waterstones fails to get the physical book onto its shelves, the title “sits unmoving on Amazon, until it arrives in our shops and then up it goes”. Most booksellers, while trying to use technology to complement their traditional business, have railed against becoming Amazon’s showroom. Mr Daunt appears to want to embrace that fate. The big question is whether Waterstones can profit from it.

FT video – Book end?

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Posted in Business, Media, Retail, Technology |

John Gapper Facebook’s banks have to do some underwriting

May 21, 2012 2:06 pm by John Gapper

The 33 banks that signed up for the Facebook initial public offering may have thought they were heavily discounting their normal six or seven per cent underwriting fee in return for some good publicity on a sure-fire winner. It doesn’t look like that now.

Facebook’s sputtering IPO is drawing scrutiny both to the role of Nasdaq, which has admitted to “embarrassing” mistakes  on Friday, but to the price stabilisation tactics that the banks, led by Morgan Stanley, had to employ.

So far, Monday does not look as if it will provide much relief, with Facebook shares falling by 13 per cent in early morning trading from Friday’s heavily supported $38 and a long day stretching ahead.

As analyses in Dealbreaker and elsewhere have noted, the use of the “greenshoe” and other support methods means the banks need not have lost money on Friday, when they stepped in as the price threatened to drop below $38.

The banks can also claim to have been doing what is sometimes an underrated job – that of underwriting the stock. Past examples of IPO underpricing, leading to huge first day “pops” made banks look like risk-free rent-seekers.

There will also be had questions about whether the lead banks and Facebook’s executives messed up the IPO by raising the price and expanding the number of shares to be sold at the last minute.

On this deal, although a joint $176m in underwriting fees still sounds like a lot, it is not much compared with the fixed costs of the banks’ broking networks and the effort they placed into winning a role.

All in all, Facebook is going to get good value for its fees.

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Posted in Business, Technology |

Andrew Hill Private views on Facebook’s public offering

May 16, 2012 6:32 am by Andrew Hill

Facebook investors: you have been warned. The last time I was in Silicon Valley was 12 years ago, in the very week that the Nasdaq crashed, marking the end of the dotcom boom. That I should fly back into San Francisco on the eve of the social network’s initial public offering cannot be a good omen.

I’m not here to write about Facebook – for expert insights, read the analysis of my San Francisco-based colleagues or the FT Lex team – but the IPO overshadows most discussions. What strikes me is how entrepreneurs, technology executives and analysts I’ve met are reluctant to talk publicly about Facebook and its founder Mark Zuckerberg. Ask them what they think about him and they tend to preface their remarks with a polite request that this part of the interview should be off the record.

Continue reading: “Private views on Facebook’s public offering”

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Posted in Business, Media, Technology |

Andrew Hill FT column: A set-to as old as the Old Testament

May 15, 2012 2:26 am by Andrew Hill

Last Thursday I was, briefly, head of communications for a large Canadian widget maker, coping with a wave of Twitter-borne rumours about the arrest of its chief executive.

Posted in Advertising, Media, Technology |

John Gapper Facebook reverses Google’s IPO innovation

May 7, 2012 2:24 pm by John Gapper

Facebook’s video for retail investors in its forthcoming initial public offering is a nice innovation, but fundamentally, Facebook is taking a step back from Google’s IPO in 2004.

The IPO bookrunners and co-managers are a litany of Wall Street names, led by Morgan Stanley, JP Morgan and Goldman Sachs. But Facebook has dropped Google’s attempt to upend the IPO process by running an electronic auction.

The biggest uncertainty is how much of a role Mark Zuckerberg, Facebook’s founder and controlling shareholder, will play in marketing the new stock. But regardless of that, his company is taking a distinctly traditional approach.

This is a shame, given the amount of effort Google, under the influence of Hambrecht & Quist, put into making its IPO more open and networked with an auction process. That was an attempt to give IPOs a Silicon Valley twist.

The most recent Silicon Valley IPOs, however, have been traditional to a fault. Not only have they stuck to Wall Street underwriting as the means of pricing the stock, but they have largely opted for dual class share structures (as did Google).

Whatever the tensions between Silicon Valley and Wall Street, it seems as if the pair have reached a comfortable accommodation.

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Posted in Technology |

John Gapper The reverse network effect on internet valuations

April 23, 2012 1:43 pm by John Gapper

Fred Wilson, the venture capitalist who is a mainstay of New York internet start-ups, has some provocative thoughts on the lifecycle of web and mobile apps – that their lifecycles are similar to those of hit television shows:

“This round trip from nothing to everything to nothing again is also true at some level with many tech companies. Digtal Equipment Corporation was founded in 1957 and shuttered in 1998. RIM was founded in 1984 and in all liklihood will be gone before the end of this decade. Same with Sun Microsystems, Silicon Graphics, and many more iconic tech companies.”

As he says, the networks effects that work in favour of social networks on the way up can also turn against them:

“Network effects are powerful in both directions. They can help you grow exponentially. But when they are going against you, they work just as fast. Myspace’s decline was mind-blowingly quick. RIM’s has been as well. Who is next?”

Continue reading: “The reverse network effect on internet valuations”

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Posted in Business, Technology |
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John Gapper is an associate editor and the chief business commentator of the FT. He has worked for the FT since 1987, covering labour relations, banking and the media. He is co-author, with Nicholas Denton, of All That Glitters, an account of the collapse of Barings in 1995.

Andrew Hill is an associate editor and the management editor of the FT. He is a former City editor, financial editor, comment and analysis editor, New York bureau chief, foreign news editor and correspondent in Brussels and Milan.

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