April 5, 2017
I wanted Yahoo to be named Yabba Dabba Hoot. Darn it. The Verizon outfit which may put some interesting software on mobile phones it sell has come up with the name Oath. I am not sure any of my friends in Harrod’s Creek would have stumbled upon this word. I noted that a number of the write ups reporting about the new name, the Tony Romo like sacking of Marissa Mayer, and the assurances that the calculus of AOL+Yahoot will change my life. See “Under Oath? How Yahoo + AOL Will Change Your Life.”
USA Today brilliantly revealed that Verizon’s Xoogler believes “the brands will stay the same. “ Yep, that’s what happens when Verizon acquires companies: The status quo is the Baby Bell way. Well, sometimes as long as one is not the CEO, the CFO, the legal team, and anyone who does not understand the ethos of the Young Pioneers and Bell Telephone training methods:
The real journalism outfit which we call McPaper here in Kentucky quoted the Xoogler responsible for the AOL Yahoot marriage. Tim Armstrong and apparently someone else allegedly said:
Armstrong has described Oath as a B2B brand, overseeing the names that you are all familiar with. Beyond Yahoo and AOL, those names include Tumblr, Huffington Post, TechCrunch and Engadget. In all, about 1.3 billion consumers use the company’s collection of brands making these among the most powerful digital brands on the Internet. “We like to say branding wise if you look at a hat, Huffington Post, TechCrunch, Yahoo Sports will be on the front, Oath will be on the side,” Armstrong said. Besides the early reaction to Oath hasn’t been all that flattering, with the new name the subject of numerous jokes out on social media.
On the side. Does oath mean economic growth?
Stephen E Arnold, April 5, 2017
February 25, 2017
I read “Verizon, Yahoo Agree to Lowered $4.48 Billion Deal.” The knock off price for an outfit with interesting security controls and a fine customer communication business process is $4.48 billion. Not bad for an aged Internet dowager which seems to have been drifting of late. The write up stated in real news fashion:
Under the amended terms, Yahoo and Verizon will split cash liabilities related to some government investigations and third-party litigation related to the breaches. Yahoo will continue to be responsible for liabilities from shareholder lawsuits and Securities and Exchange Commission investigations.
From my vantage pointing Harrod’s Creek, it is party time for the attorneys engaged in the many facets of Silicon Valley’s business school generation machine. Yahoooot or is it Yabba Dabba Hoot. I just get mixed up.
Stephen E Arnold, February 25, 2017
January 16, 2017
I read “How Autonomy Fooled Hewlett-Packard.” The article was written by Jack T. Cielsielski, who is president of R.G. Associates, Inc. in Baltimore, Maryland. Mr. Ciesielski’s company publishes “The Analyst’s Accounting Observer, which is described as “a research service for institutional investors.” The company offers this example return on a $1 million investment:
The caption for the chart is “All performance data is net of advisory fees. 3, 5, 10 year returns are annualized total returns. Inception is the annualized total return since 12/31/1992. S&P 500 Total Return sourced from www.standardandpoors.com. Past performance is not indicative of future results.”
I am not sure if the write up is a Fortune-edited article, a Fortune-commissioned article, or an inclusion in Fortune which an entity purchased. For the purposes of Beyond Search, I will assume that the article is an example of “real” reporting and spot on in its objectivity and accuracy. I recognize that depending on where one sits and the tools and information available will affect what one perceives. This is the viewshed problem, which is illustrated below. Each color shows what the respective observer “sees.”
I was interested in the write up because the legal dispute between the “old” Hewlett Packard and executives of Autonomy is on going. Obviously neither Mr. Ciesielski Fortune does not want to find itself in the legal crossfire. My assumption is, therefore, that Fortune’s “real” journalists have figured out some of the nuances of the HP-Autonomy matter. I would point out that these nuances were overlooked or misinterpreted by HP’s executives, Board members, advisers, lawyers, and accountants. Too bad neither HP nor Autonomy had Fortune-caliber experts assisting when the $11 billion deal was conceived, executed, understood, and prosecuted. Some outfits have smarter, more thorough investigators, researchers, and analysts.
The write up points out that the former top dog of Autonomy USA (Christopher Egan) had to pay $800,000 in November 2016 he garnered from the HP buy out. The prime mover in this check writing was the US Securities & Exchange Commission. The Fortune article states:
HP relied on figures he had helped inflate. The facts of the case are now public.
Here’s the method used by Autonomy as reported by Fortune:
Autonomy’s UK-based senior managers directed a program swelling revenues by almost $200 million. Autonomy sold its software through “value-added” resellers, legitimate businesses providing additional services and support to product end users while also selling Autonomy’s software. Just five resellers, in 30 transactions, provided services to Autonomy that couldn’t be called legitimate.
November 17, 2016
With or without Yahoot — sorry, I meant, Yahoo — is a darned exciting outfit for a Baby Bell. I read “Verizon Owned AOL to Layoff 500 Employees, Mostly in Corporate Unit: Source.” With all the chatter about fake news, let me state that I believe everything I read about Verizon, AOL, and every other online centric outfit in the datasphere. No distortion exists in bizarro world. Unnamed sources are the only type of source that has any traction today.
The write up says:
Digital media company AOL, owned by Verizon Communications Inc, will lay off five per cent of its workforce, or about 500 employees, a source familiar with the situation said.
Pundits, Brahmins, and former middle school teachers have been reporting about this RIF or reduction in force. Hey, there’s nothing like a Thanksgiving treat to make folks feel really great about their job. On the bright side, a certain president elect is hiring.
AOL may become two mini businesses:
- Media, search and communications
- Advertising technology and other assorted infrastructure enabled products and services.
Another rumor is that something called “Be On” may be reshaped. A copy of the Xoogler Tim Armstrong’s message to employees appears on Business Insider. Variety points out that the RIFs are “unrelated to Verizon’s Yahoo Bid,” which raises the question, “Why is AOL dumping staff?” No answer, of course.
Fortune Magazine recycles a Silicon Valley “real” news outfit with this second hand statement from the Xoogler Tim Armstrong:
“The layoffs are related to a 2017 strategy where we will add to our business. These are super targeted by area and we will be re-growing especially in video and mobile.
Yep, Happy Thanksgiving.
Stephen E Arnold, November 17, 2016
November 12, 2016
I used to pay reasonably close attention to Autonomy Software plc. The outfit was a leader in search and content processing. The methods were based on math, not human editors. Bayesian, LaPlacian, and Markovian methods created a take away happy family. Early customers included some big defense companies, government agencies, and some banks. Over the years, Autonomy generated millions in revenue from its Digital Reasoning Engine, Integrated Data Operating Layer, and other technologies.
In 2011, Hewlett Packard went to an automated teller machine, withdrew $11 billion dollars, and bought Autonomy. The deal brought patents, the products, assorted bits and pieces, and executives who had shepherded the search and content processing company from zero to somewhere in the neighborhood of $700 million in revenue. Oh, the Autonomy deal brought along the shrunken head of Fast Search & Transfer, one of the outfits to take on Autonomy only to find itself struggling with revenues and some rumors of financial fast dancing. Fast Search went to Redmond in 2008, and Autonomy cruised along until HP showed up with a tractor trailer filled with money.
After buying Autonomy, HP found that the Autonomy management team did not fit the Sillycon Valley pioneer’s life style. The founder of Autonomy quit and a handful of Autonomy executives tagged along. HP found out that it did not have a clue how to make money from search and content processing. HP also learned that its auditors, accountants, senior executives, and lawyers were in the dark when it came to generating money in a sector where dozens of companies have gone down the drain. What happened to the wizards from Delphes, Endeca, Fast Search, et al?
Well, one went to jail or was sentenced. Now, if the information in “HP Fight about $11 Billion Takeover Sees Former Autonomy Executive Indicted on Felony Charges” is accurate, HP wants to put Sushovan Hussain, Autonomy’s financial manager and a minivan filled with other Autonomy executives, into orange jump suits.
The write up reports:
The indictment charges that Sushovan Hussain, “together with others, engaged in a fraudulent scheme to deceive purchasers and sellers of Autonomy securities and HP about the true performance of Autonomy’s business, its financial condition, and its prospects for growth.”
The hammer dropped on November 10, 2016. The write up says:
… federal prosecutors indicted Hussain in U.S. District Court in San Francisco. He was charged with wire fraud and conspiracy to commit wire fraud. Wire fraud is financial fraud involving use of telecommunications or information technology. The charges carry a combined maximum prison sentence of 20 years. The federal government is seeking at least $7.7 million from Hussain, money it said was gained through crime.
Autonomy denies the allegations that Autonomy pumped up revenues and doctored assorted information. HP apparently was unaware of “alarms” about HP which surfaced in 2007. The newspaper article adds:
Daniel Mahoney, research director of forensic accounting firm CFRA, told this newspaper in 2012 that his company in 2007 started sounding alarms about Autonomy in reports to investor clients. Summarizing the beliefs of himself and other analysts, Mahoney said, “Our concern was the organic growth that Autonomy was reporting was overstated … it seemed like they were constantly moving things around in their financial statements to make things appear better than they are.”
Okay, 2007. HP bought Autonomy in 2001. Presumably HP reviewed Autonomy’s financials, talked to resellers, interviewed executives, consulted the mid tier firms specializing in search, and other research prior to deciding $11 billion was the right sized number for Autonomy.
If not, what caused HP to buy Autonomy? If HP did its homework, why did the company ignore the 2007 storm warnings?
The saga continues even though HP sold Autonomy earlier this year to Micro Focus for an alleged $8.8 billion. If that number is accurate, a $1.2 billion loss is important, but the real motivating factor may be the fact that HP’s approach to deal management may have been wobbly. To brush up on the Autonomy system, check out the free report at this link.
Excitement will ensue.
Stephen E Arnold, November 12, 2016
November 10, 2016
I thought that the Yahoot — sorry, I meant Yahoo — was behind us. I noted two interesting announcements about the Purple Haze machine. Business school case study writers have a gold mine with this Yahoot thing. Purple gym shoes might be the perfect fashion accessory when one thinks about the Xoogler’s management expertise manifested in an SEC filing. The extracts below come from the articles cited in this blog post.
A Yahoo fashion accessory like these New Balance sneakers can be a complement to deposition day fashion. Yahoot’s professionals can make themselves instantly recognizable with these stylish kicks.
The first write up comes from a trendy business newsletter in the form of a story with this title: “Yahoo Faces at Least 23 Lawsuits Over Its Massive Data Breach.” One lawsuit is too many. Twenty three is an embarrassment of riches. The write up reports:
the Company is cooperating with federal, state, and foreign governmental officials and agencies seeking information and/or documents about the Security Incident and related matters, including the U.S. Federal Trade Commission, the U.S. Securities and Exchange Commission, a number of State Attorneys General, and the U.S. Attorney’s office for the Southern District of New York.
Cooperation is good. Tucked into the write up was this statement:
Although the company says it only spent $1 million related to the breach last quarter, it admitted that the breach may “cause users and customers to curtail or stop using our products and services.”
I also noted this article: “Yahoo Admits Some Employees Knew of Massive Hack in 2014.” Let’s see. That’s about two years ago. The write up points out:
“An Independent Committee of the Board, advised by independent counsel and a forensic expert, is investigating, among other things, the scope of knowledge within the Company in 2014 and thereafter regarding this access,” Yahoo said in its filing. But it wasn’t until its August probe that the company got confirmation of the extent of the breach, a source with knowledge of the investigation said.
The source for both of these articles is a Yahoo SEC filing.
Outstanding judgment on the part of the Yahoo management team to cooperate with authorities, contradict the date of the “alleged” breach, and perform these cartwheels as Verizon tries to figure out if Yahoot is a swatch of discolored purple fabric which can be converted into Yoga pants or a t shirt. Perhaps business school students at some time in the future can wear purple New Balance sneakers to their discussion group meetings about Yahoo?
Stephen E Arnold, November 10, 2016
October 27, 2016
I read “Verizon: ‘We have to assume’ Yahoo’s Massive Hack Is a Major Deal.” The write up summarizes a telephone call between Verizon and folks who care about the former Baby Bell. Tucked into the news report were some interesting factoids, which I assume to be accurate. The write up is from a real newspaper close to Jeff Bezos’ warm, kind heart.
Is a dust up between the former Baby Bell (Verizon) and the Purple Haze machine on the horizon?
Here are the factoids I noted:
Verizon’s chief financial officer seems to suggest that Yahoo’s security woes and loss of a few (okay, 500 million user credentials) may have a material impact on the Yahoo deal. I interpret “material” as meaning [a] We will buy the Purple Haze machine but for less than $4.8 billion or [b] Adios, Yahoo.
The write up included this intriguing paragraph:
Verizon will take “some time” to determine the fate of the deal, Shammo [Verizon CFO] said, unless Yahoo “comes up with a different process” for interacting with its buyer.
I translated into Kentucky speak the paragraph as meaning “Verizon will go slow” and “Yahoo needs to figure out a way to answer our questions and learning to speak Baby Bell.” Both of these statements would be interpreted as criticism here in Harrod’s Creek. Fisticuffs can break out in the local watering hole for similar perceived problems in information exchanges.
Stephen E Arnold, 27, 2016
October 18, 2016
I read “Verizon CEO ‘Not That Shocked’ about Yahoo Breach That Exposed 500 Million Users.” I noted two candidates for my Quotes to Note file.
Here’s the first attributed to Lowell McAdam, CEO of Verizon:
“…occasionally they’re [bad actors] going to land a punch. Certainly not anything we wanted to have happen. Certainly we’re going to do everything we can to fortify ourselves.
Here’s the second statement:
we still see a real value to the asset there. But in fairness, we’re still understanding what was going on, to define whether it’s a material impact to the business or not. But the industrial logic of doing this merger still makes a lot of sense.
Yes, industrial logic. Working well for Yahoo.
Stephen E Arnold, October 18, 2016
September 23, 2016
Remember ShrinkyDinks. Kids decorate pieces of plastic. The plastic then gets smaller when heated. I believe the ShrinkyDink management process has been disclosed. The innovator? Marissa Mayer, the former Google search guru turned business management maven.
What’s the ShrinkyDink approach to running a business? Take a revenue stream, decorate it with slick talk, and then reduce revenues and reputation. The result is a nifty entity with less value. Bad news? No. The upside is that Vanity Fair puts a positive spin on how bad news just get worse. A purple paradox!
ShrinkyDink Management. Pop business thinking into a slightly warmed market and watch those products and revenues become tinier as you watch in real time. Small is beautiful, right? I can envision a new study from Harvard University’s business school on the topic. Then comes an HBR podcast interview with Marissa Mayer, the Xoogler behind the ShrinkyDink method. A collaboration with Clayton Christensen is on deck. A book. Maybe a movie deal with Oliver Stone? As a follow up to “Snowden,” Stone writes, produces, and directs “Marissa: Making Big Little.” The film stars Ms. Mayer herself as the true Yahoo.
I read “Yahoo Verizon Deal May Be Complicated by Historic Hack.” Yahoo was “hacked,” according to the write up. Okay, but I read “hack” as a synonym for “We did not have adequate security in place.”
The write up points out:
The biggest question is when Yahoo found out about the breach and how long it waited to disclose it publicly, said Keatron Evans, a partner at consulting firm Blink Digital Security. (Kara Swisher at Recode reported that Verizon isn’t happy about Yahoo’s disclosures about the hack.)
CNBC points out that fixing the “problem” will be expensive. The write up includes this statement from the Xoogler run Yahoo:
“Such events could result in large expenditures to investigate or remediate, to recover data, to repair or replace networks or information systems, including changes to security measures, to deploy additional personnel, to defend litigation or to protect against similar future events, and may cause damage to our reputation or loss of revenue,” Yahoo warned.
Of interest to me is the notion that information about 500 million users was lost. The date of the problem seems to be about two years ago. My thought is that information about the breach took a long time to be discovered and disclosed.
Along the timeline was the sale of Yahoo to Verizon. Verizon issued a statement about this little surprise:
Within the last two days, we were notified of Yahoo’s security incident. We understand that Yahoo is conducting an active investigation of this matter, but we otherwise have limited information and understanding of the impact. We will evaluate as the investigation continues through the lens of overall Verizon interests, including consumers, customers, shareholders and related communities. Until then, we are not in position to further comment.
I highlighted in bold the two points which snagged my attention:
First, Verizon went through its due diligence and did not discover that Yahoo’s security had managed to lose 500 million customers’ data. What’s this say about Yahoo’s ability to figure out what’s going on in its own system? What’s this say about Yahoo management’s attention to detail? What’s this say about Verizon’s due diligence processes?
Second, Verizon seems to suggest that if its “interests” are not served, the former Baby Bell may want to rethink its deal to buy Yahoo. That’s understandable, but it raises the question, “What was Verizon’s Plan B if Yahoo presented the company with a surprise?” It seems there was no contingency, which is complementary with its approach to due diligence.
The decision making process at Yahoo has been, for me, wonky for a long time. The decision to release the breach information after the deal process and before the Verizon deal closes strikes me as an interesting management decision.
September 14, 2016
Documentum is an outfit that some big companies have to use. Other big outfits have hired integrators like IBM to make Documentum the go to system for creating laws and regulations. Other companies looking for a way to keep track of digital information believed the hyperbole about Documentum. Sure, one can get Documentum to “work.” But like other large scale, multipurpose content processing and management systems, considerable expertise, money, and time are often necessary. Documentum is now more than a quarter century young. Like other giant companies buying late 1980s technology, the job of generating sufficient cash flow is a big one. How is that acquisition of Autonomy going, Hewlett Packard? Oh, right. HP sold Autonomy and has a date in court related to that deal. What about Lexmark and ISYS Search Software? Are those empty offices an indication of rough water? What about IBM and Vivisimo? Oracle and Endeca? Dassault and Exalead? You get the idea. Buy a search vendor and discover that the demand for cash to make the systems hop, skip, and jump are significant. Then there is the pesky problem of open source software. Magento, anyone?
Now OpenText has purchased one of the US Food and Drug Administration’s all time favorite software systems. No doubt that visions of big bucks, juicy renewals, and opportunities to sell hot OpenText properties like BASIS, Fulcrum, and BRS Search are dancing in the heads of the Canadian business wizards.
I learned that OpenText is the proud new owner of Documentum. You can read the details, such as they are, in “OpenText Signs Deal for Dell EMC Division.” I learned that Documentum carried a price tag of $1.62 billion, a little more than what Oracle paid for Endeca and what Microsoft paid for the fascinating and legally confused Fast Search & Transfer content processing systems. OpenText, to its credit, paid one tenth the amount Hewlett Packard paid for Autonomy.
“This acquisition further strengthens OpenText as a leader in enterprise information management, enabling customers to capture their digital future and transform into information-based businesses,” OpenText CEO Mark Barrenechea said in a statement Monday. “We are very excited about the opportunities which ECD and Documentum bring, and I look forward to welcoming our new customers, employees, and partners to OpenText.”
I also noted “Moody’s Places Open Text (OTEX) Ratings on Review for Downgrade.” That write up informed me:
Open Text plans to finance the acquisition with a combination of cash on hand, debt and equity. If the company raises equity to finance a significant portion of the purchase price, the Ba1 CFR will likely be confirmed. In a scenario where the company funds the acquisition with just cash on hand and new debt, the Ba1 CFR could face downward pressure. However, in such case Moody’s would evaluate the company’s ongoing commitment and capacity to de-lever, which could mitigate downward rating pressure. Negative ratings movement related to the CFR, if any, would be limited to one notch.
This is financial double talk for we are just not that confident that OpenText can make this deal spew revenue growth and hefty, sustainable profits. But my interpretation is fueled by Kentucky creek water. Your perception may differ. May I suggest you put your life savings into OpenText stock if you see rainbows, unicorns, and tooth fairies in this deal.
I noted this passage:
Open Text has made over $3 billion of acquisitions since 2005 and although the company does not break out results of acquired companies, EBITDA margins have increased to 35% from 17% over this period.
Get out your checkbook. Let the good times roll.
My view from rural Kentucky is less optimistic. Here are the points I noted on my Dollar General notepad as I worked through the articles about this deal:
- Michael Dell was quick to dump Documentum, underscoring the silliness of EMC’s rationale for buying the company in 2003 for about $1.7 billion
- The cost of maintaining Documentum server and the eight acquired company’s technology is likely to be tough to control
- The money needed to keep a 25 year old platform in tip top shape to compete with more youthful alternatives makes me wonder how OpenText will finance innovation
- The open source alternatives, whether for nifty NoSQL methods or clones of more traditional content management systems constructed by programmers with time on their hands, are likely to be a challenge.
To sum up, OpenText is a roll up of overlapping and often competing products and services. I hope the OpenText marketing department is able to sort out when to use which OpenText product. If customers are not confused, that’s good. If the customers are confused, the time to close a deal for a giant, rest home qualified software is likely to be lengthy.
OpenText is much loved by those in Canada. I recall the affection felt for Blackberry. Stakeholders will be watching OpenText to make sure that it does not mix up raspberries and blackberries. Blackberries, by the way, have “drupelets.” That sounds like Drupal to me.
Stephen E Arnold, September 14, 2016