The ownership structure is designed to make sure the “god group” has a say in things Palantirian. The term appears to be forever. That seems reasonable when climate change, financial pressure, and the Rona are rampant.
Palantir Technologies: Minor Questions Remain
October 1, 2020
DarkCyber noted “Techie Software Soldier Spy: Palantir, Big Data’s Scariest, Most Secretive Unicorn, Is Going Public. But Is Its Crystal Ball Just Smoke and Mirrors?” The write up joins the caravan of publications digging into the ins and outs of the intelware business.
There are precedents for a vendor of specialized services becoming a public company. One example is Verint, and there are others. Sometimes the lineage of an intelware company can be difficult to figure out. There are start ups in Cypress; there are partnerships in Herzliya; and there are Byzantine limited liability operations in midtown Manhattan.
What’s striking about Palantir is that the coverage has been content with the jazzy bits. DarkCyber understands the need to create buzz and capture eyeballs. The write up uses an interesting quotation from Admiral Poindexter, an interesting person who may be qualified to explain intelware:
“When I talked to Peter Thiel early on, I was impressed with the design and the ideas they had for the user interface,” Poindexter told me recently. “But I could see they didn’t have — well, as you call it, the back end, to automatically sort through the data and eliminate that tedious task for the users. And my feedback from the people who used it at the time, they were not happy with it at all. It was just much too manual.”
DarkCyber wondered:
- Why the write up did not explore the i2 Analyst’s Notebook vs.. Palantir legal matter. That activity suggested that Palantir may have had some interest in a proprietary file format and allegedly worked in interesting ways to obtain closely guarded information. A related question is, “Why would bright start up engineers resort to allegedly questionable methods to figure out a file format?” Too bad the write up ignores a legal matter which illuminates Palantir’s methods.
- Why is Palantir running into the revenue ceiling which other vendors of search and content processing systems for government entities hit? Are there too few customers? Did Autonomy, another search and content processing company, bumped into the revenue ceiling too? Is there a elephant standing in a pool of red ink in the accounting departments of some search and content processing companies?
- Why are intelware vendors offering their products and services under generous free trials programs to the known customers with allocated funds for such systems? And in parallel, the vendors are working overtime to find someone with deep pockets to buy these start ups?
- How similar are the products and services of intelware vendors? Why is innovation confined to graphics and innovation confined to recycling ideas in circulation for decades? One of the DarkCyber team observed, “Isn’t Palantir Gotham Titan the old Analyst’s Notebook with a pop up wheel on the right mouse button?” (I hire skeptical and maybe slightly cynical engineers I think.)
- Could it be that in the “real world” of fast-moving events the intelware vendors’ products don’t work all that well? Is it time for deeper analysis of comparable products and services? How does Palantir stack up against Voyager Labs’ offerings or the the LookingGlass system.
- Why doesn’t smart software do a better job of importing data? What has Datawalk figured out that eludes the Palantirians?
- Why do some Palantir Gotham installations remain idle? Is it because even the simpler interface is too quirky to use when real-time events generate pressure? Is it difficult for some licensees to allocate staff to use the system in order to become masters of the dataverse?
- Why haven’t Wall Street pushes generated more revenue? What happened to the Thomson Reuters’ deal?
- How long did it take Palantir to stand up its first version of its system after the core team decided the move forward with Gotham? (If you know the answer, write benkent2020 @ yahoo dot com. We know the answer and the winner will receive a copy of CyberOSINT: Next Generation Information Access. Free too. Almost like a trial of the products and services from an intelware start up.)
There are other questions the DarkCyber team considers important as well. Perhaps a “real news” outfit will dig into the intelware market, track the technologies, the inter-company tie ups, and the use cases or in some cases the dis-use cases for these products and services?
DarkCyber, however, finds the idea of Palantir’s going public interesting. Was the point of the exercise financial escape for increasingly concerned investors and grousing employees? Too many questions and too few answers still I think.
Stephen E Arnold, October 1, 2020
Palantir Technologies: A Problem for Intelware Competitors?
September 24, 2020
The Palantir Technologies initial public offering is looming. Pundits are excited; for example, “Palantir Has A Long Uphill Battle Towards Customer Acquisition, But Benefits From Stickiness And Contract Expansion” makes clear that the journey to profitability may be like the Beatles observed: A long and winding road. Others are focused on churn; for example, “5 things to Know about Palantir’s Upcoming IPO.” DarkCyber’s response: “Just five?”
The issue is intelware. Many companies have tried to convert selling to law enforcement, intelligence agencies, and regulators into a billion dollar software and services business. There are some success stories; for example, Booz Allen fits the bill. The company sells time. The company has its own software, not much, but it exists. The company cheerleads, which is a nice way to say that for money “experts” will talk about promising products from the competitive marketplace.
Palantir is more like Autonomy than a blue-chip consulting firm. Autonomy played the “secret black box” chip with its neuro-linguistic programming. It worked until it did not. The firm licensed its black box to BAE Systems in the 1990s. The Autonomy marketing machine then generated revenue slowly and steadily. Then Autonomy acquired companies and cranked up its sales machine. At “peak Autonomy,” the well managed outfit Hewlett Packard, grabbed a brass ring with Autonomy engraved on it. The cost was north of $10 billion and years of legal bills. Autonomy was a publicly traded company, and it had a revenue track record dating from 1996. The HP deal was completed in October 2011. That means that the FY2010 data give us an idea about how much secret black box software can generate with “advanced” software, great marketing, and demanding management. The revenue for Autonomy after 15 years was in the neighborhood of $870 million.
One of Palantir Gotham’s innovations: A right mouse click displays a wheel of choices. The interface is definitely jazzier than that of Analyst’s Notebook, now owned by IBM.
Palantir Technologies opened for business in 2003. The company has been in business for 17 years. Yep, that’s two years longer than Autonomy. And what is Palantir’s alleged revenue for the last fiscal year? $742 million. The company’s advantages were the support of Peter Thiel (a Silicon Valley Thor), secrecy, a method for importing ANB files (if you don’t know what this is, well, what can I tell you in a free blog post?), and okay sales and so-so marketing. (One of Palantir’s innovations was a wheel of choices, not Bayesian methods wrapped in mystery.)
If my math is correct, Autonomy generated $128 million more revenue that Autonomy. If one uses 2011 dollars, not the Rona roiled 2020 dollars, the difference is more like $400 million, give or take $20 million or so. Yep, Autonomy appears to have outperformed Palantir: Less time, more revenue.
What?
Why?
Who?
How?
Let’s take each question.
First, what? The lackluster performance of Palantir Technologies illustrates the difficulty intelware companies, even ones with great advantages like the aforementioned ANB filter, have making really big money quickly. Remember. To generate less revenue than Autonomy, Palantir required $2.6 billion in funding. DarkCyber thinks that patient investors may be nervous about their investment which could melt away like a real snowflake. You can work out the math. Take 17 years of losses, subtract the revenue generated over 17 years, add in some interest just for spice, and mix into a pressurized container containing the fumes of burning a big cash pile. Read more
Palantir: Will Investors Embrace Intelware Outfit Generating Consistent, Substantial Losses for More Than a Decade?
September 11, 2020
The stock market is chugging along, fueled by greed, the Rona, and a need to fuel the 21st-century F. Scott Fitzgerald gestalt. “Palantir Is Being Valued around $10.5 billion ahead of Direct Listing as Investors Question Growth Story” includes some interesting information about Palantir, an intelware startup which is only 17 years old, losing money, and shrouded in mysterious behavior.
The write up states:
Palantir said in its updated prospectus on Wednesday that it has 1.64 billion shares outstanding, as of Sept. 1 [2020]. Based on the average private market transaction price in the latest quarter of $6.45 a share, the company is being valued by investors at just over $10.5 billion. That’s far below Palantir’s valuation of $20.4 billion in a 2015 funding round.
Is “far below” a signal?
The write up notes:
In July, Palantir raised $410.5 million by selling shares at $4.75 a piece, according to the filing, which comes out to a valuation of about $7.8 billion. Transactions during the quarter took place at anywhere from $4.17 a share to $11.50 a share, suggesting a range of $6.83 billion to $18.8 billion. The math gets even fuzzier when considering that Palantir had a reported valuation of $20.4 billion in 2015, when the share price was $11.38. That price, based on the supplied share count as of Sept. 1, would indicate a current valuation of $18.6 billion.
Interesting.
But the losses need to be viewed differently; for example:
Palantir wants investors to concentrate on what the company calls its contribution margin, or the revenue left after subtracting the costs it bears to generate sales. That number climbed to 55% in the second quarter from 18% a year earlier.
I don’t recall “contribution margin” from my economics class in 1962.
The write up points out:
Palantir has only 125 customers that spent on average $5.6 million each in 2019. Glazer says the company’s products and sales strategies are “in their infancies.”
DarkCyber believes that Palantir’s trajectory over the last decade makes clear that there is a glass ceiling for software and services centric solutions. If our data are semi-accurate, Palantir is unlikely to grow in a way to repay its investors or achieve profitability in a highly competitive market sector.
Interesting play in the time of Rona, constrained budgets in government agencies, and a hint of financial desperation in some allied sectors.
Stephen E Arnold, September 11, 2020
Palantir Has Only Unicorn Scorn for Fellow Travelers
September 7, 2020
It is a time of change for Palantir, a software company that proudly serves the US intelligence community. The firm is both going public and planning to move away from Silicon Valley to Denver, Colorado. CEO Alex Karp took the opportunity to engage in some situational signaling. CNBC describes how “Palantir CEO Rips Silicon Valley in Letter to Investors.” Writer Ari Levy shares some excerpts:
“‘Software projects with our nation’s defense and intelligence agencies, whose missions are to keep us safe, have become controversial, while companies built on advertising dollars are commonplace. For many consumer internet companies, our thoughts and inclinations, behaviors and browsing habits, are the product for sale. The slogans and marketing of many of the Valley’s largest technology firms attempt to obscure this simple fact.’ Although he did not name any such companies specifically, Facebook fits the description—an ironic touch given that [Palantir cofounder Peter] Thiel was an early investor in that company and remains on its board of directors. Karp said in the letter that government agencies have been hamstrung, in part by failed tech infrastructure and that Palantir’s mission is to help. ‘Our software is used to target terrorists and to keep soldiers safe,’ he wrote. ‘If we are going to ask someone to put themselves in harm’s way, we believe that we have a duty to give them what they need to do their job.’”
That is some wordsmithing. Levy notes one risk factor acknowledged in Palantir’s paperwork—its strident refusal to work with China, despite that country’s rank as the world’s second-largest economy. The potential hit to the company’s growth is no match for its distain of the Chinese communist party, apparently. Count another virtue signaled. Surprisingly, Google’s alleged work with China did not make it directly into the letter, but the write-up reminds us:
“Thiel has accused the company of ‘seemingly treasonous’ behavior for allegedly helping the Chinese government while backing down from a contract with the U.S. government after facing employee criticism. Here’s how Karp addressed the matter: ‘We have chosen sides, and we know that our partners value our commitment. We stand by them when it is convenient, and when it is not.’”
The article reproduces the letter in full at the bottom, so navigate there to read the entire composition. Yes, perhaps it is high time this righteous company said goodbye to famously progressive Silicon Valley. Will Karp miss Philz Coffee as much as his former compatriots? Will interested individuals believe this restatement of reality from a fan of the ANB file format?
Cynthia Murrell, September 7, 2020
Palantir: Planning Ahead
September 4, 2020
I read “In Amended Filing, Palantir Admits It Won’t Have Independent Board Governance for Up to a Year.” The legal tap dancing is semi-interesting. Palantir wants money and control. I understand that motive. The company — despite its sudden interest in becoming a cowboy — has Silicon Valley roots.
What’s fascinating is that the company was founded in 2004, although I have seen references to 2003. No big deal. Just a detail. The key point is that the company has been talking about an initial public offering for years.
The write up explains that after submitting an S-1 form to the Securities & Exchange Commission, Palantir submitted a revised or amended S-1. For a firm which provides intelware and policeware to government agencies, planning and getting one’s ducks in a row seem to be important attributes.
Did Palantir just dash off the first S-1 at Philz Coffee? Then did some bright young stakeholder say, “Yo, dudes, we need to make sure we keep control. You know like the Zuck.”
After 16 years in business and burning through a couple of tractor trailers filled with cash, it seems untoward to submit a revision hard on the heels of an SEC S-1 filing.
Careless, disorganized, or what the French call l’esprit d’escalier strikes me as telling.
Observations:
- The resubmission suggests carelessness and flawed management processes
- The action raises the question, “Are these Silicon Valley cowboys getting desperate for an exist?”
- For a low profile outfit engaged in secret work for some of its clients, public actions increase the scrutiny on a company which after a decade and a half is not profitable.
Interesting behavior from from Palantirians. Did the seeing stone suffer a power outage?
Stephen E Arnold, September 4, 2020
Palantir: Stakeholders May Know Whom to Blame If Money Does Not Flow
August 25, 2020
Another Palantir technologies item. Is it accurate? Who knows. But I found “Palantir Targeting 3 Class Voting Structure According to Leaked S-1, Giving Founders 49.999999% Control in Perpetuity” fun reading. The write up states:
Wow, this is a really complicated ownership structure.
Okay, I understand. Just as in the Great Chain of Being, there is “god” or in this case a “god group” at the top. In the middle are the people who do knowledge work for the “god group.” At the bottom are the worker bees.
The ownership structure is designed to make sure the “god group” has a say in things Palantirian.
Observations:
- Investors know whom to invite to a meeting if the Palantirians’ numbers don’t materialize. Will the “god group” show up for that chit chat? Unlikely. Their lawyers, for sure.
- Who leaked this document? Why? Under what circumstances? Is anyone “looking” into this referenced confidential S-1 filing? Peter Thiel, a big dog, must be really thrilled with the leaker, the leaked info, and the outfit disseminating confidential information.
- Will the complicated structure work as well as Mark Zuckerberg’s set up? Mr. Zuckerberg has more customers, multiple revenue opportunities, and billions of people. So, probably not as the Palentirians hope.
It is worth monitoring the situation.
Stephen E Arnold, August 25, 2020
Palantir Technologies: Maybe Stealth Is Better for Specialized Services Companies?
August 24, 2020
I, like many other Palantir watchers, read “Leaked S-1 Screenshots Show Palantir Losing $579M in 2019.” My hunch is that this going public thing is not going to be the cake walk some envision. Palantir Technologies is a specialized services company. In my lingo, that means the firm’s principal technology was developed for and influenced directly by the needs of intelligence, law enforcement, and similar enforcement agencies. I am not going to dwell on some facts which informed Palantir observers should know; for example:
- The company was founded in 2003. That is just about 17 years ago. In that time, the technology for intel and LE professionals has advanced. Anyone who has been in the “enterprise software game” knows one thing: Keeping the 2003 Buick running is not getting easier, nor is it getting cheaper to keep that four-door sedan humming. What’s this mean? First, the built in costs for a 17 year old engineering structure are not likely to decrease. Second, massive investment is needed to keep pace with upstarts like Datawalk. Third, some of the new specialized services solutions are quite easy to use and very, very slick.
- Palantir has ingested about $2.6 billion from about three dozen, Type A, usually impatient, and generally attitude choked, entitled people. That’s a big price tag on a company losing about $600 million per year. Real estate should be less expensive in Denver, but the traffic? Yeah, about the same as Sillycon Valley.
- The number of customers for high end specialized software is small compared to the number of people who happily consume TikTok videos. That’s a big, big problem. The number of vendors selling more modern systems outnumbers the number of intel and LE entities able to purchase, training professionals, babysit, and then — in a crisis situation — actually use the Fancy Dan software.
But these are facts which I have written and lectured about, and I have not done much with Palantir’s approach to sales, its exciting interactions related to the i2 Analyst’s Notebook AND file format, and the changing economics for LE and intel agencies. Let me just say that this “downsizing” movement is not new and it is not going to make selling big ticket software easier. One former Swedish intel professional asked me for a recommendation for investigative software or what I call intelware. I told him, but the fellow said, “Nope, we’re going with a low cost Israeli solution. It’s good enough.” That’s a potential problem for specialized services firm with gigantic cash burning systems. Better is not going to be “good enough” to make the sale.
Let me hit my main point: Stealth. I have long been an advocate that specialized software companies avoid the public spotlight. There are many reasons. Going public is a very public action, and it exposes the financial weaknesses in a way which is ultimately either a home run or a strike out.
Consider Voyager Labs. What is this company? What does it do? Getting info is difficult. The firm is a vendor of specialized software, but it keeps a low profile or distracts with some wacky marketing play for (heaven forbid!) advertising companies. What about Nice? What’s it do? Customer experience. Yeah, CX. And there are hundreds of other companies in the specialized services business. Only a few have gone public, and these outfits are very skilled at making sure their businesses are positioned in a way that seems logical to those unfamiliar with some of the more interesting facets of their business. One example is Verint. Another is BAE Systems. Will Palantir emerge as a BAE Systems-type outfit with shares chugging along in a range that does not excite Robinhood investors? With the losses reported from a somewhat mysterious source, it’s hard to say. But on the surface, assuming the “leaked” financial data are accurate, it seem like a long shot.
The IPO, the investors and stakeholders hope, will get them some cash. Will the payoff be one of those pre-Rona 17X jobs? You will have to noodle that question as you ponder 17 years and losing half a billion a year. Just getting one’s money back might be a realistic scenario to ponder. On the other hand, there is the possibility of losing money. Not a happy thought. Stealth may be a better option for some specialized services firms.
Stephen E Arnold, August 24, 2020
Palantir Technologies and Semi Hard Numbers
July 10, 2020
Palantir Technologies is super secretive. The company plans to become publicly held. Does secret and public match up for you?
“Palantir Built Itself into a $20 Billion Success with a Secretive and Controversial business. Now It’s Prepping for Life As a Transparent Public Company” offers some numbers; for instance:
- The company is valued at $20 billion US
- The company’s technology is 17 years young
- The company has raised about $3 billion US in funding
- 200 employees sent a letter to top management complaining about Palantir’s work for US Customs.
None of these numbers indicate if the company is profitable.
Important? Probably not in today’s fraught economic environment.
Stephen E Arnold, July 10, 2020
A Peek into Google and Palantir Contracts: The UK National Health Service Versions
June 8, 2020
Curious about the legalese, terms, and conditions of US companies licensing and servicing government entities in the United Kingdom require? Good news. You can (at least as of June 6, 2020 at 0600 US Eastern time) can read allegedly complete contracts for software and services.
- The Google NHS agreement is at https://tinyurl.com/y88tzdqq
- The Microsoft NHS agreement is at https://tinyurl.com/y8vzj5ye
- The Palantir NHS agreement is at https://tinyurl.com/ybgdl82p
A contract from Faculty.ai is also available. Founded in 2014, Faculty.ai does not have the cachet of a Google. If you want to look at that contract, it is for now at https://tinyurl.com/ya3kzolw.
The deals are between these firms and an entity doing government business under the name of NHSX which seems to mean “a joint unit bringing together teams from the Department of Health and Social Care and NHS England and NHS Improvement to drive the digital transformation of care. COVID-19 Response.”
Are there some interesting details in these documents? Yep. Will these be shared in this blog post? Nope. You will learn some of the DarkCyber’s team insight if you attend our National Crime Conference presentation about investigative tools and systems.
Not invited? For fee briefings are still offered. Contact benkent2020 at yahoo dot com.
Stephen E Arnold, June 8, 2020
Palantir Technologies: A Very Unusual Emission from a Specialized Services Firm
May 26, 2020
The PR battle among the firms providing specialized services to law enforcement and intelligence entities has taken an unusual turn. If you send email to an outfit like BlackDot, you will probably be ignored. The same non response holds true for the vast majority of firms delivering solutions that put bad actors at a disadvantage. Sure, there are less low profile uses of these technologies, but applications like eDiscovery do not capture the attention of the real media.
DarkCyber spotted “Our Product Is Used on Occasion to Kill People’: Palantir’s CEO Claims Its Tech Is Used to Target and Kill Terrorists.” DarkCyber has noted that NSO Group has found itself in the PR spotlight due to allegations from Facebook and assertions about an NSO professional using the firm’s system for personal activities. But the “kill people” thing is sure to catch the attention of the hundreds of specialized service firms’ attention.
What’s even more interest catching is that one of the senior managers of Palantir Technologies serves as a member of the Axel Springer shareholder committee. What’s an Axel Springer? The company owns Business Insider, the “real news” outfit which reported Mr. Karp’s rather intriguing statement about a use case for Gotham and other Palantir modules.
The story also provides a link to a video from an outfit called Axios, presumably to buttress the “true fact” of Mr. Karp’s statement.
For a low profile outfit to offer this alleged admission about software’s link to termination with extreme prejudice may have some downstream consequences. With low profile companies like Shadowdragon publicizing its system on Twitter, will PR become the go-to marketing method in the future?
Making sales is one thing, but some government customers are wary of specialized services vendors who hum the 1960s song “Talk Too Much.” Some licensees can consult the “seeing stone” or just hit Philz and listen for some Palantirian chatter.
Stephen E Arnold, May 26, 2020
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