What's with the tech sector?


blogs.wsj.com/tech-europe/2011/0 … ift-in-it/


Mostly self serving drivel…

Its a shell that will be written down $9B plus over the next 3 to 5 years. Although not in the same league as the AOL / Time Warner debacle. How much was that? $40B?

Although I did get a laugh out of this…

As I’ve said before the true strength of the Valley is that a large number of the most successful teams are full of people who would never be hired in Europe. People without advanced degrees in Comp Sci / engineering from Stanford, MIT or UC. Fancy credentials from Stanford, MIT, CMU etc may get you VC money but it rarely gets the product out the door. In fact its a very good counter indicator. Most of the successes with a Comp Sci / EE background tend to come from the second string colleges.

Having talked to enough people from Cambridge over the years I have absolutely no doubt when they try to go toe to toe versus a valley competitor they will be crushed 9 times out of 10. Because in the Valley the fact that you got a first from Trinity, St Johns or Peterhouse (or a 4.0 from Stanford for that matter) means diddly squat to those who actually create revenue generating product. Do you have the wherewithal to get a shippable product out the door? Yes? Good. Dont have a fancy schmaltzy degree. We dont care.

Compare and contrast the want ad’s on craigslist SF versus CWJobs.co.uk. In SF its all about experience. In the UK its all about credentials. I could make a very very long list of people who have been successes in the Valley (or high tech) over the years who would never have even been called for an interview (when they started out) by UK (or European) companies because they were not “qualified” for the job. We could start with Bill Gates, Steve Jobs, Larry Ellison (all college drop outs) and work our way down…


I’m pretty sure you’ve got it completely wrong on Autonomy, jmc. Its offering is proven, already in use globally and growing - fast, as is its target market. Lynch didn’t want to let it go and was always going to make an acquirer pay up. Comparing this takeover to the AOL/TimeWarner debacle is way off the mark. TimeWarner were not even buying any technology because AOL didn’t own any. That was just a misguided land grab at the top of a bubble - a la Dunner in Ballsbridge.

Incidently, I can’t remember a company on the London market causing so much disagreement and bickering amongst analysts as Autonomy. As I’ve said before, that’s a problem on this side of the Atlantic. Much of the investment industry here is ignorant when it comes to technology, the cycle of innovation and its disruptive nature. Most analysts just want to identify a trend, draw a line and read off into infinity. The US (as I’ve also said) is different. Lynch was pushed to get a NASDAQ listing and resisted - mainly because his head had been turned by his fractious relationship with the investment industry in London. If he’d gone for it, I believe Autonomy would have had a much higher market valuation, not so far off the $10bn HP paid.

As you can probably tell, I’ve been a fan of Lynch and Autonomy for some years (I like it when someone makes me money). It’s a shame to see it go. But Lynch will be back and I’ll be backing him.

Your logic is a little confused here. Are you suggesting firms should hire people like Gates, Jobs or Ellison? That’s a receipe for chaos. Most successful, former college drop outs I know tend to have problems with authority and fitting in with a team. They would rather be in charge and please themselves. Studying for exams is seen as a waste of more useful time. I’m not being critical here - we need people like this. The employer by contrast is looking for someone to fit in and follow orders they don’t necessarily agree with - if the candidate has problems even following a study plan at university that doesn’t bode well.

Ironically, my description of drop outs fits Gates, Jobs and Ellison perfectly.


So where are my acquisition numbers wrong? The annual report is all fluff. Complete BS.

Well we’ll see how big the write-off at HP is the next 5 years. I expect 90% of the purchases price. And if the UK management does not do a buy back I’d expect most of the UK operations to be shut down by the end of five years. Most of the revenue seems to come from the US operations.

[snip] But hey, he made you a few easy bucks at the expense of HP’s stockholders so what do you care. The fact that it looks like all a front is neither here nor there.

Autonomy looks to me just like another acquisition shill company. Because on close inspection it shows all the characteristics that made The Learning Company and Riverdeep such huge “successes”. How many billions have they lost over the last 20 years?

In other words you’ve never seen inside any successful US high tech start ups. They succeed for the reasons I’ve outlined. And European and UK companies fail, and will continue to fail, because they are run like civil service bureaucracies. In the US engineers are paid far more than management, in the UK it is the complete opposite. That tells you where their true priories are.

So whenever politicians and business men go on about how they need to emulation the US high tech culture, but continue to hire like big companies always have, dont be too surprised when almost all European high tech start ups turn out to be failures. UK companies are probably the most open to change, culturally, but I find it amusing to watch their eyes grow wider and wider as I describe to them just how the valley works, tell war stories about the many failures, and the few success I’ve seen up close, and tell them just what are the common traits that increase the probability of a company surviving and growing. In the end they always cop out, just trying to carve out a comfy little niche, without the driving ambition to prove that they can defeat all comers.

The Valley succeeds because no one give a damn what diploma you have, because there is no stigma to failure, and because it is pervaded with an overwhelming sense of fantasy where nothing is impossible. Reality is purely optional. I’ve seen lots of substantive companies come out of nowhere over the years and I’ve seen lots of phony flash in the pan operations. Autonomy looks like a complete sham. Not quite dot.com sham, but still a sham.

Gone in five years…


What is Title 144?
I cannot find anything relevant on Google.




Good debate.

A links for those interested in Mike Lynch
blogs.wsj.com/tech-europe/2011/0 … ift-in-it/

JMC, what is the case for (or against) Barry O´Callaghan & Riverdeep?

Would appreciate your summary of what happened there.


I think HP overpaid too. Worse, by buying Autonomy they’ve exposed unstructured data as a profitable business segment. Expect Autonomy to have lots of me-too copies soon , basically on the back of HP’s acquisition. There’ll be a freeware/shareware product on the market, by the end of next year that will do 85% of what Autonomy can do. Microsoft will have a product in 4 years (planned for 2…), etc. etc.

The think about software is that anyone can compete on static business - it is a set of problems that need to be solved. Not everyone can compete successfully, but there are plenty who try. Dynamic business is much trickier (web advertising, for example) as you have to market people onto your sites.


siliconrepublic.com/careers- … ough-will/


because the rates being paid are poo for experienced techs.


Further analysis on the deal.


Whatever one thinks of the Autonomy deal (and I think Autonomy has great technology as was superbly managed), the price HP paid is a measure of their extraordinary desire to carve a new strategy. Whether they will be capable of making a success of it remains to be seen. With Lynch on board they have an excellent chance.

In any case it was a great outcome for Autonomy shareholders. In my opinion, there are quite a few others with similar potential, espcially amongst the smaller caps and in my core themes of cloud computing, mobile internet, broadband infrastructure and video on demand. If folks are interested, I’m happy to use this thread to share ideas from time to time?


Def a rich price - but to compare it to River Deep and Lynch to Barry O’Callaghan as one poster did is beyond churlish. (I’m surprised he didn’t throw Fran Rooney in the mix).

(And I’m all ears!)

BTW Here’s an interesting article on the Application

nytimes.com/2011/03/05/scien … wanted=all


Ah putting lawyers out of jobs - is there anything sweeter? :smiling_imp:


Worth every penny so :laughing:


In early 1997 the SEC changed the rules about when the initial investors could cash out. The change in wording looked innocuous enough but it was mostly responsible for the dot com bubble which pretty much destroyed the tech IPO market.

Pre '97 the rules were pretty simple. All initial investors could not cash out the vast majority of their stock until two years after the IPO. So the IPO company not only needed at least 8 to 10 quarters of profit (not just healthy EPITDA) but needed to remain healthy (and profitable) at least 24 months after the IPO. So the initial investors could only cash out successfully if the IPO was a genuine company with real strong growth prospects.

The rule was changed so that the time period became 12 month after the investment was made. So now all you needed was to create a company that looked half way plausible on the day of the IPO when all the initial investors could cash out. The schedule now looked like this. Someone makes a half way plausible pitch to the VC’s. By plausibly I means something that is likely to fly with the marks, sorry investing public, in 18 months time. So the VC’s put in the initial seed money and after 6 month if the idea still looks like it will sucker the “investors” on the opening day then the main round is made. That is why there have been so many me-too VC companies since '97. Easier to sell shit to the clueless if it looks like it is part of a “trend”.

So you spend a couple of hundred K on the usual shills during the road show and on the day of the IPO all the initial investors dump their stock. After the initial random movements (because the company is valueless) the stock flat lines to somewhere around -80%/-90% over the next 24/36 months.

The game has changed somewhat since then. Not not many IPOs now, although most are pretty much junk companies. Most VC activity is spend creating do nothing companies that are acquired by each others companies after a few years, usually as a very obtuse tax right off as far as I can work out.

That’s why if you see startups offering stock options nowadays you know they are clueless. Because there is little chance of them going public. And even if they did the ISO stock holders still cannot sell their stock until 12 moths after the IPO. Unlike the founders and initial investors. When the stock will be mostly worthless. In the old days people with per IPO ISO’s could make very serious money if the company went public. It was not unusual for ISO’s to be worth at least 3x/4x annual salary per year. Those days are long gone.


I did try to go into some detail here…


…but even though in the original wording I very much kept on the right side of Irish libel law Yogans (understandably) wariness reduces it to shenanigans…

The short story. Softkey / The Learning Company. Felony financial malfeasance through massive abuse of accounting regulations. Riverdeep. ibid.

Do massive leveraged buyouts of companies with very strong cash flows. Abuse to destruction rules regrading goodwill and intangible assets and then asset strip the carcass when the cashflow starts dying. Repeat the process on a new healthy victim. Houghton Mifflin is the current victim being eviscerated.

These people make Tiny Rowland and his African “enterprises” look like paragons of selfless virtue.


Jmc, I think your suspicions are spot on. I’ve been wondering the same things myself for ages.

Lynch’s claims that 99% of the software industry OEM Autonomy’s software are ludicrous. The best comparison to that is Oracle. Oracle databases are found in all kinds of applications across all verticals. As a result, you find message boards talking about how to best implement applications on top of Oracle, customers willing to be public references, and general recognition in the industry that an Oracle database is a useful piece of technology. Ignoring fluffy PR articles like we saw in the WSJ this week, there is no such evidence for Autonomy’s technology being anywhere near so useful or ubiquitous. This is highly suspicious.

Qualitatively, Autonomy’s marketing story stinks to high heaven when you do a sniff test comparison to reality. Quantitatively, the numbers are so hard to reconcile that they are meaningless. Anyone who takes them at face value is taking a massive and unjustifiable leap of faith. Revenues weren’t broken down when reported for years and then all of a sudden when the city started complaining, the breakdown suddenly appeared? Aren’t financial analysts supposed to do some actual bloody analysis?

If you do a little research you’ll find that many of the banner names that Autonomy lists as part of its OEM program have long since replaced Autonomy technology with alternatives. We all have Google, and if you run a few searches, some glaring gaps will become clear. Oracle and Adobe ColdFusion are notable examples, and with some digging you’ll find others.

Furthermore, Verity listed 260 OEMs when Autonomy acquired them in 2005. Autonomy claims that they now have more than 400. You’ll notice some funny things. First, the 400+ number has been the same for a few years. Second, the names of new/extended OEMs seem largely recycled from Verity’s OEM program (all of Verity’s filings and results announcements are available since they were listed in America). There are a few new names, but a 30-minute analysis of names mentioned in results announcements points to a trend of very few new names after a flurry of new ones post-Verity acquisition, which completely contradicts the trend of wildly increasing OEM revenue! Finally, does anyone else find it suspicious that Autonomy always announces between 10-14 OEM deals every quarter? There was a 5-quarter stretch where it was 12 new/extended OEM deals for each of the five quarters! Maybe it’s just me, but that’s an uncanny consistency.

Don’t take my word for it either, others seem to have noticed the same things:

blogs.forrester.com/leslie_owens/11-08-26-what_is_autonomy_without_its_marketing (Industry analyst questions Autonomy’s technology)
realstorygroup.com/Blog/2215-Another-look-at-the-Autonomy-IDOL-OEM-business (Questions on the OEM business)
ediscoveryjournal.com/2011/08/edj-to-conduct-deeper-analysis-of-hps-autonomy-acquisition/ (A public call to deeper analysis)


Will they now pull the plug on the Autonomy deal. I’m sure there is an exit fee but they may think its worthwhile if the Autonomy deal was an Apotheker play.



I read elsewhere that Unless there’s a “material change” they are contracted to buy Autonomy Think it was NY Times. The reaction to Meg: You’ve got to be kidding!