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January 22, 2007

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IBM and top Silicon Valley companies could become targets for private equity firms

By Tom Foremski for Silicon Valley Watcher

IBM, the world's largest computer and IT services company, could become an acquisition target for private equity firms said Steve Bengston, managing director at PricewaterhouseCoopers.

Mr Bengston was speaking at a recent lunch panel on trends and predictions for 2007 organized by FountainBlue. Also on the panel was Fred Greguras, a top lawyer at Fenwick and West, and Rick Ellinger, a venture capitalist with WCA Technology, and myself.

Private equity firms are raising ever larger funds and making ever larger acquisitions, some as large as $35bn, said Mr Bengston. At that rate, it is only a matter of time before even some of the largest tech companies become targets.

IBM has a current market capitalization of about $145.5bn. To take the company private would require a premium to be paid. But several private equity firms could potentially finance such a deal.

"IBM is a perfect candidate for private equity firms, there is a lot of restructuring that could be done," said Mr Bengston.

If such a deal were to happen, the new owners would be free to breakup the company into several large business groups. This is a strategy that IBM considered before Lou Gerstner took over as CEO in 1993. He spent nearly ten years restructuring IBM but keeping its major business groups intact.

Mr Gerstner retired from IBM in December 2002 and is now a member of the Carlyle Group, one of the world's largest private equity groups. It would be ironic if Mr Gerstner were to be brought in to help take IBM private and then possibly break it up.

Fred Greguras from the top Silicon Valley legal firm Fenwick and West, said that private equity firms are fast becoming large players in Silicon Valley, and are acquiring lots of startups.

Private equity firms also target large public companies private then apply financial engineering to restructure the companies. They are then sold to other private equity firms or they go public again. The profits on such deals can be huge and there are also massive fees that the private equity firms collect from the companies they acquire.

However, there are concerns that private equity firms are loading up companies with high debt loads which will make them more vulnerable during economic downturns. And the huge amount of money flowing into private equity funds is likely to result in new regulations.

Here is the market capitalization of some of Silicon Valley's largest companies: Intel at nearly $120bn, Cisco Systems at $161bn, Hewlett-Packard at $114bn, and Oracle at $88bn.

Google has a market cap of $147bn and it is controlled by its founders and early investors which protects it from a hostile acquisition. Microsoft has a $301bn market cap.

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January 18, 2007

Wednesday: Talking about SVW on two panels

By Tom Foremski

Wednesday morning I spoke on a panel alongside some of the top journalists covering Silicon Valley: David Kirkpatrick from Fortune, Jay Bonasia from Investor's Business Daily, and Rachel Konrad from Associated Press. (More details here)

Then in the evening, I did it again, I was on a panel with Om Malik from GigaOm, and Matt Marshall from VentureBeat. What was interesting was that in the morning I addressed an audience of public relations professionals, and in the evening I spoke to an audience of media professionals--both audiences are trying to understand what blogging is about and how it impacts their work.

I knew many of the people at the evening event, which is a newly formed "tech writers" group organized by Dean Takahashi and Elise Ackerman, reporters at the San Jose Mercury.

The group consists of about 50 of the top reporters covering Silicon Valley. Dean and Elise have done an excellent job in bringing reporters together--it is extremely rare that we can chat with each other without PR people or others in the mix.

We met in an Italian restaurant in San Francisco. Matt spoke first, then Om, and then it was my turn to talk about the trials and tribulations of becoming a blogger journalist. The content of the evening is all off the record. However, I can write about some of the things that I talked about.

I spoke about how much I liked my job, and some of the many unexpected discoveries and insights that have occurred since I left the Financial Times in May 2004. I also said I didn't particularly like the work of trying to build a business and all that entails.

The operational aspects of running a business are time consuming. I'd much prefer just going out, talking to people, coming back, and writing. That is the simple life that every journalist wants. However, an independent blogger journalist has to do 15 other jobs/tasks too.

So it was great to hear Matt and Om talk about this aspect of their work and to hear about their pain. I just hope that we managed to discourage the assembled hacks from rushing out and doing the same as us, we don't need more competition :-)

The mumbo jumbo of social media

By Tom Foremski

Tuesday evening I was in CNET's HQ in downtown San Francisco for my first Social Media Club experience. Social Media Club is a creation of my friends Chris Heuer and Kristie Wells, and it consists of bringing together small groups of people to discuss subjects and to share in idea creation.

The format is "world cafe" which means people discuss and debate in groups of four or five. After 20 minutes or so, everyone changes groups, and continues the discussion. Then everyone changes groups one final time. Towards the end, the entire room is invited to share their experiences and ideas.

It was time spent in the way I love to spend time: talking about media with some very interesting people. The topic that evening was social media and what could be the most powerful thing social media could achieve this year, and our role in it.

Within my groups that evening, a common theme was trying to understand what is meant by "social media." It is a term that is used a lot these days, especially within the world of public relations agencies, who create "social media news releases" (BTW, I have never received a social media news release), and some agencies have "social media practices."

The term social media seems to have become a catchall for the world of blogs, online forums, search-discovered content, trackbacks and talkbacks. I'm not a big fan of the term but it is becoming more common.

I think a better term would be "conversational media" because it is more descriptive and more neutral than "social" which invokes many other meanings. But I can live with the term, especially since there is some sort of common understanding starting to slowly emerge.

Tuesday night we all struggled in defining social media, then we struggled to figure out what could be the most powerful things it could achieve.

There were many common thoughts expressed that evening and many uncommon insights. One common theme that emerged was that social media needs to become a lot more inclusive and relevant to a lot more people.

For example, blogging is the largest component of social media, yet only a tiny percentage of people read them, and even fewer numbers write blogs. We often forget, that for the vast majority of people, all of our chatter about blogging, social media, etc, is just so much mumbo jumbo.

Tuesday evening was full of mumbo jumbo. Our challenge is to translate it into a common language and make it relevant and useful to the majority of people. Because it is a powerful thing and one that can change society for the better, imho.

January 17, 2007

1.17.07: US Attorney investigating stock options resigns

By Richard Koman for SiliconValleyWatcher

Kevin Ryan, the US Attorney for Northern California responsible for prosecutions of tech firms for options backdating, has resigned amid what is widely regarded as a Bush Administration purge of US Attorneys, the San Francisco Chronicle reports.

It's not clear what effect Ryan's departure will have on his office's investigation of Bay Area companies for allegedly concealing their backdating of stock options granted to top executives. Ryan appointed a task force last summer to look into the practice and has obtained two criminal indictments and a flurry of executive resignations.

The Department of Justice has asked for resignations of all but one US Attorney in California and Democrats see the moves as at attempt to replace Attorneys who don't meet the Bush Administration's conservative litmus test. Under the Patriot Act, the Department can appoint "interim" replacements indefinitely.

Sen. Diane Feinstein sees this as a way to bypass Congressional review of the appointees and has introduced a bill to roll back the Patriot Act provision so that appointees can only serve for 120 days. Permanent appointment would be made by a federal judge, as they were before the Patriot Act.

But most observers don't think Ryan has been caught up in the purge.

"I don't see Ryan doing anything that doesn't comport with the ideological line out of Washington,'' said Peter Keane, a Golden Gate University law professor and former dean. He said other prosecutors who reportedly are under pressure to leave have been those who "don't meet the general conservative litmus test.''

So what does this mean for Apple and other lower-profile tech companies under the US Attorney's gaze? It's unlikely that Washington has a problem with prosecuting tech companies: white-collar crime is what US Attorneys are supposed to do. Indeed the problem with Ryan appears to be that he was spending more time on San Francisco gang crime than on corporate crime.

Still with a change at the top, investigations against Silicon Valley will probably tread wate for awhile - at least until a new boss is appointed.

January 16, 2007

Talking about the business of technology

By Tom Foremski

On the morning of January 17 I'll be on a panel with David Kirkpatrick of Fortune, Jay Bonasia from Investor's Business Daily, and Rachel Konrad from Associated Press. We'll be discussing how we cover the "business of technology" and the types of stories and trends we'll be looking for in the coming year.

The panel is organized by Bulldog Reporter. More details here.

1.12.07: Bill would require webcasts, sat radio to use DRM

By Richard Koman for SiliconValleyWatcher

Democrats and Republicans are cosponoring yet another bill that requires technology companies to deploy DRM technology that would hamstring their users' legal uses of copyright material in order to prop up the Hollywood's business models.

Under the Platform Equality and Remedies for Rights Holders in Music (PERFORM)Act, reintroduced today by Sens. Dianne Feinstein (D-Calif.), Lindsey Graham (R-S.C.), Joseph Biden (D-Del.) and Lamar Alexander (R-Tenn.), both Internet and satellite music broadcasters would have to pay "fair market value" for the use of copyright music libraries, News.com reports.

The bill is a direct assault on the young satellite radio industry, as well. It would stop satellite providers from allowing users to store a copy of broadcast songs.

The proposal says that all audio services--Webcasters included--would be obligated to implement "reasonably available and economically reasonable" copy-protection technology aimed at preventing "music theft" and restricting automatic recording.

"New radio services are allowing users to do more than simply listen to music," Feinstein said in a statement. "What was once a passive listening experience has turned into a forum where users can record, manipulate, collect and create personalized music libraries."

Not all recording would be banned under the bill, though. The sponsors seem to be particularly offended by any sort of active searches on the part of users.

Radio listeners would be permitted to set their devices to automatically record full radio programs on certain channels at certain times. But allowing users to program their devices to automatically find and record specific sound recordings, artists or albums would be prohibited. So-called "manual" recording would be allowed, as long as it's done "in a manner that is not an infringement of copyright."

And the bill mandates that providers deploy technology to prevent people from "separating component segments of the copyrighted material" contained in broadcasts. And they would be required to restrict users' "redistribution, retransmission or other exporting" of all or part of copyright music to other devices.

Opponents say that users have a perfect right to time-shift and even program-shift music they listen to on broadcasts by storing broadcasts for later listening and even editing.

The proposal "remains a fundamental assault on consumers' reasonable rights and expectations about home recording and fair use in any modern context," said Robert Schwartz, general counsel to the Home Recording Rights Coalition.
Gigi Sohn, president of advocacy group Public Knowledge, said the bill attempts wrongly to equate download services like iTunes with radio services.
"This bill looks to the past rather than to the future," she said in a statement, "by limiting the ability of consumers to use material to which they have subscribed and by limiting future innovations in electronics."

Obama announces - in online video

In yet another sign of the central role of the Internet on electoral politics, Barack Obama announced today that he is launching an exploratory committee for a run for the Democratic nomination for presidency. What's notable is how he made the announcement, not in a press conference or call to media but in a video posted on his website.

It's a fitting venue perhaps, since Obama emphasized in his announcement video that:

Years ago, as a community organizer in Chicago, I learned that meaningful change always begins at the grassroots, and that engaged citizens working together can accomplish extraordinary things.
So even in the midst of the enormous challenges we face today, I have great faith and hope about the future - because I believe in you.

And that's why I wanted to tell you first that I'll be filing papers today to create a presidential exploratory committee.

Rachel Sklar notes on The Huffington Post that the move to announce directly to the public via the Web, rather than via media, shows a deft political touch:

Pretty savvy move, actually, on Obama's part, with the obvious bounty of media coverage to come (never mind in the lead up), to say nothing of the suddern traffic possibilities on his website (if he slaps Google ads up there quick he can totally rake it in!). That's why it's savvy — Obama knows that he's been the object of scrutiny and fascination, obviously, and this is a great way to sow he's not courting it (even though the citizen journalism touch will provide additional play).

Twyla Tharp shows how to get Andy creative

By Tom Foremski

Twyla Tharp, the celebrated New York based dancer has a hot book that is making the rounds out here in Silicon Valley. The Creative Habit is her blueprint for how she primes the creative and inspirational pumps.

The popularity of her book represents something much larger. It is our search to be more productive, more creative, to become more inspired. Ms Tharp's techniques offer no shortcuts: "set up a routine" is the most valuable advice. At least for me.

Here is a recent video of my friend Andy Plesser in New York, dancing with Ms Tharp:

This is an impromptu dance created and directed by Twyla Tharp. Joining her is a complete amateur Andy Plesser, a 55-year old with no formal formal dance background but considerable enthusiam.
This was part of a taping session of several interviews about dance, video, creativity and the Internet done for Beet.TV, a videoblog about the online video revolution and it's implications for business and society.

GOOG continues to gain in search engine ranks as MSFT, Ask and Time Warner slip

By Tom Foremski

ComScore Networks' latest analysis of search engine activity was for December 2006, it showed Google gaining share, and at a faster pace than second placed Yahoo!

Google increased its lead by 0.4 share points to 47.4 percent of the total US market, compared with November 2006. Yahoo added 0.3 share points with 28.5 percent of the total. Microsoft sites were third with 10.5 percent, followed by Ask Network with 5.4 percent, and Time Warner with 4.9 percent.

Google and Yahoo gains were at the expense of Microsoft, which lost 0.5 share points, Ask, which fell by 0.1 share points, and Time Warner which lost 0.2 share points.

ComScore assembles its data from monitoring the Internet activities of more than 2m consumers.

Foremski's Take: Google's lead shows no signs of flagging. Yahoo is doing a decent job in gaining share but not enough to catch Google. Google continues to grow much faster.

Third, fourth and fifth places in search rankings are all declining. Is there a place for these and specialized search engines on the Internet? Or is it that only the top two Internet businesses in each category have the best chances to succeed?

From ComScore Networks:

* Americans conducted 6.7 billion searches online in December, up 1 percent versus November. Annual growth rates in search query volume remained strong with a 30-percent increase since the same month a year ago.

* Google Sites led the pack with 3.2 billion search queries performed, followed by Yahoo Sites (1.9 billion), MSN-Microsoft (713 million), Ask Network (363 million), and Time Warner Network (335 million).

For more information, please visit www.comscore.com.

January 15, 2007

1.15.07: Timeframe for citjour: 10 years?

By Richard Koman for SiliconValleyWatcher

With Backfence now on life support, we wonder: Is citizen journalism (citjour) dead? Was it even a good idea? One could make an argument that citjour was one of those memes that bounced around the media blogosphere until it became self-evidently a must-do - but did anyone ask the citizens?

In a piece on Backfence's demise (yes, demise, says one of Backfence's angels: "At this point, I don't look for any return or any prospect of recovery"), The Washington Post quotes consultant Vin Crosbie:

"Realistically, it's going to take close to 10 years for the business models to be there and for there to be enough advertisers willing to give money to hyperlocal start-ups," said Vin Crosbie, managing partner of Digital Deliverance, a Connecticut media consulting firm. "Backfence's problem is that it was too early."

Cofounder Susan DeFife is hooking up with two former VPs to create a consulting firm. Her former partner Mark Potts, who had already left the company, is returning to run what's left of the company.

"It always ends up being so much different than the way you imagine it to be," Potts said. Over the next three months, he said, Backfence will add more features, such as social networking, online video and mapping. "We haven't rolled out as quickly as we'd wanted to. But we think the basic concept we went after is absolutely still the right place to be."

1.15.07: EoPlex 'prints' tiny components

By Richard Koman for SiliconValleyWatcher

A fascinating technology story in this morning's SF Chronicle: Redwood City-based EoPlex is a startup with a proprietary secret sauce (literally) that manufactures complex miniature parts through a kind of printing process.

The company intends to mass-produce tiny gears and switches using a process that builds 3-D objects by layering materials on top of each other, over and over, until a third dimension takes shape. Think of a book instead of a poster.

The process is based on EoPlex's proprietary substrate - a toothpaste-like glue that can carry ceramic or metal particles for fabrication.

Imagine that the first pass of "ink" squirts out a square line that contains a metallic powder. This square blob is immediately hardened by a quick blast of ultraviolet light. Then the EoPlex technology prints a second layer of fluid inside and around the four hardened lines.
This second fluid differs from the first. It does not have any metals inside. It has one purpose -- to create a flat surface upon which to print the next layer.
Thus, to build a box of any given height involves a repetition of these steps: lay down the next square layer of metal-bearing paste; harden it with ultraviolet light; fill and surround it with the next layer of empty goo; harden it up; and repeat until done.
In the final step the printed object is placed in an industrial furnace, where the real magic occurs. The goo, the ink, the carrier fluid evaporate completely -- leaving behind only the metal or ceramic that was deposited in those alternating steps.

January 12, 2007

Silicon Valley secrets . . . from a Silicon Valley mom

Kate Sanford writes on the excellent group blog Silicon Valley Moms Blog. This post is a great description of the type of secrets that Silicon Valley citizens try to keep. It's all very much a part of the Silicon Valley culture.

Here are some extracts from: Silicon Valley Moms Blog Silicon Valley Secrets

A few months ago I was interviewed by a 19 year old intern who asked me why people blog in the silicon valley. "Because of the secrets," I said. "It's such a secretive place that we're bursting at the seams."

. . .
Picture an enormous elephant with blonde hair and boobs, lounging in the middle of the living room. Dressed in the finest Fendi wear. Buffing its toenails, with huge clanking bracelets sliding up and down its forelegs. THAT's technology in the valley. The coolest new product - awesome! Oooh, check it out. And <insert name here> just started a new company with <insert name here> making <oops, can't tell you> and funded by <insert name here.> What fun!

. . .

Here are some typical (and real) valley secrets and situations. Do any sound familiar to you?

In your startup, your working-from-home, equity-paid engineers have stolen the source code and are holding it hostage until you renegotiate their contract, giving them the ability to license it.
Your best programmer is manic depressive and "codes better" without his meds.
The president of your company has disappeared and it later comes to light that he's been murdered by a woman who works on the assembly line.
Your ex-boyfriend, girlfriend, or spouse is being investigated for something which you can totally believe and which tickles you mightily.
One of your executives has a collection of knives, which he likes to play with and often leaves lying around the office.
One of your coders is having a sex change.
Things suck and you don't want people to know.
You're in talks to sell your company for millions of dollars and terrified that information will leak and the deal won't go through.
The deal went through just as your best friend's company tanks and he loses everything.
Your best friend's company just sold and your company is tanking. (What do you talk about over dinner?)
You went through negotiations and hired a top-level, very well-known firm to prepare the paperwork - they screwed it up and the deal is off.
You find out that a competitor’s CEO was part of the swinger’s scene several years ago.
In a period of insanity, you founded your company yourself. It's three years later, you have maxed out three credit cards, your employees are furious at you, and you're looking as good as you can while you're praying that someone will buy you.
You are now worth a hundred million dollars and all of your friends are having a hard time financially (as many are in the valley.)

Silicon Valley Moms Blog Silicon Valley Secrets

I'll be speaking at New Communications Forum 2007 March 7-9, 2007 at the Venetian in Las Vegas

Now in its third year, NewComm Forum is the premier conference that brings together leaders from around the globe to explore and discuss the revolutionary impact of participatory communications and social media on advertising, marketing, public relations, corporate communications, business and media. Conference highlights will include:

Opening keynote presentation by David Weinberger, co-author Cluetrain Manifesto

28 conference sessions in four tracks: internal communications, public relations, advertising and marketing, journalism and new media
4 hands-on pre-conference Boot camps: Blogging 101, Wikis 101, Podcasting 101 and Videocasting 101 taught by the leading experts
1 in-depth post conference workshop: How to Map Your Social Media Strategy
Expo hall featuring the latest solutions from the top vendors

The comprehensive conference program will feature real-world case studies from leading companies and in-depth expert education from dozens of leading experts and the research fellows of the Society for New Communications Research, including:
Tom Abate
John Bell
Elisa Camahort
John Cass
Jamie Chabra
Jeff De Cagna
Todd Defren
Andrea Eckerle
Kimberly Fabrizio
Tom Foremski
Paul Gillin
Eileen Gittins
Josh Hallett
Chris Heuer
Neville Hobson
Shel Israel
Dan Karleen
Rob Key
Steve King
Kathy Klotz-Guest
David Kligman
JD Lasica
Benjamin Levy
Dr. Bernard Luskin
Mike Manuel
Albert Maruggi
Jen McClure
Jim Nail
Brian Oberkirch
Katie Delahaye Paine
David Parmet
Shoba Purushothaman
Giovanni Rodriguez
Joel Richman
Gordon Rudow
Zane Safrit
Eric Schwartzman
Ted Shelton
Brian Solis
Lisa Stone
David Strom
Laura Sturaitis
Carol Thomas
Jeffrey Treem
Stephen Turcotte
Kami Watson Huyse
David Weinberger
Jeremy Wright
Linda Zimmer
“This year’s Forum will be the biggest and best ever,” said Jen McClure, executive director, Society for New Communications Research. “We’ll be addressing topics such as how to really listen to and create lasting relationships with your customers, how to use Web 2.0 tools in your communications strategy, best practices for corporate blogging, bridging new media with traditional media, the social media press release, managing brand reputation and crisis communications in the blogosphere, citizen-generated video, Second Life, measuring social media programs and more. In addition, there will be plenty of opportunities to network, learn and discuss in a relaxed and fun setting.”
The event is presented by the Society for New Communications Research (http://www.sncr.org), a nonprofit global think tank dedicated to the advanced study of new media and emerging modes of communication and Lawrence Ragan Communications (www.ragan.com), the leading publisher of corporate communications, public relations, and leadership development newsletters.
For more information, visit http://www.newcommforum.com or call 650-331-0083.

Link to New Communications Forum 2007 to Be Held March 7-9, 2007 at the Venetian in Las Vegas

11.12.07: Bill would require webcasts, sat radio to use DRM

By Richard Koman for SiliconValleyWatcher

The bill is a direct assault on the young satellite radio industry, as well. It would stop satellite providers from allowing users to store a copy of broadcast songs.

"New radio services are allowing users to do more than simply listen to music," Feinstein said in a statement. "What was once a passive listening experience has turned into a forum where users can record, manipulate, collect and create personalized music libraries."

Not all recording would be banned under the bill, though. The sponsors seem to be particularly offended by any sort of active searches on the part of users.

Radio listeners would be permitted to set their devices to automatically record full radio programs on certain channels at certain times. But allowing users to program their devices to automatically find and record specific sound recordings, artists or albums would be prohibited. So-called "manual" recording would be allowed, as long as it's done "in a manner that is not an infringement of copyright."

Opponents say that users have a perfect right to time-shift and even program-shift music they listen to on broadcasts by storing broadcasts for later listening and even editing.

The proposal "remains a fundamental assault on consumers' reasonable rights and expectations about home recording and fair use in any modern context," said Robert Schwartz, general counsel to the Home Recording Rights Coalition.
Gigi Sohn, president of advocacy group Public Knowledge, said the bill attempts wrongly to equate download services like iTunes with radio services.
"This bill looks to the past rather than to the future," she said in a statement, "by limiting the ability of consumers to use material to which they have subscribed and by limiting future innovations in electronics."

1.12.07: Criminal and civil investigations into Jobs option grant

The US attorney's office and the SEC are investigating Apple's backdated grant of 7.5 million options to Steve Jobs in Decemer 2001, The Wall Street Journal is reporting today. There could be both criminal and civil sanctions against some of the players, including two former company lawyers.

WSJ: US Scrutinizes Grant to Jobs

Apple attorney Wendy Howell apparently created false documentation stating that the grant was made to jobs at a meeting on Oct. 19, 2001. That's what Apple told shareholders in a 2002 proxy statement. But the grant wasn't actually made until December - and the October grant meeting never happened. The price of Jobs' grant was backdated to a date when Apple's stock price was 20 percent lower.

Howell has been fired, Thomas Carlucci, Ms. Howell's attorney, said that while at Apple "Ms. Howell acted as instructed by Apple management and with the company's best interest being paramount."

In point of fact, Howell says, it was Nancy Heinen, Apple's longtime GC, who recently resigned, who ordered her create the docs. Heinen denies it and says that all grants were approved by superiors.

The SEC wants to talk to Howell, Heinen and Fred Anderson, former CFO, who did resign under a backdating cloud.

Under accounting rules, no grant is actually made until final terms, including price, are settled and final approval is given by a company. Apple has said that its board "originally approved" the grant dated in October 2001 on Aug. 29 of that year when the stock was trading at $17.83. But according to a person familiar with the situation, Mr. Jobs wasn't satisfied with the terms of the grant in August and negotiations continued for months. Apple has said the grant was finally authorized by the board on Dec. 18, 2001.
On that date, the stock was trading for $21.01. The grant, however, was backdated to Oct. 19, when the share price was $18.30. Apple hasn't disclosed any details surrounding the decision to backdate the grant. Two people familiar with the matter say the October date coincided with a meeting of the board's compensation committee. The committee, however, didn't ISSUE the grant at the meeting, they say. According to Apple's practice, the full board was required to approve stock-option grants to the chief executive.

January 11, 2007

How IBM Venture Capital Group succeeds without any venture capital

By Tom Foremski

Late last year I met with Drew Clark, co-founder of IBM Venture Capital Group which operates out of the heart of Silicon Valley, in Menlo Park.

There are just half-a-dozen specialists and their support staff, yet the group has been very successful, and doing it with OPM (other people's money).

Drew Clark, explains: "In the late 1990s we saw the many billions of dollars invested by the venture capital community and we thought about the best way we could participate and leverage those investments. That's when we set up the VC group. Since then we've helped IBM acquire key startups and also partner with hundreds of others in business ventures."

IBM's Venture Capital Group does not manage a fund as do other VC organizations. The company doesn't even have a strategic VC fund such as Intel, which makes billions of dollars in investments. Instead, it tells the VC community, and the startups, what types of technologies it is interested in, and the direction of its business strategies.

Then it waits for the magic innovation engine of Silicon Valley to spit out companies with technologies that it can leverage across its global business platform.

For example, Steve Mills, head of IBM's Software Group, can acquire a small Silicon Valley software company and immediately monetise its products across IBM's global distribution channels. It would take years for a software company to acquire that kind of capability.

It is a sweet deal for IBM since it doesn't have to identify, and invest in startups, and help grow them into larger businesses--the Silicon Valley VC community does it all for them and with their own money.

And the VC community is happy to do it and have an exit--selling a portfolio company to an IBM, SAP or Oracle, is very welcome.

The IBM VC group has had a hand in 15 acquisitions, and Mr Clark says that the annual rate of acquisitions will accelerate. It will accelerate because IBM is pushing harder into emerging markets, in India and in China.

"In China we helped a small startup in the financial services area where we needed a secure online payment system. We have good contacts with the banks and we were able to put together an IT and business solution that has been very successful," Mr Clark says.

It is such IT services projects that IBM can help startups find customers, and help refine their technologies. Big Blue is creating "innovation" centers around the world where its engineers and researchers help startups develop their technologies, and bring them into contact with IBM's client companies. It partners with about 1200 startups.

IBM benefits from the IT/business services contracts that build the complex IT and business infrastructures. Services is more than half of IBM's revenues and increasing--so it is a smart strategy. It makes more money from services than it would as a vendor of hardware and software.

Mr Clark is particular impressed with China and the startups that are emerging over there. He sees a lot of innovative thinking in China, and emerging technologies that IBM could leverage.

We spoke for a while abut innovation and Silicon Valley and the unique culture of this place. Mr Clark fully appreciates the value that Silicon Valley continues to produce, despite innovation occurring in many other places around the world.

I see Silicon Valley as unique because it tolerates massive amounts of failure. Here, people are allowed to fail, and fail often--something that other cultures punish.

Mr Clark and his teams regularly meet with VCs to tell them what they are looking for. One current area of interest is in Service Oriented Architecture.

- - -

Additional Info :

IBM: The Venture Capital Group Report

Hot topics at IBM Venture Capital Group

The Long Tail of SaaS
Virtualization creep
Irving on Innovation
Open source & storage: it's about time
Open hardware is here to stay
Mainframe trends: a virtual and practical leap to SOA
Information-based medicine

About:

IBM Strategy & Venture Big News - Drew Clark | PodTech.net ...

Drew Clark of IBM's Director of Strategy and CoFounder of IBM's Venture Capital Group talks about the formation of a new Venture Capital Advisory Council ...
www.podtech.net/home/technology/105/ibm-venture-news-drew-clark - 30k -

16 years fighting for our rights: Electronic Frontier Foundation fundraiser tonight!

I'm definitely going to this:

Upcoming.org Electronic Frontier Foundation's Sweet 16 Party at 111 Minna Gallery (Thursday, Jan 11 2007)

Join EFF for a birthday bash to celebrate 16 years fighting for your rights. The party will be on January 11, 7-10 PM at 111 Minna Gallery in San Francisco. DJ Ripley and Kid Kameleon will be keeping the dance floor hopping all night long.
A $20 donation gets you in the door. No one will be turned away for lack of funds, and all proceeds go toward our work defending your digital freedom.
This fundraiser is open to the general public. 21+ only, cash bar.

Electronic Frontier Foundation

1.11.07: Steve Jobs benefitted from backdated options

By Richard Koman for SiliconValleyWatcher

Steve Jobs didn't benefit from backdated stock options grants he received, because he gave them up in 2003. So says Apple's internal investigation on the matter. But, it turns out, he certainly did benefit.

According to Apple filings with the SEC, Jobs exchanged his options for $75 million worth of restricted Apple stock - 5 million shares - just about the value of the options he gave up, the Washington Post reports.

Washington Post: Apple Chief Benefited From Options, Records Indicate

Steve Dowling, Apple's director of corporate communications, said the 2003 transaction did not directly benefit Jobs because he could not sell the restricted shares until he had remained at Apple for another three years.
Some investor advocates call that explanation disingenuous. "You are torturing the English language to say he did not benefit from the options," said Patrick McGurn, executive vice president of Institutional Shareholder Services. "He certainly benefited from the grant because the grant was converted on a value-to-value basis."

Plus, McGurn says, the stock option value was inflated because of improper backdating, so the amount of restricted stock he received was also improper.

Jobs was finally able to sell his 10 million restricted shares (there was a stock split) in March 2006. He sold half at that time for $295.7 million. At today's close of 98.50, that would give him roughly $492 million if he sold the remaining shares today - nothing to sneeze at even with a personal fortune of $4.9 billion.

Still with the SEC and possibly the federal and California attorneys general looking into the matter, that might not be such a bright idea.

Apple disclosed to the Securities and Exchange Commission late last month that it had falsified the approval of 7.5 million stock options given to Jobs in 2001 by recording a fictitious October meeting to ratify the options. The company acknowledged that the options were actually finalized on Dec. 18, 2001. That date's stock price, which Apple now concedes should have been the basis for the option price, was 15 percent higher than it was on the date of Jobs's grant.
Though Apple said Jobs may have recommended the selection of some favorable dates for options, it said he did not appreciate the accounting significance of choosing false dates. The company said its internal review found no misconduct by current members of Apple management.

And there's another grant, in 2000, of 10 million shares. The options were granted on Jan. 12, 2000, a date Apple stands by. And it just so happens that on date Apple stock was worth the lowest for a six-month period. Apple didn't communicate the grant until Jan. 18, which the stock had gained 20 percent. Guess he was just lucky. ..

Lucian Bebchuk, director of Harvard Law School's program in corporate governance, said Jobs falls into a category of chief executives that Bebchuk has labeled "super-lucky." These are the people who have received stock options on dates representing the lowest price of the financial quarter.
"He has some company. He is not the only one to be as fortunate," Bebchuk said. He and his fellow researchers found in a study released two months ago that about 1,000 CEO grants from 1996 to 2005 fell into this category. For most of these options, he said, the dates were more likely to have been the result of "manipulation" rather than good fortune.

Lost in space...(CSS)

Over the past few weeks I've had time to continue my exploration of Cascading Style Sheets (CSS): the glue that holds together the Web 2.0 generation of web sites.

It is easy to get lost in that CSS space and lose hours, and days, because it promises supreme control over any web enabled computer user interface--which is where the crown jewels are to be found.

The beauty of CSS is that there are many techniques to get to the same place, which means there are endless arguments on many issues, within the CSS webmaster communities. Yet two or more years ago, CSS was still very much in the background because web browser support was patchy and differed.

These days Internet Explorer 7.0 is a much better citizen of the CSS world, and so are the other major browsers. But there is still no universal CSS understanding among browsers. This makes it more difficult, more time consuming, and more expensive to build web sites using a pure CSS approach that look the same within all browsers.

One way to avoid the madness in chasing workarounds, is to realize that a web site should look good in all browsers, but doesn't have to look the same in all browsers.

Yet within the web master web design communities there is a strong Puritan streak emerging in regards to CSS. Now the trend is to try to develop pure CSS based web sites--without taint from any other, or older web design technologies..

There is almost a mania to validate web sites as pure CSS (by using free online services) to make sure everything is kosher and copasetic. And web masters will sneer at sites that don't validate as pure CSS. (By the way, if a site fails CSS validation it doesn't mean that it doesn't work...)

I don't care if my sites validate as pure CSS, as long as things function they way they should.

For example, the use of tables, a common way to layout web page elements using html--the core web language--is one of the biggest sins in the CSS community. Yet this is technique is easy and offers greater browser compatibility.

Such hybrid approaches are fine; and chasing after pure CSS layouts is money wasted at this point in our web tools evolution. The point of web user interface design should be to figure out a way to implement it using all available techniques and technologies. The end justifies the means. Web design projects do not have to validate as pure CSS if there are faster, hybrid approaches available, IMHO.

Still, CSS is incredibly compelling once you start getting to know it and use it. It's because it promises to abstract all content from all form. CSS defines the look and feel of content such as text, images, video, with incredible control and dexterity, and can be changed in a micro-second. You'll be surprised how much separation from content and form can be achieved. CSS Zen Garden is a stunning example of the power of CSS.

The reason I'm interested in CSS is that it is important for journalists, and any online publisher, to know about CSS, RSS, PHP, JavaScript, and how server-side processing/publishing works.

My goal is not to become expert in these areas but to know enough about how they work, how they slot together. Because then I can potentially design new types of media products. After all, these are all media publishing technologies.

Tools I've been using and like:

- StyleMaster 4.6 from Westciv.com in Australia. This is an excellent CSS editor with dozens of tools plus inbuilt tutorial and support functions that work very well. StyleMaster makes for an excellent CSS development platform--you don't need DreamWeaver of GoLive and everything validates 100 per cent.

- EditPlus is a great text/html/CSS editor, it is small, fast, and clean.

- Microsoft's Live Writer is a very good "Word" for creating blog posts and then posting to multiple platforms. Many users are also developing and releasing a lot of good plugins, so it is only going to get better. We'll have to see how Microsoft decides to monetise this free Beta.

January 10, 2007

Cisco updates SVW on iPhone trademark battle with Apple

UPDATE: The Seattle Post-Intelligencer has a copy of the complaint (PDF).

This is from John Earnhardt, Senior Manager of Policy Communications for Cisco Systems. He writes the Cisco High Tech Policy Blog:

Update on Cisco's iPhone Trademark - Intellectual property is the lifeblood of Silicon Valley and we all have to protect our property.
The iPhone trademark is owned by Cisco. We (Cisco) had hoped to reach an agreement to share our trademark with Apple, yet they decided to use the name without our agreement, so we, unfortunately, are having to go to court to stop them from using the name.

We still hope we can reach an agreement, but when your neighbor steals your property, you have no recourse other than to call the cops and file a complaint.

Full Cisco statement at: http://newsroom.cisco.com/dlls/2007/corp_011007.html

Thanks John.

And thanks to Ron Piovesan from Cisco for the following:

Commentary from Mark Chandler, Cisco's SVP and General Counsel, on Apple's infringement of Cisco's iPhone trademark. Today’s announcement from Cisco regarding our suit with Apple over our iPhone trademark has spurred a lot of interesting questions. Most importantly, this is not a suit against Apple’s innovation, their modern design, or their cool phone. It is not a suit about money or royalties. This is a suit about trademark infringement.
Cisco owns the iPhone trademark. We have since 2000, when we bought a company called Infogear Technology, which had developed a product that combined web access and telephone. Infogear’s registrations for the mark date to 1996, before iMacs and iPods were even glimmers in Apple’s eye. We shipped and/or supported that iPhone product for years. We have been shipping new, updated iPhone products since last spring, and had a formal launch late last year. Apple knows this; they approached us about the iPhone trademark as far back as 2001, and have approached us several times over the past year.

For the last few weeks, we have been in serious discussions with Apple over how the two companies could work together and share the iPhone trademark. We genuinely believed that we were going to be able to reach an agreement and Apple’s communications with us suggested they supported that goal. We negotiated in good faith with every intention to reach a reasonable agreement with Apple by which we would share the iPhone brand.

So, I was surprised and disappointed when Apple decided to go ahead and announce their new product with our trademarked name without reaching an agreement. It was essentially the equivalent of “we’re too busy.” Despite being very close to an agreement, we had substantive communications from Apple after 8pm Monday, including after their launch, when we made clear we expected closure. What were the issues at the table that kept us from an agreement? Was it money? No. Was it a royalty on every Apple phone? No. Was it an exchange for Cisco products or services? No.

Fundamentally we wanted an open approach. We hoped our products could interoperate in the future. In our view, the network provides the basis to make this happen—it provides the foundation of innovation that allows converged devices to deliver the services that consumers want. Our goal was to take that to the next level by facilitating collaboration with Apple. And we wanted to make sure to differentiate the brands in a way that could work for both companies and not confuse people, since our products combine both web access and voice telephony. That’s it. Openness and clarity.

At MacWorld, Apple discussed the patents pending on their new phone technology. They clearly seem to value intellectual property. If the tables were turned, do you think Apple would allow someone to blatantly infringe on their rights? How would Apple react if someone launched a product called iPod but claimed it was ok to use the name because it used a different video format? Would that be ok? We know the answer – Apple is a very aggressive enforcer of their trademark rights. And that needs to be a two-way street.

This lawsuit is about Cisco's obligation to protect its trademark in the face of a willful violation. Our goal was collaboration. The action we have taken today is about not using people’s property without permission.

Cisco Press Release on this issue can be viewed here: http://newsroom.cisco.com/dlls/2007/corp_011007.html.

Please also see my fellow ZDNet blogger, Russel Shaw on this topic:

There are four "live" trademark assignments for iPhone or derivative term. Only one of these four is owned by Cisco. Each of the other three are being contested.

I will show you these trademark assignments now, and bring you up to speed on Trademark Office actions specific to each.

Please see:
Three ‘iPhone’ trademark applications neither Cisco nor Apple owns are awaiting Trademark Office action

Citizen Journalism in trouble as Backfence reorganizes

By Tom Foremski

Dan Gillmor, the dean of citizen journalism, sold (or gave) his BayoSphere citizen journalism project to Backfence, a once-promising citizen journalism startup. Backfence, however, has run into problems as Amy Gahran, over at Poynter.org describes:

Backfence (which runs a high-profile family of hyperlocal citizen-media sites) announced a substantial retrenchment. CEO and co-founder Susan DeFife resigned, citing differences with the company's board of directors. Also, 12 of 18 employees were laid off.

Poynter.org: Backfence Backpedals: Money Lessons

Ms Gahran runs through many possible reasons why the venture has failed to succeed. Please see: Backfence Backpedals: Money Lessons

Tom's take: Citizen journalism is hard to do without a considerable involvement of professional editors. It is similar to trying to run a high school newspaper and requires a lot of work. Dan Gillmor discovered this with Bayosphere, which had a very small community involvement.

It is not enough just to put up a site and have a grateful army of citizen journalists populate it with great content. Journalism is not that simple.

Dan Gillmor's favorite refrain is that his readers know far more about the subject he writes about than he does. That might be true, but that doesn't mean they know how best to tell a story.

Often, they are not able to tell a story because they are too close to it--they might get into trouble. And journalists get to talk to a lot of people, they can add connections and relevancy, and improve upon news stories.

That's why we have professional journalists (and professional PR communicators). The job at hand is to help individuals, communities, organisations, and companies tell their stories in a compelling way. And the most compelling stories are true - and not spun.

January 10, 2007 | Permalink | Comment on this post | Tag: Mediasphere