Tech Confidential

EA's deadline for Take-Two offer looms. What's next?

2008-05-16T20:12:06Z

With the expiration date hanging over Electronic Arts Inc.' $2 billion unsolicited bid for Take-Two Interactive Software Inc. (the offer expires tonight at 11:59 EST, to be precise), an analyst note from Lazard Capital Markets' Colin Sebastian has video game bloggers speculating about the prospects of the offer.

Sebastian issued a note Wednesday on EA's financial statement claiming new information regarding the offer would be forthcoming Monday. There is no indication whether EA will extend the expiration, up its bid or simply walk away come Monday. EA has already extended the offer deadline from April 30 to May 16.

In March, New York-based Take-Two rejected a $26 a share offer from EA and said it would not negotiate with any prospective buyer until after release of its "Grand Theft Auto IV" video game on April 29. Take-Two said the crime-themed video game sold 6 million units globally in its first week with an estimated retail value of more than $500 million. The shares continue to trade above the offer price closing Thursday, up 0.36 or 1.33% at $27.33 a share.

For more thoughts on the deal, watch Tech Confidential's latest Behind the Money video here. - Matthew Wurtzel

Finisar goes bargain hunting, buys Optium

2008-05-16T16:17:20Z

Little more than 18 months after a successful IPO, optical subsystem maker Optium Corp. [OPTM] has agreed to be swallowed by larger rival Finisar Corp. [FNSR] for about $212 million.

After pricing at $17.50 in October 2006, the company's shares climbed 21% on their first day of trading, granting handsome returns to their VC backers, including Battery Ventures, Kalkhoven, Pettit, Levin & Johnson Ventures LLC, Texas Pacific Group Ventures, and TL Ventures of Wayne, Pa.

But its shares have been on a gradual decline since peaking at $24.95 in December 2006, and the the company swung to a loss in its second fiscal quarter, which ended Feb. 2. of this year.

Based on Finisar shares' closing price Thursday, May 15, of $1.33, the buyer got itself quite a bargain. It's offer represents a 2.2% premium for Optium shareholders, valuing the target's shares at $8.32 each, less than half of Optium's IPO price.

Finisar has been relatively quiet on the acquisition front since 2005, when it acquired part of Infineon Technologies AG's optical component unit. While this latest deal was described by the companies as a merger, Finisar shareholders will own 65% of the combined company, which is expected to produce annual revenue of around $660 million. Finisar CEO Jerry Rawls will, however, hand over his role to Optium chief Eitan Gertel at the merged company. Rawls will remain chairman after the deal closes.

Shares of Finisar climbed 13%, to $1.50, in early afternoon trading on the news; Optium shares climbed 12%, to $9.08.

Finisar hired Oppenheimer & Co. and DLA Piper US LLP for advice on the deal. Optium turned to Morgan Stanley & Co. and Goodwin Procter LLP. -- Olaf de Senerpont Domis

See May 16 press release on the Optium acquisition from Yahoo! Finance
See October 2006 story on Optium's IPO from TheDeal.com
See January 2005 story on Infineon and Finisar from TheDeal.com

Yahoo! rejects Icahn slate

2008-05-16T13:58:37Z

With a growing number of investors demanding a sale to Microsoft Corp. [MSFT], embattled web search engine Yahoo! Inc. [YHOO] on Thursday, May 16, rejected Carl Icahn's attempts to seize control of the company's board and force a deal.

In an open letter to Icahn, who launched a proxy battle on Thursday, Yahoo! chairman Roy Bostock said the activist investor had revealed a `` significant misunderstanding'' about the Microsoft talks in his letter earlier in the day.

Icahn revealed that he was seeking to invest as much as $2.5 billion in Yahoo! stock and began a proxy fight to have his own slate or 10 directors elected to the company's board. He and some other investors want the company to reopen talks with Microsoft, which earlier this month withdrew it $47.5 billion offer for the company.

For the full story, go to TheDeal.com

Yahoo! stuck in spin cycle

2008-05-16T13:55:51Z

Yahoo! Inc. [YHOO] late Thursday, May 15, released its response to Carl Icahn and his decision to lead a proxy fight for control of the company's board of directors. The letter is quite good, providing some detail that up until this point was not known regarding its conversations with Microsoft Corp. [MSFT] (most notably the two companies met in person on seven occasions). Reading the letter, you would have little doubt that Yahoo!'s board of directors not only met their fiduciary duty to shareholders in negotiations with Microsoft but even bent over backward to try and reach an agreement.

There's just one problem -- no one's buying it.

Had Yahoo! spent as much time negotiating with Microsoft as it did trying to find alternatives to making a deal, headline writers would right now be plastering that silly Microhoo combination name wherever they could. Yahoo! shareholders would still be teary-eyed, wondering how they were able to sell their shares for $33 when they were trading at $19.18 before Microsoft stepped in (that's a 72% premium for those paying attention). Microsoft shareholders, meanwhile, would be asking their management the same questions Yahoo! shareholders are asking their management -- how are you going to make this work.

Instead, Yahoo! is facing a proxy fight with one of the most wily and well-connected corporate antagonists around. It will still be a challenge for Icahn to persuade Yahoo! shareholders to elect his slate of candidates to the board, let alone get Microsoft back to the bargaining table, but the distraction of a proxy fight on top of the distractions from Microsoft's pursuit is the last thing Yahoo! needs right now. --David Shabelman

See May 15 response to Icahn from Yahoo!
See May 16 post on Yahoo!'s response from Alley Insider
See May 16 post from Dealbreaker.com

Just along for the ride

2008-05-16T13:51:26Z

The following is from Tech Confidential partner OC VC, a blog written by Marc Averrit, cofounder and managing partner at Okapi Venture Capital:

I have written about the parallels between surfing and investing in start-ups before (see Surf's Up!... ironically, written just about a year ago to the day), but have found myself thinking about the similarities yet again recently and thought I'd share my thoughts on the matter with all of you once again.

Whether you are a VC or surfer in SoCal, see if this feels familiar to you:

You get up at the crack of dawn;

travel to where you are thinking (praying) the waves will be;

the water is so cold you can't feel your feet or face;

you almost drown paddling out;

your arms/chest/back/shoulders ache from the effort;

you finally get to the lineup only to find the waters more and more crowded; and

you have periodic thoughts about getting eaten by a shark or catching a staph infection in our polluted waters...

and then you catch your first wave and all of the above just goes out your mental door and you're in the moment enjoying the ride. Life is short. Enjoy the ride.

See May 15 post from OC VC

Icahn pushes Yahoo! toward Microsoft

2008-05-16T04:53:17Z

Spending a billion dollars and finding 10 friends to run as candidates for Yahoo! Inc.'s board of directors was fairly easy for Carl Icahn. Things get tricky now.

With his announcement Thursday, May 15, that he had formed a slate to stage a proxy fight for control of Yahoo!, Icahn served notice that the company has some more explaining to do for allowing Microsoft Corp. to walk away from its $33 a share, $47.5 billion takeover offer.

In a news release announcing his slate of candidates for Sunnyvale, Calif.-based Yahoo!'s board, Icahn disclosed he has purchased 59 million shares, or 4.2% of the outstanding shares, with a current value of $1.6 billion and has sought clearance from the Federal Trade Commission to acquire up to $2.5 billion worth of Yahoo! stock. He criticized Yahoo! for acting "irrationally" in rejecting Microsoft's offers, saying it was "unconscionable" that it did not allow shareholders the opportunity to accept its offer.

For the full story, visit TheDeal.com

Fuzz introduces Blip, the indie music connoisseur's Twitter

2008-05-15T22:12:36Z

I've spent some time toying with Blip, the new "Twitter-for-music" service from Fuzz.com, over the past day or so. (As I write, it's playing Yo La Tengo, courtesy of someone in Mexico named "karnevil".) Blip allows users to stream whatever songs other users are playing at that moment or in the recent past, as well as post their own songs. It's a new spin on an old idea -- on-demand streaming via your friends -- that fits into Fuzz's overall strategy: Centralize a lot of music services in one network, so that a listener doesn't have to visit a bunch of different sites or deploy a variety of different services to hear what they want.

I visited Fuzz's office in San Francisco Wednesday afternoon, and talked with founding CEO Jeff Yasuda (pictured). A former VC with Redwood Ventures and investment banker with Lehman Brothers, Yasuda is a self-described music nut who clearly feels most at home surrounded by guitars and stacks of CDs, and Fuzz has become his labor of love. He said the company -- formally Fuzz Artists Inc. -- has subsisted thus far on three angel rounds of funding since 2005, with unidentified Google executives providing a portion of the money. Yasuda wouldn't specify the dollar amount, but when I asked him if it was in the single-digit millions, he said it was "more than a couple."

Yasuda walked me through the company's Web site, pointing out editorial content, social networking features, Web services for bands to connect with fans and promote music, local show calendars, a Muxtape-like song-sharing tool complete with movable graphic art elements, and Blip. (I wrote about a separate Fuzz site targeting older consumers, Sonic Boomers, here.) My first impression is that Blip could quickly become the most popular thing Fuzz has done, partly due to a familiar, easy interface whose visual similarity to Twitter's is unmistakable. It's built on the backs of three other music search engines including Seeqpod, and only streams what its crawlers can turn up elsewhere on the Web or within Fuzz's own archives (no uploads are required, or permitted). Even without a critical mass of users, Blip entertained; I can imagine it becoming addictive.

Yasuda admits that Fuzz is pre-revenue, and has yet to test its money-generating ideas (advertising, brand sponsorship, b-to-b plays for media companies). Surely the company will find itself racing against time as the other popular music services it echoes build their brand names, and it will have to show consumers the benefits of centralizing these services under one umbrella. At the moment, its niche audience remains independent music fans; whether it will aim for a general audience remains to be seen.

Fuzz won't seek additional money from venture investors, according to Yasuda. Instead, it will seek its next outside funding from media companies, and has been offered at least one term sheet. Yasuda said he sees record labels, retailers, print and television media, and other Web companies as potential investors. And although Fuzz at one point aspired to be a record label, signing up artists including Oakland, Calif.'s The Lovemakers, Yasuda says it won't go any farther down that road. -- Paul Bonanos

See May 6 post on Sonic Boomers from Tech Confidential

For more, see TechCrunch

Oracle's buy may spawn more insurance software M&A

2008-05-15T22:12:00Z

Oracle Corp. [ORCL] got little attention for its acquisition of insurance software maker AdminServer earlier this week, but according to a report from Novarica, the deal could heat up M&A activity in the insurance software sector, with IBM Corp. [IBM], SAP AG [SAP] and Microsoft Corp. [MSFT] all would-be buyers.

Novarica calls the Oracle purchase "a significant departure from the pattern of acquisitions seen in recent years and may set a new wave of insurance software M&A." While the acquisition of AdminServer was so small that Oracle did not have to disclose the price, Novarica says a host of other companies are more likely to become targets in the wake of Oracle's purchase.

"Though there have been many acquisitions over the past three years of insurance software companies, the vast majority of them have been either fire sales, sales of companies that have peaked or sales of companies with less than $10 million in revenue," Novarica reports. - Andrea Orr

See May 13 announcement from Oracle on AdminServer acquisition

Behind the Money, Episode 30: Electronic Arts' bid for Take-Two

2008-05-15T21:48:00Z

In this episode of Tech Confidential's Behind the Money online video show, we speak with Matthew Wurtzel, editor of Dealscape, about Friday's expiration date for Electronic Arts Inc.'s bid for Take-Two Interactive Software Inc.

Lazard Capital Markets analyst Colin Sebastian issued a note on EA, suggesting that new information regarding the offer will come Monday. There is no indication yet whether EA will extend the expiration, up its bid or simply walk away. EA has already extended the offer deadline from April 30 to May 16.

In March, Take-Two rejected a $26 a share, or $2 billion, offer from EA and said it would not negotiate with any prospective buyer until after release of its "Grand Theft Auto IV" video game on April 29. Take-Two said the crime-themed video game sold 6 million units globally in its first week with an estimated retail value of more than $500 million. - The editors

Click to play

Obrem gets little support for latest demands on Micrel

2008-05-15T18:19:41Z

In its ongoing efforts to replace the entire board of directors of chipmaker Micrel Inc. [MCRL], Obrem Capital Management LLC on Thursday urged Micrel to come clean with its shareholders and release some information that will lay out the company's "record of dramatically missing forecasts."

Specifically, Obrem, which holds about 15% of Micrel stock, asked Micrel to share information from previous shareholder meetings. It said the content of those meetings would show the company's track record for missing forecasts by large margins and for dismissing potential business combinations that could have enhanced the company's value.

Obrem also cited a Wednesday story from DealReporter on Micrel that stated, "The presence of 70-year-old CEO and founder Raymond Zinn has always served as a major impediment for suitors as Zinn has never been a seller." (Tech Confidential noted this last month.)

The immediate reaction to Obrem was underwhelming. But Micrel did get another boost, with Proxy Governance Inc. joining three other independent proxy advisory firms in recommending shareholders vote against all of Obrem's proposals at a special meeting to be held on May 20. - Andrea Orr

See May 15 announcement from Obrem
See May 15 statement on Obrem and Micrel from Proxy Governance
See May 13 story on RiskMetrics report from TheDeal.com
See April 9 post on Zinn from Tech Confidential
See March 27 story on Obrem and Micrel from TheDeal.com

SilkRoad travels smooth path

2008-05-15T18:13:22Z

Controversial software investor Andrew "Flip" Filipowski (pictured) seems to have landed on his feet quite nicely since the blowup and contentious bankruptcy sale in 2003 of Divine Inc., his $1 billion attempted roll-up of several software and e-commerce companies.

His most significant venture since then, human resources software startup SilkRoad Technology Inc., just landed a $54 million new round led by Foundation Capital. The deal follows a $10 million round for the company from Azure Capital Partners in February, which was the first institutional funding the company had received outside of the backing of Filipowski's SilkRoad Equity fund.

The five-year-old company has not disclosed how much SilkRoad Equity and private investors put into the company prior to these recent rounds, but the new money is aimed at expanding the company's hosted software sales and marketing efforts, strategic acquisitions and new product development. In April SilkRoad announced that the first three months of 2008 marked the company's 19th consecutive quarter of growth, and that it is achieving 98% retention rates among customers of its software-as-a-service offerings.

SilkRoad reports 700 customers currently, for products that help customers with hiring, performance measurement and management, recruitment and retention. - Clifford Carlsen

See May 15 press release on latest funding from SilkRoad Technology Inc.
See October 2003 story on Divine from The Deal

Snocap CEO bounces to Glassdoor board

2008-05-15T16:29:36Z

Considering that it's named Glassdoor.com, a new company backed by Benchmark Capital isn't very transparent about its goals. Founded by a group of Expedia veterans, Glassdoor promises "a new way of doing things to a category in need of real change," but hasn't revealed any details about its product.

Most of its co-founders and five board members have spent considerable time in the online travel industry, but one person hasn't. The outsider is Rusty Rueff (pictured), late of music fingerprinting and commerce technology developer Snocap Inc., which was sold last month to social music site Imeem Inc. Rueff joined Snocap as CEO in late 2005 and presided over its partnership with MySpace, which allowed the social networking site's millions of artists to sell music directly to consumers.

Rueff joins Glassdoor's board alongside former Expedia CEO Erik Blachford and TripAdvisor chief Stephen Kaufer. Glassdoor co-founders on the board are CEO Robert Hohman and nonexecutive chairman Rich Barton, an Expedia founder who also serves as CEO of real estate site Zillow.com.

Glassdoor remains stealthy about its goals, but has apparently been around long enough to take in a $3 million Series B round from Benchmark Capital on top of a seed round from its founders. Barton is a venture partner with Benchmark. - Paul Bonanos

See press release from Glassdoor
See April 7 post from Tech Confidential about Snocap and Imeem
See Oct. 2007 post from Tech Confidential concerning Rich Barton

Internet startups breathing easier

2008-05-15T15:36:41Z

Back in February, when Microsoft Corp. [MSFT] first made a pass at Yahoo! Inc. [YHOO], there was some hand-wringing in Silicon Valley about what it would mean for startups if one of its golden tickets to acquisition went away. While an acquisition of Yahoo! would conceivably remove one of the more able and somewhat active buyers from the game, the consensus that emerged was that good companies would continue to be acquired and the loss of Yahoo! would not be a huge setback.

Helping to pick up the slack, some pundits argued, would be traditional media companies, who up to that point had not jumped head-first into Internet property acquisitions. It turns out they were right. CBS Corp.'s [CBS] $1.8 billion deal to acquire Cnet Networks Inc.[CNET] and Comcast Corp.'s [CMCSA] pickup of business social networking property Plaxo Inc. both suggest there will be other, less traditional buyers of Internet properties and startups.

With Carl Icahn helping to put Yahoo! back in play by starting a proxy fight for control of its board of directors, the announcement of these deals couldn't come at a better time for startups. - David Shabelman

See Feb. 6 story in Tech Confidential
See May 15 post from Dealscape
See May 15 post from Corporate Dealmaker