<What is your feeling on the NA and Charlotte's situation?>
Web: As one who struggles with the technological side, I'll take a stab, but from a non-tech perspective.
Roktar has two points. First, he asks why MRVC should have to settle for a 60% or 66% stake in these two companies with admittedly promising technology when MRVC could -he assumes - have had 100%. Second, he questions the ability of MRVC to "execute" successfully a business plan to develop these technologies.
The second question is the easiest. Roktar is equating MRVC's disastrous August '98 stock plunge for proof that the company executives lack an ability to execute. The fact is - as all of us regulars know - that Noam & Co executed beautifully for 34 consecutive quarters of earnings increases through July of l998. Even if they did so by concentrating on pedestrian networking products with less than the most advanced technolgies, I think their record was nothing short of amazing when you remember that they were competing against Cisco, 3COM, CS, Bay, NN etc, and - to me - it is stupid to claim otherwise. Against these competitors, and building the business from "scratch", they almost had to start at the low end. But they put together the engineers and the world-wide sales force that for 8 1/2 years stole business from bigger and more established companies. And then in Aug '98 they preannounce a 10% earnings shortfall, they maybe miss a product cycle, and they invest a hell of a lot of the company's resources into breaking into cutting edge networking products. So Wall Street decimates MRVC's stock. What does this prove? To me, it only proves that we were in a period where the street hated small caps. But that's changing. (I think.) But the point is: these boys do know how to execute.
TRACKING STOCKS AND THE NEED TO MOTIVATE TALENTED PEOPLE
Just yesterday, I heard that MSFT is considering creating a "tracking" stock to unlock the POTENTIAL stock market value of some of its internet properties. Necessarily, it cannot own 100% of the stock for the market cannot trade what it cannot own. Other big companies such as TimeWarner, IBM, INTC have, or are considering doing the same. Why can't a little company like MRVC do the same thing? I think it was Frederick the Great who said: Those(generals) who try to defend everything, end up losing everything. Only if you're a Cisco and #1 with unlimited resources can you even contemplate keeping it all in-house.
I must admit that when I first heard of the plans to create the 3 partially owned startups, I had some of the same questions as Roktar. There is still the question of trust. It is certainly possible that Noam, etc are trying to divert company resources into their own, or relative's pockets, but this inherent in every case where a partially owned start up tracking stock is used. I, for one, give MRVC's executives the benefit of the doubt, but believe that under the circumstances MRVC could not have broken into the big time without this mechanism.
Bruce |
