Here is a recent article on SFE from last weeks Wall Street Journal.....
Hot IPOs Put Unsung Backer
In the High-Tech Limelight
By WILLIAM M. BULKELEY
Staff Reporter of THE WALL STREET JOURNAL
WAYNE, Pa. -- He doesn't surf the Web or even have a computer in his office here in this Philadelphia suburb. But Warren "Pete" Musser, the 72-year-old chairman of Safeguard Scientifics Inc., has quietly become one of high-tech's star investors by spotting trends early.
"We've created $25 billion of public companies," says Mr. Musser, who until recently was as little known to the investing public as Safeguard, which he and a partner founded 42 years ago with $300,000. Better known are the hot high-tech companies Safeguard has backed -- Novell Inc., for example, and Cambridge Technology Partners Inc.
Safeguard stepped into the limelight in August with the initial public offering of one of its investments, Internet Capital Group Inc. Safeguard was an early investor in ICG, which provides financing for Internet commerce companies. Its 14% interest in ICG, bought in two transactions for a total of $29 million, is currently valued at about $1.5 billion.
Safeguard is one of the few public companies that, acting like venture-capital firms, invest in promising technology companies. In the revved-up Internet economy, these companies have become a popular way for individual investors to participate in the tech bonanza. Like its better-known Massachusetts counterpart, CMGI Inc., Safeguard also owns stakes in publicly traded companies.
In this year's first quarter, Safeguard's 146% gain made it the fastest-rising stock on the New York Stock Exchange, and it hit a high of $120 a share in May. In the ensuing Internet sell-off its stock price fell by half. It closed Wednesday at $76, down $2.75, in New York Stock Exchange composite trading.
The company also drew attention this year when it helped ax two bosses in a single week. In July, Mr. Musser orchestrated the ouster of Cambridge Technology's chief executive, James Sims, after the computer-services and consulting company missed earnings estimates, causing a sharp stock decline. Safeguard owns 14% of Cambridge, and Mr. Musser, who serves as its chairman, says he was also upset by what he describes as Mr. Sims's failure to improve operations by adding such techniques as computerized planning.
"We asked Jim to excuse himself," Mr. Musser says. Mr. Sims says he had previously planned to resign as soon as a successor was named.
The same week, Edward Anderson, the chief executive officer of CompuCom Systems Inc., Dallas, 54%-owned by Safeguard, abruptly resigned amid pressure from Safeguard for him to change the company's business model. Safeguard President Harry Wallaesa says Safeguard was unhappy with CompuCom's slow transition from reselling personal computers to more-lucrative computer services.
Mr. Anderson says he resigned to become CEO of eCertify, an Internet company in Reston, Va., that is partly owned by CompuCom. Mr. Wallaesa is now president of CompuCom.
Mr. Musser, who owns a 9.5% stake in Safeguard, boasts that he doesn't know how to use a PC because he doesn't want to spend the time learning how. He sends messages to his lieutenants by dictating to his assistant at Safeguard's headquarters here. The complex includes the offices of nine private venture-capital funds started by Safeguard, which is general partner of each of them. It also owns direct stakes in a number of private firms and 11 public companies.
Safeguard receives up to about 6,000 business plans annually. To help choose the 10 to 20 investments the company makes each year, Mr. Musser and his team focus on three "practice areas": business-to-business Internet commerce firms, corporate software and services, and network infrastructure.
An example is iMedium Inc., a tech firm backed by Safeguard that is developing technology to turn online pictures into direct-marketing tools. Using the technology, consumers who like the look of, say, a pair of sunglasses on a Nascar driver could click on them and automatically order a pair. "The incredible thing is, with all the venture-capital money out there, how many good deals we see," says Mr. Musser, who believes the U.S. is on the "greatest productivity and creative wave we've ever seen in our lives."
Since 1985, Safeguard has allowed investors to buy stakes in Safeguard companies as they go public. Safeguard says that if you had invested $10,000 in Safeguard at the end of 1992, and invested in all the rights offerings and IPOs since, you would have invested a total of $35,014. Wednesday that investment was valued at $426,832, for a total return of 1,119%. The return on the S&P 500 over that period has been 249%.
The policy paid off in August, when Safeguard shareholders got to buy one ICG share at $12 for every 10 Safeguard shares they owned. ICG stock closed Wednesday at $95.375, up $4.25 a share, in Nasdaq Stock Market trading.
Stanton Moyer, a 70-year-old retired banker in Bryn Mawr, Pa., says he has made "several million" dollars from Safeguard stock and the public offerings of Safeguard investments, including the ICG bonanza.
"I will ride Mr. Musser's coattails as long as I live," says Mr. Moyer, who dubs the Safeguard CEO "King Midas."
Mr. Musser started early as an entrepreneur. In 1953, three years out of Lehigh University, he and a partner left stockbroker jobs at Hornblower & Weeks to form their own brokerage firm. In 1957, they created the investment firm that became Safeguard. The name came from an early investment in a business selling carbon-paper-based check-writing systems.
But the company's big hit was a 1980 investment in a little Utah computer company called Novell, which grew to dominate the networking market. Although Safeguard sold the stock in the early 1990s, Mr. Musser still sports the license plate NOVELL on his bright red Nissan 240 SX convertible.
Best Regards
KEITH |
