Flip gets front page treatment in today's Chicago Tribune:
chicagotribune.com
Tech haven vision rides on
'promoter' Andrew 'Flip'
Filipowski
By Rob Kaiser
Tribune Staff Writer
June 18, 2000
It was the winter of 1986 when Andrew "Flip"
Filipowski finally made it to Harvard.
The school had rejected his application years earlier, but
now Filipowski was the 35-year-old head of a hot
Chicago software company.
All week at an executive-training program, he peppered
the professors with witty remarks and novel takes on the
school's famous case studies. Even the Harvard
Business School elite had to concede that the Polish guy
from Chicago had something on the ball.
But Filipowski wasn't finished. At the closing dinner, he
popped up and told the b-school professors he could
turn their lives around. It was simple: Buy out Harvard
Business School. Professors would rule, and the
administrators would work for them.
At the time, everyone laughed. But nobody's laughing at
Filipowski's wild ideas today.
Now the college dropout with the ponytail,
diamond-stud earring and flowered Hawaiian shirts is
looking to turn Chicago into a high-tech haven.
At 49 years old, he still knows how to work a crowd.
And his ability to make his grand plans sound like the
next big thing has, for better or worse, installed him as
the face of Chicago's fledgling dot-com community.
Whether that's a good thing is set to be tested in coming
days as Filipowski offers stock to the public in his latest
big vision.
It's called Divine Interventures Inc., a new-economy
conglomerate that invests in Internet firms. And Chicago
has seen nothing like it before.
But Filipowski's plan for a splashy public offering is
loaded with peril. The market for these ventures has
soured and one of his leading advisers has warned him
to back off.
If his company flops, Filipowski will not flop alone. A
glittering lineup of investors stands to suffer as
well?from Michael Jordan to the heir to the Wrigley
fortune.
Moreover, Chicago's effort to emerge as a high-tech
center in the same league as San Francisco, Boston or
New York would be undermined, perhaps for good.
That would confirm the city's image as a backwater for
the fastest-growing part of the economy.
It's all riding on a guy with an uneven track record, who
was demoted at one company, kicked out of another
and wooed into selling a third after promising he would
keep it.
"Flip is a wonderful promoter, but I'm not sure he's a
good investor," said Len Batterson, chief executive of a
Chicago venture capital company. "There's a certain
danger in that. If [Divine] doesn't make it, it's a
high-profile failure" for technology in Chicago.
If the past is any indication, what happens to Divine
won't change a thing about the man himself: Filipowski
will remain a flamboyant collector of everything from
multimillion-dollar homes to vintage comic books. He
will continue to seek out extreme business risks, thinking
nothing of putting on the line his own reputation and the
livelihoods of his employees.
"You can back off and melt into the background," said
Filipowski. "Or you can step forward, hang a bull's-eye
on your chest and take the good with the bad."
At least Filipowski is no interloper. He grew up on
Chicago's Near West Side, sweeping up at his father's
grocery stores, though never well enough to satisfy his
dad's standards. His parents, Polish immigrants, pushed
him to achieve.
His father often recited a Polish expression, which
Filipowski translated: "No matter how people want to
sugarcoat it ... in their minds, they will absolutely be
thinking that if you're poor, you're stupid and if you're
stupid, you're poor."
His first brush with wealth came in the eighth grade, at
the exclusive St. John's Military Academy in Wisconsin,
a private boarding school where he lived with children
from wealthy families.
"I felt that if these kids could be rich, as stupid as they
were, this truly was the land of opportunity," he said.
After finishing at the top of his St. John's class,
Filipowski applied to Harvard and Yale, expecting to
get into one or both schools, but the Ivy League
institutions rejected him. He returned, heartbroken, to
Chicago and enrolled at the University of Illinois at
Chicago, dropping out a year later.
Despite the setback, his first wife, Janet Filipowski,
recalls he "had this flair about him." Filipowski took her
to fancy restaurants and brought her flowers on every
date. She fell in love with him, she says, because he
cried when they saw the movie "Love Story." About six
months after they met, he proposed.
Filipowski launched his career in the computer
equivalent of the mailroom. He worked the 4 p.m. to
midnight shift at the Time-Life Building on Michigan
Avenue, changing printer paper and feeding punch cards
into the primitive machines. During breaks, he would
sneak into Time's video library, where he taught himself
COBOL and other programming languages.
His talent for technology became apparent when he was
hired at Motorola Inc. as a computer programmer. The
19-year-old Filipowski and another young programmer,
Ray Nawara, would speed-read technical manuals and
make cutting-edge computing look like "child's play,"
said Bob Pappas, who supervised the pair. "I've never
seen anything like it before or since."
Filipowski's career took off.
After a stint at A.B. Dick Co., he reunited with Nawara
at Cullinane Software of Boston, where ace salesman
Filipowski rose to become chief operating officer.
As the company prepared to go public in 1978, founder
John Cullinane wanted Filipowski to pitch the firm to
potential investors.
"Flip would get up and say almost anything," Cullinane
said. "If it turned out he was wrong, it didn't seem to
faze him. He would go on."
But Filipowski went too far?a habit that would hurt him
later in his career, too.
He devised a plan to split the company into three parts,
even though the firm had just told a much different story
to investors.
Cullinane wasn't pleased. "He came on so strong and so
aggressively, I had to rein him in ... and send him back
to Chicago," he said.
So Filipowski returned to his hometown, quit his
$100,000 job at Cullinane and started his own firm.
"I remember feeling like I was sweating at the same time
I was taking a shower," said Filipowski, recalling the day
he left Cullinane. But the break also was liberating, he
said."You could cross that boundary of being scared
and go ahead and do something rather than retreat from
fear."
The company Filipowski started, DBMS Inc.,
specialized in what he wanted his former employer to
do?develop software applications, education and
consulting services for the Cullinane database system.
Joined by his friend Nawara, Filipowski installed in
DBMS a culture similar to those in today's Internet
start-up companies?spurning business attire,
centralized authority and the 40-hour workweek. At 10
p.m. most weeknights, Filipowski and most of his
employees were still at the office.
"His mind was working 24 hours a day," Janet
Filipowski recalls. "He'd wake up in the middle of the
night talking computers. I would poke him in the ribs and
say, 'Be quiet. I don't understand one word you're
saying.'"
Filipowski and Nawara were inseparable, often traveling
together to Las Vegas, where Filipowski displayed a
penchant for gambling and breaking rules.
On one trip, Filipowski approached a $5 blackjack
table and plunked down a bet of several thousand
dollars. When the dealer said he couldn't cover it,
Filipowski glanced over at the pit boss, who instructed
the dealer to disregard the rule.
DBMS expanded to 450 employees, but its spending
grew even faster. Steep salaries, research and
development, and expensive office space forced
Filipowski to fire 100 employees.
At the same time, Filipowski began clashing with
Nawara. Filipowski wanted the company to focus on a
new IBM database product, while Nawara thought it
should stick with the Cullinane system. The disagreement
became personal.
In one incident, the pair sat at different tables during a
company dinner in the Bahamas. Each started ordering
more and more expensive dishes and drinks off the
menu, upping the ante with items like Napoleon brandy.
"Each wanted to see who could outspend the other,"
said Pappas, who had become a DBMS executive. "It
got to be absurd."
Several former DBMS employees said Nawara
resented being thought of as the lesser partner in the
company and began bad-mouthing Filipowski to others
at the firm.
In November 1986, Filipowski took the problem to the
board of DBMS, which agreed that Nawara should be
fired.
But Nawara didn't stay away. With the support of new
investors, Nawara returned to the offices of DBMS four
months later and, in a kind of corporate coup, took
over.
When Filipowski arrived at work, he was ordered to
leave and security guards escorted him from the
premises.
Once as close as brothers, Filipowski and Nawara have
barely spoken since their fallout. Nawara declined to be
quoted in this article.
Most people who talked with Filipowski after he was
kicked out of DBMS remark on his resiliency, about
how he barely let the event affect him.
But his wife had a different impression.
"That's when he changed," Janet Filipowski said. "He
put a shell around himself. I think he was hurt so badly
by it. And he was more determined than ever to make a
big, successful company."
Filipowski called on rich friends to fund his new
company, Platinum Technology International Inc.
"I really wondered if he was going to make it," said Art
Friego, a friend of Filipowski's who was among the early
investors. "I never expected to get any money back."
At the same time, Filipowski's marriage was coming
apart. Janet Filipowski's reaction to the DBMS debacle
contributed to the problem. "I told him to get a real job,"
she said. "He never forgave me for saying that."
Filipowski's new company, which he started in the
basement of his Lisle home, made and sold software to
support the databases that companies use to conduct
their routine business operations, such as payroll,
inventory and marketing.
But DBMS, which had a similar product and mission,
filed a lawsuit against Platinum, Filipowski and other
former DBMS executives. The lawsuit asserted a variety
of wrongdoing by Platinum workers, such as stealing
DBMS' employees and customers.
Filipowski denied then?and still denies?the allegations
in the lawsuit. But to settle the case he gave up his entire
remaining stake in DBMS, which was worth millions.
Freed of that legal burden, he focused on Platinum,
convincing employees that it was bound for greatness.
"Flip would walk into a room and start talking and you
would think we were an enormous company," although
at the time it had only about 200 employees, said Corey
Ferengul, Platinum's director of product integration. "It's
kind of a Knute Rockne effect."
Filipowski's expensive tastes were reflected in the annual
retreats for the company's top salespeople he held at the
best hotel in Maui.
A concierge service sent flowers, ordered theater tickets
and even planned weddings for employees. People who
adopted children could take time off and receive $5,000
in assistance. Employees could even get pet insurance.
Filipowski worked tirelessly. He went on calls with
salesmen, spent days with customers and participated in
technical meetings that sometimes lasted 16 hours. "He
would be there for every minute," said Mark Fetherolf, a
Platinum executive. "I've never seen anybody make that
kind of management style work the way he did?not
micromanage, but get into every corner of the
company."
Once a rumor spread through the company that Platinum
employees in Asia had started wearing more formal
attire to conform to the local business culture.
"He left this message that said, 'If anybody in this
company tries to do this I want to hear about it. It's not
going to happen here,'" Fetherolf recalled. "He got so
much mileage out of that, [especially from] the engineers.
These guys wanted work and lifestyle and all that to be
integrated, and he was their champion."
Around 1992, the database market began to shift.
Companies began to scrap mainframe computers in
favor of client-server systems, in which employees at all
levels were given greater access to corporate
information.
The movement spurred consolidation among
softwaremakers and set off a round of acquisitions and
mergers in the industry. Filipowski was left with a
decision: whether to unload Platinum to the highest
bidder or become an acquirer himself.
He charged ahead, gobbling up smaller software
companies?often paying top dollar. And to inspire his
employees, Filipowski vilified Platinum's competitors.
Computer Associates, a software company that was
growing even faster than Platinum, emerged as enemy
No. 1?a cheap, uncaring corporate behemoth, in
Filipowski's view.
Platinum employees followed Filipowski's lead. They
made fun of Computer Associates executives and
flaunted T-shirts that read, "Friends don't let friends buy
from CA."
But when Platinum ran into trouble in 1998, missing its
quarterly earnings estimates, Filipowski changed his
view of CA.
The earnings shortfall was partly due to a delay in
completing an important new product. The high spending
hurt, too: Revenue per employee at Computer
Associates was about three times the $129,000 revenue
per employee at Platinum.
Platinum's stock tumbled from more than $30 to under
$10 per share, making the firm a prime target for a CA
takeover.
To his employees, Filipowski's attitude toward CA
seemed the same as ever. On more than one occasion
he swore that he would never sell the company.
Still, when Sanjay Kumar, the president of Computer
Associates, called to arrange a meeting in the spring of
last year, Filipowski agreed.
Over dinner in a restaurant near Filipowski's sprawling
North Carolina home, Kumar offered to buy Platinum's
stock for nearly three times its going price.
Filipowski said he at first said no, saying the deal could
fly only if Computer Associates took the unheard-of
step of putting several billion dollars in an escrow
account and promising to let Platinum keep the money
even if antitrust regulators stopped the acquisition.
"He reached across the table and said, 'Done deal,'"
Filipowski recalled. Kumar couldn't be reached for
comment.
At the time, the $3.5 billion deal was the largest sale
ever for a software firm. Filipowski, who personally
pocketed about $290 million, expressed little remorse
about going back on his earlier statements, saying that in
the end he had no choice.
Soon after the sale, Filipowski launched Divine
Interventures.
Employing his marketing panache, Filipowski billed
Divine as an "Internet zaibatsu," a reference to corporate
clans that built Japan into an imperial power before
being banned after World War II.
The fanfare worked, as the riches from the Platinum deal
and the boom in technology stocks made Divine an easy
sell. Filipowski quickly raised $400 million.
Microsoft Corp. was an early backer of Divine, as were
Dell Computer Corp., Compaq Computer Corp.,
Hewlett-Packard Co. and Chicago's Aon Corp.
Numerous local businessmen, many Filipowski's
personal friends, also invested in Divine. (Tribune Co.,
which owns the Chicago Tribune, has a $2 million stake
in the company.)
The city joined the excitement over Filipowski's new
enterprise, contributing $14 million in tax increment
financing for Divine's planned Goose Island
headquarters campus. Last December, Mayor Richard
Daley and Filipowski held a joint press conference at
Goose Island, where the mayor announced how the city
planned to become a "high-tech hub."
Promoting Divine, Filipowski spoke at business forums
throughout Chicago declaring that the city's corporate
elite needed a swift kick to join the new economy.
While the speeches sounded impressive last fall, they
ring a little hollow now as the red-hot technology market
has cooled.
The tech-heavy Nasdaq stock market is trading 25
percent below its record high in March, and investor
interest in speculative technology ventures has declined
sharply.
Divine, which had rapidly grown to more than 750
employees, laid off 29 people last month because of a
slowdown in deals. Construction at its $62.9 million
Goose Island campus, which was originally scheduled to
open this fall, has been delayed and could be canceled.
Like many Internet companies, Divine has never posted
a profit.
As investors have soured on technology stocks,
Divine-style "incubators" that nurture Internet start-up
companies have been hit especially hard. Two similar
companies elsewhere that have already gone public,
CMGI Inc. and Internet Capital Group, this year have
seen their stocks plunge 66 percent and 85 percent,
respectively.
Divine also faces an increasingly crowded field as
hundreds of existing and new companies start incubators
around the world.
"A year from now there will be blood in the streets,"
predicted Charles Rutstein, an analyst with Forrester
Research. "There's too much money flowing into these
things."
Divine's lead investment banker, CS First Boston, tried
to postpone the company's stock offering until the
climate improved.
Filipowski's response reflected the gung-ho attitude that
has marked his entire career: He fired CS First Boston
and replaced it with another firm that was willing to be
more aggressive.
Then Filipowski and the new firm, San Francisco-based
Robertson Stephens, jacked up both the price of the
shares and the total amount of cash to be raised in the
initial public offering, from $140 million to $200 million.
The IPO could give insiders a chance to unload some of
their stock for a profit after a mandatory waiting period.
Filipowski declined to comment on the pending public
offering.
To some, the plan to proceed with the offering sounds
almost as dicey as the quip long ago to buy out Harvard
Business School.
Those who know Filipowski see the rush to market as
almost inevitable, given his hard-charging style and the
get-rich-quick culture of Internet enterprises.
Now the stock market is due to weigh in on whether
Filipowski has what it takes to lead corporate
Chicago?belatedly?into the on-line Gold Rush.
Tribune reporter Ray Gibson contributed to this
story. |
