Excite@Home CFO Jumps to Siebel, While Its CFO Eases Off to Winery
By Adam Lashinsky
Silicon Valley Columnist
7/25/00 7:00 AM ET
SAN FRANCISCO -- In one of the stranger high-level personnel moves of late in Silicon Valley, the long-time chief financial officer of down-in-the-mouth Internet pioneer Excite@Home (ATHM:Nasdaq - news - boards), Kenneth Goldman, will replace the long-time CFO of growing software powerhouse Siebel Systems (SEBL:Nasdaq - news - boards), Howard Graham.
The move helps Siebel ease away from Graham, a veteran CFO who has made millions for himself with a huge tech-industry winner, but whose reputation was sullied by a scandalous episode at his previous employer. In Goldman, Siebel gets another veteran CFO who has made millions for himself helping to preside over a company that ultimately has disappointed investors.
As the departures of both finance chiefs were long in the works, the news isn't likely to affect either stock. Indeed, Excite@Home announced Goldman's departure July 10, and Graham introduced his replacement to analysts during Siebel's regular earnings conference call last week. But the moments are potentially seminal for Excite@Home and Siebel. The former company is in the process of rebuilding its management team under a new CEO. The latter is exiting completely its immature start-up phase and entering the danger zone of being a billion-dollar-in-sales enterprise software company. Oracle (ORCL:Nasdaq - news - boards), where Siebel founder Thomas Siebel once worked, Informix (IFMX:Nasdaq - news - boards), where Graham was CFO, and Sybase (SYBS:Nasdaq - news - boards), where Goldman once was CFO, all floundered at the billion-dollar mark. Only Oracle survived the hiccup enough to thrive again.
There was a time when investors didn't pay much attention to the CFO, essentially the chief number cruncher for a publicly traded company. But today, with "investors" having taken on a broader definition than ever before, CFOs have achieved near rock-star status. And their departures tend to be unsettling for Wall Street. Perhaps the best recent example of a turning point marked by a CFO departure was the December exit of Gregory Maffei, the former colorful finance chief at Microsoft (MSFT:Nasdaq - news - boards).
It turns out that Maffei called the top of Microsoft's stock perfectly. Maffei presided over a huge uptick in Microsoft's market value and engineered its myriad equity investments. He good-naturedly warned investors that Microsoft couldn't counter the "law of big numbers" -- that big companies can't grow as quickly as small ones -- and since he left, his prophecy has come true. Microsoft's growth has slowed considerably since Maffei stepped down to be CEO of the company now known as 360networks (TSIX:Nasdaq - news - boards). Shares of Microsoft reached an all-time high of nearly 120 a few days after Maffei left at the end of 1999, and closed Monday at 70 9/16. Meanwhile, 360networks, which went public in April, is trading at 17 7/16, near its high of 20.
Getting back to Siebel and Excite@Home, the question is what the shuffling of the deck means to both companies.
Goldman, 51, had been the CFO of a number of Silicon Valley companies before joining what once was cable-access Internet service provider @Home in its prerevenue stage in 1996. These included software maker Sybase and chipmakers Cypress Semiconductor (CY:NYSE - news - boards) and VLSI Technology. He's known as one of the handful of grown-up chief financial officers who could shepherd a company like @Home through the IPO and secondary-offering process.
Observers expected Goldman to jump into venture capital, following the lead of former Excite@Home CEO Tom Jermoluk, who recently joined venture firm Kleiner Perkins Caufield & Byers as a partner. He also might have joined a start-up, many of which he invests in personally.
"Ken likes upside, and he could have any CFO job in the industry," says the CEO of one publicly traded valley firm who has worked with him in the past.
But Goldman says he made the arguably lateral move to Siebel because he realized he likes playing at the level of top Valley CFOs like the finance heads at companies like Cisco (CSCO:Nasdaq - news - boards), Sun (SUNW:Nasdaq - news - boards) and Oracle. Besides, VCs and start-up executives tend to be somewhat marginalized in the grand scheme of things.
"If you get out of the game, you get out of the game," says Goldman, who starts at Siebel Aug. 21, and already has turned over the reins at Excite@Home to Mark A. McEachen, formerly an executive with GM subsidiary Hughes Electronics. Goldman says his departure allows Excite@Home CEO George Bell to build his own team and that besides, "I've done my duty here."
For a while, that duty was overseeing @Home as it soared from its mid-1997 IPO to nearly 100, on a split-adjusted basis. But shares of Excite@Home -- the Internet service company bought the Internet search engine and then flip-flopped a bit in its strategy of combining the two companies -- peaked in early 1999 and have been on a sickening downward trajectory ever since. The shares closed Monday at 16 1/8.
Ultimately, that situation made for the opposite of upside for Goldman. According to Excite@Home's most recent proxy statement, Goldman received 100,000 options during 1999 at $59.47 per share. There's no need to cry for the CFO, however. He was an active seller of @Home shares obtained on very low strike prices long before the stock began its tumble.
Meantime, Siebel -- which provides software applications that companies use to manage their relationships with customers -- has been on a tear. Headed by the former Oracle sales executive who put his name on the door, Siebel often generates publicity by tweaking Oracle, the leading maker of databases and a contender with Siebel in the market for Internet-oriented software applications. Siebel's shares, adjusting for three splits since its mid-1996 IPO, are up about 40-fold at Monday's close of 158 5/16.
Graham joined Siebel part time in late 1996, when the company had $40 million in revenue and 165 employees. Last week Siebel reported second-quarter revenue of $387 million -- putting it far beyond the billion-dollar threshold on an annualized basis -- and now has 5,200 employees.
"My style suits itself well to a company where I can be personally involved in a deal and have my arms around the finances," says Graham, 53, who says he informed CEO Thomas Siebel about a year ago that he intended to retire within the year. Having been involved in the preblowup Informix -- like Oracle and Sybase, a maker of database software -- Graham acknowledges that the billion-dollar bugaboo is real. However, he says that "nothing in the outlook would lead me to believe there's something wrong" with Siebel Systems.
If Goldman is powering on with his career, Graham is powering down. He has been on the board of the Testarossa Vineyards in Los Gatos, Calif., for five years and plans to spend time this fall working part time for the winery -- not tending to the books, but rather learning how to make wine and maintain the winery's equipment.
Graham's retirement won't be worry-free. His time as the keeper of the books at Informix continues to be a source of controversy. The software company last year settled charges of improper accounting under Graham's watch that also involved a termination of shareholder lawsuits. Graham says the matter remains under investigation by the Securities and Exchange Commission, a nod to the fact that although the company is finished with the SEC, he and former CEO Phil White are not.
Graham has been a frequent seller of Siebel stock at varying prices. For example, in February he exercised 41,000 options at $12.27 a share and sold them for $105.29, according to insider transaction data posted at Yahoo! Finance. He sold 126,000 shares earlier in the month after exercising options for a similar spread.
thestreet.com
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The departure was long in the works? I missed that one.
Jack |
