Loud3r – gets a new voice and funding

2009 June 7
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by taulli

loudLoud3r.  Yes, it’s a funky name but it is getting some attention.  In fact, according to a recent report, Loud3r received a round of funding (under $1 million).

Actually, the website is making a change in focus.  Instead of being a network of long-tail sites – which essentially aggregates news from the web — the company is now entering the enterprise space.  Although, this is also a tough market to crack.

Now, Loud3r claims that it has a better mousetrap.  Basically, its semantic technology is apparently better at getting more relevant results. 

But is this really enough to get big companies to buy new technology?

Desperately Seeking Data Domain

2009 June 2
by taulli

ddupSince its IPO a few years ago, Data Domain (Nasdaq: DDUP) has been able to post strong growth, despite a tough IT environment.  Then again, the company has a cutting-edge offering of storage applications (the technology is called de-duplication).

And, Data Domain has certainly gained the attention of big-time suitors.  First, there was the a $25-per-share agreement to sell out to NetApp (Nasdaq: NTAP). 

Now, EMC (NYSE: EMC) has jumped into the fray, offering $30-per-share or a cool $2 billion in cash. 

Yes, it’s a nice situation for Data Domain.  If anything, we could see a bidding war – and perhaps even more suitors come to the table.

What’s more, this is an indication that there’s real value in the tech sector, especially for those firms that can still post substantial growth.

GM’s $172 billion hairball

2009 June 1
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by taulli

Today, GM (NYSE: GM) yet again made history – with its massive bankruptcy filing.  In fact, the company has a staggering $172 billion in debt and only $82.3 billion in assets.

In other words, GM has been propped up – over the years – by incredible feats of financial engineering.  It seems that lenders thought that the company would somehow find another way to keep alive.

But of course, with the credit crunch and global recession, the plunge in auto sales was the tipping point.  And, of course, GM has now become a ward of the state.

Even though the bankruptcy will be relatively smooth, the after-shocks will not.  There will be real pain across the country.

For example, there will be plant closings (from 12 to 20).  Ad budgets will get slashed.  And auto dealers will close down (about 40% of its 6,000 dealer network).

Actually, using the BizEquity database, I was able to get a sense of the size of the auto dealer market place.  I just focused on the smaller ones (with sales under $10 million).

The upshot?  Well, over the past year, the average valuation went from $918,251 to $642,227.  Unfortunately, in light of the recent bankruptcies of GM and Chrysler, the valuation plunge will likely continue.

Keep in mind that auto dealers are the proverbial home-town business.  They help communities.  They provide jobs. 

Unfortunately, this positive force will be severely contracted – putting yet more pressure on the US economy.

AOL to pile on debt?

2009 May 31
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by taulli

AOL is a symbol of the craziness of the dot-com era.  Yet, at the end of the day, the site still has a lot of scale.  In fact, it generates huge amounts of cash flows.

Considering this, it looks like AOL will take on debt as it preps for its spinoff from Time Warner (NYSE: TWX).  This is according to a report in Bloomberg.com.

How much debt?  Actually, it could be as much as $1.5 billion.

But, of course, this is mostly speculation.  We won’t know more until AOL files the necessary papers with the SEC, which could take a couple months or so.

$19.5 Billion Rio Tinto Deal: Still on track?

2009 May 15

rioIn today’s world, it’s tough to raise capital.  But, try raising $19.5 billion.

Well, in the case of Rio Tinto Group, the company has been able to strike an agreement to raise this amount from Aluminum Corp. of China.  However, as should be expected, there’s been buzz that the deal will fall through.  For example, the Australian government may reject the deal.

So to dampen such talk, Rio Tinto Chairman, Jan du Plessis, has made public statements indicating that the transaction is on track.

The company, which is the #3 miner in the world, certainly needs the capital infusion, as the debt load is a staggering $38.9 billion (a big part was the result of the acquisition for Alcan).  In fact, Rio Tinto said it will unload certain assets (for $12.3 billion).

But, the fact remains that the global environment is improving.  In other words, Rio Tinto may come back to the table and renegotiate terms.  If anything, it’s possible to instead pull off a rights offering, which seems doable.  Or, Rio could reach out to another strategic investor – say BHP Billiton – to snag capital.

Yes, options are always nice — especially when you’re trying to raise a huge amount of capital.

GE/NBCU jumps on board video search

2009 May 11
by taulli

everyWhen it comes to search, online video is still in the early stages.  But things are changing quickly.

For example, one of the top players in the space – EveryZing – has snagged $8.25 million in venture capital.  The investors include a variety of VCs like Fairhaven Capital, General Catalyst Partners and Accel Partners.

But there is also a strategic investor:  GE/NBCU’s Peacock Equity Fund (NYSE: GE).  In fact, as part of the deal, EveryZing’s technology will be distributed across NBCU’s Internet properties (iVillage.com, NBC.com, CNBC.com, etc).

The technology is certainly cutting edge, including speech-to-text systems and natural language processing.  What’s more, EveryZing takes a white label approach, which is a smart way to get traction.  Keep in mind that this was a big part of Google’s (Nasdaq: GOOG) strategy during its early days.

Dow rings up billions

2009 May 8
by taulli

dowNot that long ago, the sentiment on Dow Chemical (NYSE: DOW) was bleak.  The company’s deal to raise capital – from the Middle East – to finance its Rohm and Haas transaction imploded.  Yet, Dow manage the situation brilliantly.

That is, in the past week the company pulled off a $6 billion debt offering (which was oversubscribed) and an equity offering of $2.25 billion.  The upshot is that Dow has repaired its balance sheet, which also helps with its investment credit rating.   In fact, the company will now be able to pay off a preferred tranche (from a hedge fund and the Haas family trust). 

All in all, things have worked out quite well.  And, it’s another indication that the financial markets are beginning to thaw.

ExactTarget lands a cool $70 million

2009 May 8
by taulli

exacttargetEven though the VC market has been sluggish, there are still some mega deals.  Just look at the recent $70 million round for ExactTarget.  The investors include Battery Ventures and Scale Venture Partners.

Funny enough, the capital raise is on par with a typical public offering.  So, is this a private-type IPO?

Perhaps.  VCs still have large amounts of money – and need to put it to work.  Besides, they are likely to secure good valuations on large-company fundings.  And yes, public markets will eventually comeback (in fact, we are already seeing signs of this).

ExactTarget, which develops sophisticated email market products, has been a strong grower over the years – with 33 straight quarters of revenue gains.  So with the infusion of capital, the company can continue the momentum and will be prepared for a public markets when the IPO window opens up again.

iStockPhoto Co-Founder: a lesson in non-competes

2009 May 6
by taulli

If you happen to sell your company, there’s a good chance you’ll need to sign a non-compete agreement (in fact usually, all key employees will have to).  As the name implies, this means you cannot start a competing firm – or work for one. 

True, in some states – such as California – non-competes are generally unenforceable.  That is, unless there is some type of consideration.  Thus, an acquisition usually qualifies.

Well, today we got a case study in this with Patrick Lor, who is the co-founder of iStockPhoto.  Hhe joined a rival, Fotolia, as the President of North America.

Back in 2006, iStockPhoto sold out to Getty Images (for roughly $50 million).  And yes, in exchange Lor had to sign a non-compete.  But, apparently he put a time limit on the agreement.

No doubt, this is critical.  After all, proven entrepreneurs are hot commodities – even in tough economic markets. 

So, if you decide to sell your company, it’s definitely worth finding ways to shorten the term on the non-compete as much as possible.

Guidance Software still can’t get traction

2009 May 6
by taulli

guidanceGuidance Software (NASDAQ: GUID) has a strong suite of software applications, which help manage complex litigation.  However, the company has suffered over the past year – and it’s more than just the macroeconomic situation.

In Q1, revenues came to $18.7 million, down 14% from the same period a year ago.  In fact, product revenues plunged 24% to $8.4 million. 

To deal with the problems, Guidance is focusing more on cost cutting.  Already, the company has reduced headcount by 7.5%, providing about $3 million in annual cost savings. 

On the revenue side, there were some bright signs.  For example, the number of new EnCase eDiscovery customers tripled over the past 12 months.  And, because of a new pricing model, the revenues will not likely show up until later quarters.

Something else:  the company plans to launch a variety of new products, which will help to boost revenues over the long-run.  And, there should be help from increases in federal spending.

Going forward, the forecast for the full-year is revenues of $85 to $90 million, with non-GAAP, pre-tax earnings of ($0.08) to $0.09 per share. 

But investors are not willing to wait.  In today’s trading, shares of Guidance are down 8% to $3.25.