Yahoo and Spin
October 1, 2015
Quote to note: You may have to pay to read “Yahoo’s Got Spin, Not Substance.” The article appears in my dead tree copy of the Wall Street Journal on September 30, 2015, on page c-16 which features a touch of money green ink. The write up is basic: The IRS has not yet granted Yahoo a no tax pass on its sale of its stake in Alibaba. What caught my attention was this quote to note:
Once Alibaba is out of the picture, Yahoo investors have little to look forward to.
Yikes. Does this mean that Yahoo’s semantic search strategy is not working?
Stephen E Arnold, October 1, 2015
The HP Autonomy Enterprise Search Epic Continues
September 26, 2015
I don’t play baseball anymore. I did. I was okay, but one of the fellows who lived in my neighborhood in central Illinois played very well. He played everyday. After a stellar high school career, he became a fielder in the major leagues. The pressure was too much. He made bad decisions. He tried to claw back to the starting rotation. Instead of swinging with the relaxed, fluid motion I recalled from our days of playing together, he tried to hit a home run every time at bat. His confidence dwindled away, and he became a person who did not perform. Last I heard, he had fallen victim to his inner demons and was searching for a panacea. But, in my opinion, he struck out. Bad management.
Definition of panacea:
noun 1. a remedy for all disease or ills; cure-all. 2. an answer or solution for all problems or difficulties:
I thought about this person when I read “Deal Divided H-P Leaders” in the September 26, 2015, Wall Street Journal. You may need to pay to access this article which is available at as “Hewlett Packard’s Then Chairman Ray Lane Tried to Quash Autonomy Acquisition.”
The main point of the write up is that HP wanted a panacea, and the senior management of HP thought Autonomy, a search and content processing company, was the answer to HP’s revenue challenges.
The Wall Street Journal points out that the Chairman of the Board of Directors was supportive of the multi billion dollar deal and then wanted to kill the deal.
Also, the WSJ identifies what I would call a “management” problem; to wit:
HP missed other red flags in assessing the Autonomy deal. In 2013, the Journal reported that outside auditors for Autonomy had noted that an Autonomy executive had alleged improper accounting practices at the company [Autonomy]. However, HP executives briefed on the allegations hadn’t passed them along to HP’s Board or to Mr. Apotheker [president and Autonomy deal supporter].
The Wall Street Journal article includes a point I made in my 2003 analysis of Autonomy, a version of which appeared in the first edition of the Enterprise Search Report.
Revenues from software which allows employees to locate information germane to work activities has for decades faced a major hurdle; namely, making sales and keeping customers. The problem, which persists today, is that enterprise search vendors have a tough time making basic key word search command the type of license fees and corporate commitment which enterprise resource planning, accounting, and compliance-related systems demand.
Enterprise search vendors have, again for decades, explained that search and retrieval was something more than finding a needed document. The buzzwords used for decades invoke “knowledge management,” “business intelligence,” and “customer support.” Each of these is baloney, but enterprise search vendors trapped. Making search work in the fast changing content environments in which organization operate was a tough technical problem. The costs of engineering fixes was uncontrollable, and, not surprisingly, enterprise search vendors layered on additional functions in an effort to make sales, charge more, and stay in business.
Autonomy, along with IBM and OpenText, were firms which grew search via acquisition. Autonomy was perhaps the most successful of the roll up tacticians. The firm acquired Verity, a system which dated from the 1980s and added it to Autonomy’s earlier video management acquisitions, document management acquisitions, and other bits and pieces accumulated since Autonomy opened for business in the late 1990s.
Each acquisition added revenue to Autonomy’s financial reports and the customers of these acquisitions became candidates for other Autonomy products. At the time of the HP purchase decision, Autonomy had about six or seven times the revenue of Endeca, another late 1990s search vendor. (Oracle bought Endeca for $1.1 billion in 2011. Other search vendors sold in the 2008 t0 2014 period traded from much lower purchase prices; for example, IBM bought Vivisimo for $20 million, a figure which was equivalent to one year Vivisimo revenues.)
HP did not, in my opinion, understand that search and retrieval was a business that broke the backs of many bright MBAs and whiz kid engineers. HP assumed that its management team would triumph in generating billions from Autonomy’s core technology. I think some of Autonomy’s innovations are important, but I know that Autonomy was able to generate six or seven times the revenue of the number two search vendor in 2011 because it managed a portfolio of content processing companies and did a pretty good job of generating revenue from lines of business ADJACENT to search and retrieval.
HP wanted the 1990s technology of Autonomy to generate billions. HP quickly learned that its view of Autonomy did not match what Autonomy’s management team built.
I am not sure how bright folks at HP could not look at the failures of Convera, Delphes, Entopia, Siderean, and other search vendors and not ask, “What’s different about search?”
HP wanted a panacea. HP demonstrates the type of problem my friend who became a major league player had and still has. In the big leagues, swinging for the fences, seeking a silver bullet, and looking for a quick fix is easy. Finding a fix for a company with problematic business models and conflicting management views is very difficult.
What does the HP experience suggest? After decades of enterprise search hyperbole, reality is different from the word picture sales professionals create in the minds of those whose desperation clouds their thinking.
My view is that HP has struck out. Bad management in my opinion.
Stephen E Arnold, September 26, 2016
Wall Street Sees Challengers to the Bloomberg Terminal
September 25, 2015
Few industries rely on timely data quite like Wall Street, and the trading platform that has long been the industry favorite has been enjoying that revenue stream for almost 30 years. However, the New York Times now reports that “The Bloomberg Terminal, a Wall Street Fixture, Faces Upstarts.” Writer Nathaniel Popper notes that funds from the popular terminal enable the company’s news endeavors: BusinessWeek and the Bloomberg Business website, it seems, “cost more than they earn.” Will all that fall away if the Bloomberg terminal loses ground to the competition?
The article relates:
“Bloomberg has sustained several challenges to its dominant market position, fending off smaller competitors hoping to bite off a corner of its business. And it has the cash reservoirs to wage a vigorous defense this time around. But Bloomberg’s own history shows that it is not easy to maintain a profitable market position like the one it has held for more than two decades. Bloomberg rose to prominence in the 1990s by nimbly replacing earlier Wall Street data companies — like Quotron and Telerate — that failed to change quickly enough to protect their longtime market dominance. Morgan Downey, the former Bloomberg executive who is building Money.Net, said he decided to leave Bloomberg in late 2013 and create a low-cost challenger after seeing how slowly Bloomberg was changing and how many of the company’s clients wanted a cheaper alternative.”
Cheaper, it seems, is the key word here. Firms are under pressure to cut costs amid new regulations and shifting markets; they are now eyeing lower-cost alternatives to the Bloomberg terminals, which run about $25,000 per year each. See the article for more on the competition, like Money.Net and chat provider Symphony.
What of Thomson Reuters? According to the article, that company’s terminal sales in the U.S. continue to disappoint, though they have done well in certain niche markets. Their terminals, we’re told, are “not notably cheaper than Bloomberg’s.” Will the upstarts topple both venerable firms?
Popper reports stockbrokers have been complaining about Bloomberg’s terminal pricing and lack of innovative product design. Then again, retired New York City mayor Michael Bloomberg is said to be taking a more active role in the company. Perhaps with his efforts, it will manage to fend off the challengers. For now.
Cynthia Murrell, September 25, 2015
Sponsored by ArnoldIT.com, publisher of the CyberOSINT monograph
Oracle Revenues: Implications for HP and IBM
September 17, 2015
Oracle is an interesting company because it owns a number of enterprise search and content processing technologies. For example, decades ago, the company bought the often overlooked Artificial Linguistics. Then Oracle complemented its “Text” and “Secure Enterprise Search” technology with Triple Hop. Gentle reader, I am confident you know about Triple Hop’s clustering methods. Then in a spate of content processing fury, Oracle bought RightNow (Dutch developed indexing technology), InQuira (natural language processing crafted from two early Sillycon Valley search vendors), and Endeca, the now long in the tooth, computationally intensive “Guided Navigation” outfit. And we must not forget the retrieval functions of PL/SQL. Oracle has almost as many search and retrieval systems to nurture as that high flying OpenText outfit in Canada.
With such a backpack of information access goodies, should we expect a revenue report bursting with good news? It struck me as I read “Oracle Beats Profit Estimates by a Penny a Share but Revenue Slides” that search and retrieval may not be a zoo with golden geese.
Oracle delivered earnings which made the fine Wall Street MBAs glow. However, the revenue did not win a gold star.
Set aside Oracle for the nonce.
Think about Hewlett Packard (Autonomy stuff) and IBM (Watson stuff). Both of these outfits are reporting declining revenues too. Both have bet large sums on information access.
My question is, “Will a payoff arrive?”
My other question is, “When the payoff arrives, will it make up for the loss in revenues from old line products and services?”
My hunch is that these big bets on search are current and future ponds of despair.
Now set aside these floundering blue chips.
What about the up and coming search vendors? Life is not easy for vendors of search and content processing technology. There are some bright spots, of course, but vendors with deep roots in traditional search craziness are likely to find revenues insufficient to pay for customer support, bug fixing, and implementation of new technical methods.
Google before its founders did an arabesque into Alphabet figured this out with the high interest credit card of technical debt. When will HP, IBM, and Oracle get the message?
Stephen E Arnold, September 17, 2015
Hewlett Packard Autonomy: Bank Issues Alleged
September 15, 2015
“The Price of Silence on Wall Street” provides a bit of information about the role of intermediaries in the HP deal for Autonomy. I find it difficult to figure out if the bank was doing its normal sales job for a juicy deal or if the bank was doing some fancy dancing.
Here are portions of the write up I highlighted when I was out of Internet range in a far off land. There is some value to printing online article for offline reading.
Item 1:
He [a bank whistle blower] says he believes people need to know about certain acts related to Barclays’ role in Hewlett-Packard’s $11.1 billion acquisition of Autonomy, a British software company, in 2011. Barclays was a financial adviser to HP on the deal and the sole provider of a one-year, $8.3 billion loan to be used, in part, by HP to buy Autonomy. Since then, the Autonomy acquisition has generally been viewed as a disaster. In 2012, HP wrote down the value of Autonomy by $8.8 billion, and said that some $5 billion of it stemmed from a willful misrepresentation by Autonomy’s management of the company’s financial performance (Autonomy’s management disagreed, and the two sides headed to court).
Item 2:
Mr. Sivere [bank whistle blower] says he believes there is more to the HP story, in particular that Barclays may have breached its internal ethical walls regarding the deal, allowing some confidential information from the banking side of Barclays to be used by Barclays traders. He reached this conclusion in his role as a compliance officer and after he saw internal digital correspondence between the two groups that made him nervous that the wall had been breached. In 2013, Mr. Sivere tells me, he filed an internal report at Barclays that questioned the ethics and legality of what he had witnessed. He reported his concern that confidentiality had been breached around certain foreign-exchange trades; around so-called Contracts for Difference trades, known as C.F.D.s; and around certain representations that Barclays had made to HP when it provided the $8.8 billion loan.
Item 3:
Mr. Sivere wrote in his letter to the Barclays board, he also believed that Barclays entered into certain suspicious derivative transactions with HP at the time of the Autonomy acquisition. “Some of these transactions included FX trades, a dollar/sterling option and C.F.D.s traded prior to the announcement (and also the bridge loan pegged to a possible manipulated Libor rate),” he wrote. “The unwinding of such derivative transactions most likely occurred during 2012 which should have raised suspicions of what exactly the Hewlett-Packard write-down was related to if not for Autonomy’s purported accounting improprieties, misrepresentations and disclosure failures.
The article includes other interesting information. I urge you to read it.
My view is that the HP Autonomy deal remains interesting to me. The amount HP paid for Autonomy set a high water mark for a content processing acquisition. This write up suggests that there is information about the deal which has not been revealed in publicly accessible articles.
The parallels with the Fast Search & Transfer matter may be worth exploring.
Stephen E Arnold, September 15, 2015
What Is Your Database Worth?
September 11, 2015
I don’t have a single answer to this question. There is an interesting database valuation item in “CrunchBase Is Spinning Out, Backed by Emergence Capital.”
CrunchBase is an aggregator of technology company information. I think the service does a good job with companies in the Sillycon Valley area. The coverage tails a bit for Rust Belt start ups, but that’s no surprise.
The database attracts two million “visitors” each month. I remain uncertain about the meaning of a “visitor,” but when most Web sites get a few hundred or fewer hits, two million seems like a lot. It is almost identical in hype thought to Facebook’s one billion users in a 24 hour period. I was pretty good at math in grade school too.
The write up’s gem was this statement:
Eight-year-old, San Francisco-based CrunchBase looks to become a standalone company in the very near future. According to several sources, the unit, which calls itself the “definitive database of the startup ecosystem,” is finalizing a term sheet with the venture firm Emergence Capital Partners for an investment of between $5 million and $7 million.
Assume that the $7 million number is on the money. That works out to $0.30 per visitor. That is almost a million in my book.
Stephen E Arnold, September 11, 2015
Coveo: A Real Life Search Implementation Success
September 11, 2015
If we detect some serious Coveo cheerleading in this recent article found on RT Insights, that might be because the story originated at that company. Still, “How Real-Time Enterprise Search Helps Seal Financial Deals” does illustrate the advantages of consolidating data resources into a more easily-used system.
The write-up describes challenges faced by London investment firm 3i Group. The global company had been collecting an abundance of data about its clients’ deals, but was spending many worker hours retrieving that information from scattered repositories. Coveo Enterprise Search to the rescue! The platform implementation included a user-friendly UI, actionable analytics, and security measures. The article continues:
“As a result of the implementation, 3i Group reports 90 percent faster access to deal-related intelligence as well as a 20 percent reduction in staff and resources required to respond to compliance requests. 3i Group’s staff members use the platform to search across 3.66 million file share documents, 6.39 million Exchange emails, 897,000 SharePoint documents, and 107 million Enterprise Vault records. For the first time, 3i Group staff members are able to perform a single search across all of the company’s knowledge repositories by using either a browser-based interface or an integrated search interface within SharePoint. 3i Group’s compliance team was provided with a dashboard that enabled them to search and correlate content from across 3i Group’s entire data set, and quickly evaluate permissions and user access rights for every 3i Group record or knowledge asset.”
Founded in 2005, Coveo maintains offices in California and the Netherlands, with its R&D headquarters in Quebec. (The company is also hiring as of this writing.)There is no doubt that being able to reach and analyze all data from one dashboard can be a huge time-saver, especially for a large organization. Just remember that Coveo is but one of several strong options; some are even open source.
Cynthia Murrell, September 11, 2015
Sponsored by ArnoldIT.com, publisher of the CyberOSINT monograph
Publishers Display Their Online Pricing Acumen
September 6, 2015
I have returned from PEI (Prince Edward Island, gentle reader). The modest traffic and the weight of fresh mussels are behind me. I learned that mussels in PEI were one third the price of those available from the fish monger in Harrod’s Creek. There is something to this pricing thing.
Perched in a comfortable gray plastic zero coefficient of friction chain in Chicago’s wonderful airport, I read “E-Book Sales Fall After New Amazon Contracts.” The main idea is that some big boys and girls in upmarket publishing houses worked overtime to get pricing control of their eBooks on Amazon.
According to the write up:
“The new business model for e-books is having a significant impact on what [the big] publishers report,” said one publishing executive. “There’s no question that publishers’ net receipts have gone down.”
What does this suggest to me? Three items:
First, the business analyses of these large outfits did not deliver oodles of dough. No surprise. Amazon prices the Google way: Data with a frosting of what sure seems like distinctly subjective behavior.
Second, the Amazon reality is that eBooks have less value than the good, old fashioned, dead tree versions. Er, streaming music exists, right?
Third, the big boys and girls continue to demonstrate their deep understanding of the world of zeros and ones.
No surprise.
Stephen E Arnold, September 6, 2015
Lexmark: Signs of Trouble?
August 27, 2015
I read “Shares of Lexmark International Inc. Sees Large Outflow of Money.”
The main point of the write up in my opinion was:
The company shares have dropped 41.65% in the past 52 Weeks. On August 25, 2014 The shares registered one year high of $50.63 and one year low was seen on August 21, 2015 at $29.11.
Today as I write this (August 26, 2015), Lexmark is trading at $28.25.
Why do I care?
The company acquired several search and content processing systems in the firm’s effort to find a replacement for the firm’s traditional business, printers. As you know, Lexmark is one of the IBM units which had an opportunity to find its future outside of IBM.
The company purchased three vendors which were among the companies I monitored:
- Brainware, the trigram folks
- ISYS Search Software, the 1988 old school search and retrieval system
- Kapow (via Lexmark’s purchase of Kofax), the data normalization outfit.
Also, the company’s headquarters are about an hour from my cabin next to the pond filled with mine run off. Cutbacks at Lexmark may spell more mobile homes in my neck of the woods.
Stephen E Arnold, August 27, 2015
OpenText: The Linear Value Chain Becomes an Ecosystem
August 27, 2015
EMC is into data lakes, wheels, and hubs.
OpenText has a different view. Navigate to “What Is a Digital Enterprise?”
The main idea is that a digital business is “empowered by digital technology.” Okay, I think that means computers, mobile devices, software. For the last 50 years I have been involved with organizations which have leased, purchased, or invented digital technology.
Is this a news flash?
The write up explains:
This means that the business engages customers and conducts business through digital channels, uses digital assets and/or capabilities, and sells digital products or services. As in the case of startups, the value proposition is keenly focusing on serving digital consumers and is enabled by digital technology. This fundamentally impacts an organization’s value chain.
But the real payoff is this statement:
The value chain of a digital business is more cyclical than it is linear.
But wait, that’s only sort of correct. The value chain is going the way of the snail darter. The Darwinian law of software and service companies is that the future is the ecosystem. Here’s a diagram which makes sense of these remarkable leaps from sequences (what a mid tier consultant calls algorithms which is equally wacky) to value chains to ecosystems.
I like the use of a circle, the interior pentagon, and lines. Very Euclidean in a somewhat four dimensional world. But, hey, Euclid is high school and reality is something else again.
I liked this closing statement:
As we move rapidly toward a Digital World, one thing is clear: information lies at the heart of innovation and disruption. No longer considered just the cost of doing business, information is instrumental in driving innovation and growth. When used the right way, information leads to greater customer satisfaction, accelerates time-to-market, helps to create new opportunities, and enables businesses to remain relevant and competitive. Information is a key strategic component for every organization today and critical to enabling transformation.
I suppose my work career which spans more than a half century in things with zeros and ones, the “rapidly” surprises me.
Perhaps OpenText will open the door to the future. With technology from Fulcrum, Information Dimensions, BRS, and many other slightly long in the tooth digital giants, OpenText may become the go to outfit for this digital stuff.
Stakeholders hope so. The revenues are creeping up but the profitability of the firm has flat lined.
Maybe the digital future thing does not deliver the bottom line impact that some senior managers are supposed to deliver. Without enough money to invest in refurbing old search technology, the future may not be too bright and shiny.
What happens if the ecosystem dies?
Stephen E Arnold, August 27, 2015
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