Charlie Rose Talks to Salesforce.com's Marc Benioff

By Charlie Rose

“Things are going faster now than ever before. There’s a level of speed we’re not used to” David Paul Morris/Bloomberg

How do you describe Salesforce to people who don’t understand it?
Well, Salesforce is a company that really pioneered the cloud. It’s kind of Amazon or EBay or Google, but this is using those exact same technologies to run your business. And businesses up to this point really have had to buy their own software and build their own data centers and hook it all up themselves. Our message is very simple: Hey, if you can buy a book on Amazon, if you can do an auction on EBay, if you can do a search on Google, you can run your business the same way. You just go right in.

You’ve been on the warpath against software for how long?
Well, that’s certainly been our pitch now for 13 years. Software: It’s got the line through it. What we’re trying to do is to make the case that we can dramatically lower the cost of business. And the way to dramatically lower the cost of business is by dramatically lowering the cost of IT. And all we do is follow around all these smart young guys, Jeff Bezos, Mark Zuckerberg, Larry Page, Sergey Brinn. And whatever they do, we’re kind of copying it, but for business. We’re not the inventors. We’re not the creators of social networking. But when we see something like social networking, we go, “Well, this is great.” Twitter? Wow. Facebook? A billion people know how to use this app, and they didn’t have to read a manual.

Weren’t you just named Most Innovative Company of the Year?
What we try to do is constantly recreate ourselves. I consider myself a student of Steve Jobs. I worked for him in 1984 at Apple. I was in the Macintosh division writing assembly language code.

So you write code. You just don’t like software.
I like software, but I really want software to be delivered differently, you know. I want it to be expressed in a different way. And I think that idea is very powerful. The thing that’s interesting is if you don’t introduce an idea like that in our industry, then the industry never changes. And that’s what happens to so many of these tech examples. That’s Microsoft, right? It’s like the same thing keeps going, and then all of a sudden, you know, gee, that’s like a really old shoe. I need a new shoe.

Which is why there’s been a changing of the guard. Talk about the next wave of talent.
I think that we have a great new visionary with Mark Zuckerberg. We have a great set of entrepreneurs, Larry and Sergey, who still have a lot in them in their 30s, and we have Jeff Bezos recreating himself. You’re going to see new competitors and new entrepreneurs. The most exciting thing that’s happening in our industry is the youth. There are all these young entrepreneurs coming up. Oh, let’s add another one: Jack Dorsey with Twitter.?… And [LinkedIn’s?] Reid Hoffman. Reid holds a huge part of the vision for social. As our industry matures, these kinds of fathers of the industry emerge. Steve Jobs was the father of the PC.

And tablet computing.
I’m going to do this seminar on Wednesday—10,000 people here in New York. I’ll say to them, “How many of you now have an iPad?” Half the hands will go up. And this thing’s only been around for 18 months. Things are going faster now than ever before. There’s a level of speed we’re not used to. There’s also a level of openness and transparency that we’re not used to. That’s what the Occupy movement is all about. Organizations and governments who don’t move to that speed and with that transparency will rapidly become obsolete.

You now seem more concerned with philanthropy than your own wealth. Do you still use your 1-1-1 rule?
Oh, yeah. When we started the company, we took 1 percent of our equity and 1 percent of our profit and 1 percent of all our employees’ time, and we put it into a 501(c)(3) public charity. At the time, it was very easy because we had no profit, we had no time, we had no equity. But then, it turned out that our company is worth, you know, tens of billions of dollars. We run 10,000 nonprofits for free; we do not charge them for our services. We do not charge universities for our services. We will deliver hundreds of thousands of hours of community service. Google copied our 1-1-1 model, and others have, too. That’s been probably our most successful part of our business, far more than our business success—our ability to inspire others to do philanthropy. It’s been a huge missing part of Silicon Valley.

Watch Charlie Rose on Bloomberg TV weeknights at 7 p.m. and 10 p.m. ET.

Emmy Award-winning journalist Charlie Rose is the host of Charlie Rose, the nightly PBS program.

View the original article here

Micro Focus in Buyout Talks Suggesting Software Steal: Real M&A

May 25, 2011, 11:16 AM EDT By Cornelius Rahn and Tara Lachapelle

May 25 (Bloomberg) -- Micro Focus International Plc is luring private-equity buyers with the cheapest valuation for a non-U.S. business software provider even as the 50-year-old computer code it was founded to translate becomes obsolete.

The Newbury, England-based seller of software to update systems running programming languages such as Cobol is trading at 12 times earnings, the lowest for an enterprise software company outside America with a market value of more than $1 billion, according to data compiled by Bloomberg. Potential buyers would gain a company that’s also cheaper relative to its free cash flow than 92 percent of global rivals, the data show.

While earnings and revenue growth are stalling after three chief executives left in five years, Micro Focus still makes almost twice as much profit per dollar of sales as the industry average and has only $73 million in debt. Matrix Corporate Capital LLP’s estimated price tag of $1.5 billion for Micro Focus would make it the cheapest business software takeover relative to earnings, data compiled by Bloomberg show. Bain Capital LLC and Advent International Corp. have made approaches, the company said last week.

“It’s a steal,” said George O’Connor, an analyst at Panmure Gordon & Co. in London who recommends buying the shares. “Considering a premium on the purchase price it would still look cheap. It’s a very well-established company with many customers and really nice products.”

Laura Stiff, a spokeswoman for Micro Focus, and Kelly Rapoport with Advent declined to comment. Alex Stanton, a spokesman for Bain, didn’t respond to a call and e-mail requesting comment.

Preliminary Interest

Micro Focus said on May 20 it had received and will explore “a number of preliminary, non-binding approaches,” including from Boston-based Bain and Advent. The company said there’s no certainty regarding the submission of an offer or the price.

A takeover of Micro Focus at 455 pence ($7.36) a share, as Matrix analyst Rajeev Bahl in London estimated last week, would value the company including net debt at 7.8 times earnings before interest, taxes, depreciation and amortization in the last 12 months. That would be the lowest multiple ever paid in an enterprise software deal of more than $500 million, data compiled by Bloomberg show.

Those terms would represent a 23 percent premium to the stock’s average closing price over the past 20 days, compared with the 38 percent average premium paid historically for deals in the industry, the data show.

Early Computer Code

Micro Focus, which counts Tesco Plc and HSBC Holdings Plc as customers, makes software that allows companies utilizing old programs on leased, power-hungry mainframes to use them on newer computers and devices. Software with programming languages such as Cobol -- the early computer code used to control automatic teller machines, traffic lights and mobile phones -- can then be run more cheaply.

The company, founded in 1976, acquired Austin, Texas-based Borland Software Corp. in 2009 to expand in the software testing business and reduce its reliance on legacy platforms.

“The jury is out on whether there is still growth in the core Cobol business, but in testing, the market is growing fast,” said Alex Jarvis, a technology analyst at Peel Hunt LLP in London with a “hold” recommendation on Micro Focus. By cutting costs, an acquirer could justify a bid of more than 5 pounds a share, Jarvis said.

Free Cash Flow

The software maker trades at 8.91 times free cash flow, less than every company in the industry except for Tokyo-based Nomura Research Institute Ltd. at 8.06 times and CA Inc. of Islandia, New York, at 8.85 times, data compiled by Bloomberg show. Meanwhile, Micro Focus made 23 cents per dollar of revenue in the last 12 months, almost double the industry’s average profit margin of 12.5 percent, the data show.

Vijay Anand, an analyst at Espirito Santo Investment Bank, expects a buyout firm to pay as much as 450 pence a share and boost revenue growth to as high as 10 percent annually.

“The key attractions are the recurring revenue stream, the solid customer base and strong cash flows due to high Ebitda margins,” said London-based Anand. “The issues the company has are fairly fixable. It mostly requires consistency of leadership and better focus on sales execution.”

The Cobol business may lure strategic buyers such as International Business Machines Corp., Hewlett-Packard Co. or Oracle Corp., while professional services and testing may be attractive to IBM or Mumbai-based Tata Consultancy Services Ltd., said Panmure’s O’Connor.

Management Turnover

Ed Barbini, a spokesman for Armonk, New York-based IBM, said the company has a policy of not commenting on rumors or speculation. Deborah Hellinger, a spokeswoman for Oracle of Redwood City, California, declined to comment. HP doesn’t comment on rumor or speculation, the Palo Alto, California-based company said in an e-mail. Mike McCabe, a spokesman for Tata in North America, also declined to comment.

Micro Focus has been plagued by management turnover. Nigel Clifford left the post of CEO on April 15 after less than a year, and just two months after the company said sales and earnings were unlikely to recover by the end of the fiscal year in April.

The shares fell 0.2 percent to 371 pence at 3:51 p.m. in London. Before today, they had slumped 21 percent over 12 months as the FTSE All-Share Software & Computer Service Index climbed 21 percent. The company’s market value had dropped to about 734.8 million pounds ($1.2 billion) as of yesterday.

‘Pedestrian’ Revenue Growth

A bid is not likely to emerge because of the company’s “pedestrian” revenue growth, limited ability to boost margins and the improbability of another public offering as Cobol continues to age, Jonathan Imlah, an analyst with Collins Stewart Plc in London, said in a May 23 report. The shares may fall to 325 pence if a bid doesn’t emerge, a 13 percent drop from yesterday’s closing price.

About 51 percent of $432.6 million in revenue in the year ended April 2010 came from maintenance with 42 percent generated by license fees, data compiled by Bloomberg show. Revenue is projected to remain flat through 2012, according to the average of analysts’ estimates compiled by Bloomberg.

“Half of the revenues are maintenance and that makes them quite cash rich, which is why private-equity firms would be looking at it,” Peel Hunt’s Jarvis said. “The core business has had quite sparse growth.”

Micro Focus, which traded at as much as 21 times its earnings in the past year, is now valued at 12 times, the lowest for an enterprise software company greater than $1 billion outside the U.S., data compiled by Bloomberg show.

“It’s a very cheap share, hence the opportunity,” said Panmure’s O’Connor.

Overall, there have been 9,870 deals announced globally this year, totaling $964.3 billion, a 22 percent increase from the $792.8 billion in the same period in 2010, according to data compiled by Bloomberg.

--With assistance from Michael Tsang in New York. Editors: Sarah Rabil, Daniel Hauck.

To contact the reporters on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net; Tara Lachapelle in New York at tlachapelle@bloomberg.net.

To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net; Katherine Snyder at ksnyder@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net.

View the original article here

Polkomtel Shareholders Said to Continue Talks With Four Bidders

May 25, 2011, 11:26 AM EDT By Maciej Martewicz and Pawel Kozlowski

May 25 (Bloomberg) -- The owners of Polkomtel SA, Poland’s second-largest mobile phone company, remains in talks with four bidders, a person close to the talks said, after a newspaper reported this week that the competition had narrowed to two.

The bids give Polkomtel an enterprise value of 16 billion zloty ($5.7 billion) to 18 billion zloty, said the person, asking not to be identified because the negotiations are private. Polish billionaire Zygmunt Solorz-Zak, Apax Partners LLP, Sweden’s biggest phone company TeliaSonera AB and a group formed by Telenor ASA and Bain Capital LLC are bidding, people familiar with the matter said earlier this month.

Polkomtel’s owners, which include Vodafone Group Plc, PKN Orlen SA, KGHM Polska Miedz SA, PGE SA, and Weglokoks SA, are considering bids only from TeliaSonera and Solorz, Rp.pl reported on its website May 22. The next round of bids are due June 10, another person with knowledge of the sale told Bloomberg today.

The owners plan to complete the transaction by the end of next month. The 2008 sale by Denmark’s TDC A/S of a 20 percent holding provides a 3.7 billion-euro ($5.2 billion) minimum valuation, KGHM said in November.

Deutsche Bank AG, which is advising one of the bidders, said in March that the price for Polkomtel won’t be “materially” higher than the one achieved in the TDC deal.

Enterprise Value

Polkomtel’s enterprise value includes about 2 billion zloty of net debt, a 1.03 billion-zloty dividend to due to current shareholders and a 130.7 million-zloty fine imposed by Polish antitrust regulators, the person close to the talks said today.

Polkomtel, which last year had earnings before interest, taxes, depreciation, and amortization of 2.83 billion zloty, said in April that this year’s earnings will be similar to 2010. The lower range of the bids gives and enterprise value of 5.65 times that level.

That compares with Turkcell Iletisim Hizmetleri AS’s 5.74 times 2011 Ebitda, and a 4.7 times multiple at Telekomunikacja Polska SA, Poland’s largest phone company, which also owns a fixed line business, according to Bloomberg data.

Polkomtel, operator of the Plus brand, has more than 14 million customers for voice and third-generation wireless services. It competes with Polska Telefonia Cyfrowa, owned by Deutsche Telekom AG, and France Telecom SA’s Orange.

--Editors: Nathaniel Espino, Kenneth Wong.

To contact the reporters on this story: Maciej Martewicz in Warsaw at mmartewicz@bloomberg.net; Pawel Kozlowski in Warsaw pkozlowski@bloomberg.net

To contact the editors responsible for this story: James Gomez at jagomez@bloomberg.net Gavin Serkin at gserkin@bloomberg.net

View the original article here

Deutsche Telekom Says No Scope for Talks on Greek OTE Stake

May 11, 2011, 6:13 AM EDT By Cornelius Rahn

(Updates with visit to Greece in fourth paragraph.)

May 11 (Bloomberg) -- Deutsche Telekom AG said there is “no scope for negotiations” if the Greek government chooses to use an option to sell another 10 percent stake in Hellenic Telecommunications Organization SA to the German company.

“If the Greek government wants to sell us the stake, it will do so,” said Andreas Leigers, a Deutsche Telekom spokesman, after Financial Times Deutschland reported the company is trying to postpone the purchase. The phone operator is standing by its obligations in the shareholders’ agreement, Leigers said, adding that there are no plans to buy additional shares in the company, also known as OTE, in the market.

Greece said Apr. 15 that it wants to sell its 20 percent OTE stake this year as part of a 50 billion-euro ($72.1 billion) asset sale plan to cut the highest debt ratio in the European Union. It has the right to sell 10 percent to Deutsche Telekom at 15 percent above the average market price of the past 20 days by the end of 2011, Leigers said.

Deutsche Telekom’s management and supervisory board will travel to Greece at the end of May, Leigers said. The visit will involve a meeting with local executives.

Deutsche Telekom, with a 30 percent stake, fully consolidates OTE, determines its management, and has the right of first refusal for the remainder of the government holding. The stock rose 2.1 percent to 7.15 euros as of 11:45 a.m. in Athens trading today, valuing the government’s stake at about 700 million euros.

--Editors: Simon Thiel, Robert Valpuesta.

To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Angela Cullen in Frankfurt at acullen8@bloomberg.net

View the original article here

Skype Is Said to Have Demanded More Than $7 Billion in Talks

May 11, 2011, 12:24 AM EDT By Dina Bass, Douglas MacMillan and Joseph Galante

May 11 (Bloomberg) -- Skype Technologies SA’s owners refused to entertain offers of less than $7 billion, the value they expected the startup to get from a planned initial public offering, before agreeing to a buyout from Microsoft Corp., according to people with knowledge of the talks.

Microsoft Chief Executive Officer Steve Ballmer clinched the $8.5 billion all-cash agreement May 9, just more than a month after his initial overture to private equity firm Silver Lake, one of Skype’s biggest owners, said the people, who asked not to be identified because the talks were private.

“Microsoft really wanted this,” said Matt McCormick, a money manager for Cincinnati-based Bahl & Gaynor Inc., which oversees $3.6 billion, including Microsoft shares. “Microsoft right now is trying to do things to keep up with other faster- growing technology companies.”

Ballmer, 55, is making Microsoft’s largest acquisition on a wager he can use Internet calling to play catch-up in mobile and Web advertising. He offered more than $7 billion to cover Skype’s debt and keep a rival from gaining a business that would add calling features to games, e-mail and software on computers and handsets. While Google Inc. expressed interest, neither it nor other bidders made formal offers, the people said.

Microsoft, based in Redmond, Washington, is making the biggest Internet takeover in more than a decade, part of an effort to lure Web users and advertisers and help it catch Google in online advertising and Apple Inc. in mobile software.

‘Needed Kick-Start’

Ballmer plans to connect Skype, which boasts 170 million active users, to Microsoft’s Outlook e-mail, Xbox game console, Windows mobile phones and corporate-phone software. Skype offers voice and video calling over the Internet.

“This could give Microsoft a much-needed kick-start” in telecommunications, said Paolo Pescatore, an analyst at CCS Insight in London. In voice services, “Skype has certainly set the benchmark and gained a lot of traction.”

Microsoft was already negotiating a partnership with Skype when Ballmer kicked off takeover discussions. He said in an interview that he opted to pursue an acquisition after consulting with the leaders of the Office and Windows divisions.

Ballmer said he then directed Chief Financial Officer Peter Klein to make an unsolicited takeover offer to Silver Lake. Talks began in late March, the people familiar said.

Ballmer led Microsoft’s efforts and kept the plans secret outside of a small team, which included Microsoft Business Division Chief Financial Officer Amy Hood and Marc Brown, who oversees corporate development, one of the people said.

No-Shop Clause

Microsoft’s negotiators insisted on a no-shop clause, which barred Skype from seeking other bidders, according to one person familiar with the matter.

The parties agreed on a price in mid-April and signed the deal the night before it was announced. Microsoft paid a high premium in part because it expected the stock to rise after the IPO, meaning it would cost more to acquire Skype down the road, two of the people said.

“Microsoft was the only serious bidder at that number,’’ Marc Andreessen, co-founder of Skype investor Andreessen Horowitz, a venture capital firm, said in an interview.

Skype’s backers also talked with Google but didn’t get to discussing a price, and no formal offer was made, two people said. There were no other serious offers, one of them said.

The deal will add to Microsoft’s profit in the year after it closes, Ballmer said in an interview yesterday.

Microsoft slipped 16 cents to $25.67 yesterday in Nasdaq Stock Market trading. That left it down 8 percent this year.

‘Deadly D’

Microsoft also may get a tax benefit from the deal. Klein said the company will pay for the purchase using cash held overseas, freeing it from having to pay taxes associated with bringing cash into the U.S.

The company may use a technique known as the “Deadly D,” named for a section of tax law, that can help reduce taxes in cases where a U.S.-based company makes a foreign acquisition, said Robert Willens, who owns a tax consulting firm in New York.

“As far as the tax implications, this is a sweetheart deal,” Willens said. “This will be seen as a real important aspect of deal and will make Microsoft investors more comfortable with the transaction.”

Skype CEO Tony Bates will be president of the Microsoft Skype Division, reporting to Ballmer. The agreement was approved by the boards of both companies. Microsoft expects to receive regulatory clearance for the purchase this year.

Skype was founded in 2003 by Niklas Zennstrom and Janus Friis. The founders sold the company for $2.6 billion in 2005 to San Jose, California-based EBay Inc., which in turn sold off most of its stake four years later. Current investors include EBay, Silver Lake and Andreessen Horowitz.

IPO Plans

A purchase by Microsoft would divert unprofitable Skype from a plan, announced in August, to sell $100 million of shares in an IPO. The company has struggled to convert users of its free PC-to-PC phone services into paying customers, according to a March regulatory filing. The company has 663 million total users, most of whom aren’t active callers.

The purchase of Skype surpasses Microsoft’s acquisition of AQuantive Inc. for about $6 billion in 2007. It’s also the biggest takeover of an Internet company since the dot-com bubble 11 years ago, data compiled by Bloomberg show. Microsoft abandoned an unsolicited effort to buy Yahoo! Inc. for as much as $47.5 billion in 2008 and instead struck an agreement to provide search services on Yahoo’s pages.

Microsoft offers corporate telephone services through its Lync product, as well as consumer video-chat products as part of its instant-messaging software and Xbox online service.

Skype as Verb

Tightly integrated Skype services could be an added selling point for Windows Phone, the mobile operating system Microsoft is promoting as to vie with Google’s Android and Apple’s iOS, said Colin Gillis, an analyst at BGC Partners LP in New York.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. advised Skype on the deal. Skadden, Arps, Slate, Meagher & Flom LLP provided legal advice to Skype’s founders. Microsoft declined to disclose its bankers. Simpson Thacher & Bartlett LLP and Covington & Burling LLP are providing legal advice to Microsoft, and Sullivan & Cromwell LLP is advising Skype and Silver Lake.

Bloomberg LP, which owns Bloomberg News, is an investor in Andreessen Horowitz.

Skype has more than $800 million in annual revenue, Ballmer said yesterday. His forecast for Skype’s impact on earnings refers to profit excluding certain costs.

Microsoft is planning to keep and promote the Skype brand.

“We love the Skype brand -- it’s a verb, for gosh sakes,” Ballmer said in the interview.

--With assistance from Serena Saitto, Amy Thomson, Sarah Rabil and Rita Nazareth in New York and Brian Womack and Cris Valerio in San Francisco. Editors: Tom Giles, Nick Turner

To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net; Joseph Galante in San Francisco at jgalante3@bloomberg.net; Douglas Macmillan in San Francisco at dmacmillan3@bloomberg.net.

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

View the original article here