Last week’s announcement that Bertelsmann will pay 4.5 bln EUR to the Belgium 25% stake owner GBL to avoid a public listing of those shares, seems to me the beginning of the end for this family run business. This is not a small amount for Bertelsmann and means that they have to sell off other units now to be able to reduce the debt. Most likely the BMG music group which delivered about 10% of the revenue and gross profit in 2005. Of course negotiations will be tough since any potential buyer knows that the Mohn family has to sell now.

This is once more a family decision that serves to protect their interests and has not much to do with economic sense. Of course everyone working in management positions at Bertelsmann knows by now (see e.g. former CEO departures such as Mr. Middlehoff’s) that it does not help to think outside of the Mohn family box. In light of that the current CEO’s statement on their website is not more than wishful thinking:

Bertelsmann is an enterprise for entrepreneurs – a decentralized, international and innovative company that grants its executives the greatest possible freedom. The world’s best artists, journalists and executives work here and serve up the world’s best media products.”
Gunter Thielen, Chairman & CEO, Bertelsmann AG

The FAZ has put together the following info graphic which shows that private equity is on a roll and also delivers best results.

Sir Robin Saxby, founder of ARM, has given an interview to the Sunday Times.

No, this is not an ironic headline but refers to a full page ad in the latest BusinessWeek where you can read an interview with Xerox’s European President about France’s management innovations. The website that goes with it is www.thenewfrance.com.

The message is: French taste for innovative management and good life. Xerox is a good pick since it has over 4,000 employees in France and in Grenoble (supposed to be French innovation center) hosts one of their four worldwide research facilities. The bottom line says “Now it is time to invest in France.” Behind this ad is the “Invest in France Agency”.

Now yet another example of US-French business partnerships is Dan Brown’s Da Vinci Code which played in Cannes a week ago. France has sold 5 million books, an all time record for book sales. The French embrace this story, written by an American and despite its many inaccuracies, like nothing seen before. E.g. half a million people have visited a marketing promotion with the Da Vinci Code on the Eurostar website (trans-channel train service between London and Paris). Also the Louvre -once heavily opposing the book- has a Da Vinci Code tour and saw 20% more visitors in 2005- many from the US. Maybe the end of anti-French sentiment in the U.S.? Germany needed a new chancellor and France maybe a bestseller book to overcome the Bush-triggered Iraq war separation.

If this will be enough to have US startups place their European headquarters in France, rather than in the UK as practically everyone is doing these days, remains to be seen. If in doubt then why not open a Europe headquarters in Switzerland? They all speak 3-4 languages and remain neutral as long as no-one touches their low taxation. Quality of life is probably one of the highest in the world. Both Google and eBay have already done so BTW. Finally, another Dan Brown book is playing here as well -Angels & Demons- although only a bit, most is featured in Rome. But now please don’t tell the Italians about it…

I’ve always had the impression that one of the major reasons why US start-ups get much more funding is the fact that the exit possibilities in the US are much better than in Europe for example.
In particular the rare cases of IPO exits seemed to me to practically only exist in the US.
Now I had a pleasant surprise as to the value of the European stock exchanges, triggered by the recent consolidation activities among the US and European stock exchanges, where NASDAQ acquired 23% of the London Stock Exchange (LSE) and then the New York Stock Exchange (NYSE) announced an agreement with the board of Euronext -the joint exchange of Paris, Amsterdam and Brussels- to acquire them for 8 billion EUR.
As BusinessWeek quotes one US institutional broker:” If you can’t beat ‘em, buy ‘em.”
But what is there to be beaten I asked myself? Then a chart gave the numbers that made things clear.
In 2000 NASDAQ still had about 120 new foreign listings, far ahead of the NYSE’s 60 and the LSE’s 40. While from the 2000 high all three exchanges declined to just 20 new foreign listings each. Then in 2003 the LSE suddenly took off, with 70 listings in 2004 and a record 140 in 2005, while both NASDAQ and the NSYE stayed at around only 20 new foreign listings.
Reasons that are mentioned are: to a small extent the new stricter regulatory situation in the US (SarbOx), but mainly the fact that Europeans simply decided to stay in Europe and not go to the US, since trading afterwards would anyway be mainly done by Europeans who know those stocks much better. Lots of technology investments into back office and regulatory structures also seemed to be paying off which added to the positive development. I am sure a third reason was an aggressive and a good job done by the LSE in attracting new IPO listings.
Also positively mentioned here is the Hong Kong stock exchange that seems to be doing well too.
The recent consolidations will probably leave some big losers, among them –not fully decided yet, though- the Deutsche Börse in Fankfurt, which could end up suddenly between LSE/NASDAQ and the NSYE/Euronext somewhere in no man’s land. Now maybe looking East -Moscow and a bit further to the new Dubai exchange- might be a good alternative for them, or perhaps the only one? Hong Kong might be too far off, and they are probably too busy anyway to even be interested.
Regardless of how all this plays out, the great news is that finally Europe seems to have a good IPO exit platform that should also encourage higher investments into start-ups.

I am reading this biography, which carries the subtitle “The Greatest Second Act in the History of Business”.
The first half of the 300+ page book describes Steve Jobs in his years up to age 30 or so. While he built Apple Computer during this time, lots of his major failures happened as well. According to this excellently researched book by Jeffrey S. Young and William L. Simon, Steve Jobs was -to summarize it in a simple way- quite a jerk both personally as well as in business. His early success made him arrogant and his capability of sensing next wave technology developments was both a blessing and a problem. Convinced about himself, he thought he was able to rely on his instincts only and avoid market research entirely. Some infamous examples of his subsequent product management failures at that time were:

• The first Macintosh lacked software applications (only Mac Word, Mac Paint and MS Word were available); also the internal memory as well as hard disk drive capacity were too small, requiring users to constantly use the floppy disk drive. This was dubbed the “Disk Drive Olympics” within the Apple Mac team.

• Another major failure was the Apple internal project Lisa, which never managed to develop a product that had a market acceptable price.

• Infamous, too, was his first venture NEXT Computers, right after he left Apple. No clear customer target group in mind, endless product development, and again way too high product price, which ultimately lead to its failure.

• Most of us know of Pixar as being a success story in the animation movie. Have you ever heard of Pixar Image Computer? Steve Jobs had it in mind –in retrospect quite amusingly- to market the customized computer system that the Pixar group, which he bought from Star Wars Star Trek inventor George Lucas for a cheap 10 million USD, used to create their cutting edge animated films. Jobs tried to sell this computer system to hospitals because he thought that the image processing capabilities would be of great use in analysing X-ray or MRI pictures. Of course that environment cannot accept complicated-to-handle tools, which is what their system was. And the price was once again way too high. This is yet another example where Jobs did not analyse market needs prior to a product development launch.

While the above gives the impression that Steve jobs was by no means the genius so many think of, please note that this summary is only based on one half of the biography. I assume I will read about some more human side and also a more business savvy side of him in the other half, which I plan to write about as well.

Also, the above examples lead me to a book I intend to read next. It is called Why Smart Executives FAIL – and what you can learn from their mistakes.

BusinessWeek has an article wondering whether its bubble time again in Silicon Valley and whether we should worry. This bubble is supposedly all about the producers of Web 2.0 products and is I think therefore almost by definition far less of a concern than the more general bubble of late 1990s.

When Caterina Fake, co-founder of the Flickr photo-sharing Web site, sat down in March to write a blog entry, she expected to rankle some readers. Her post, titled “It’s a bad time to start a company,” was a frank argument that a bubble was reinflating Internet businesses. Valuations are rising, hordes of copycat companies are getting funded, and venture capitalists are flooding hot areas with money again. Fake, who bootstrapped her company on $250,000 after the dot-com bust and sold it last year to Yahoo! Inc., wrote that those trends are making it impossible for upstarts to stand out. She dissed the notion that a second wave of Net development, dubbed Web 2.0, will benefit all the new ventures, many of which she called “features,” not companies. The frothiness, she added, reminded her of 1998.

I do agree with much of the opening statement. There is a lot of money floating around; there are a lot of people willing to either take risks or fund others; and I am certain that many of the “Web 2.0″ companies will fail because they don’t really have a product. However I disagree with the idea that this is anything out of the ordinary. It seems to me that we are looking at a return to the more usual Silicon Valley cycles, with one area hyped while others apparently languish, rather than the simultaneous frothing everywhere of 1999.

So do I think that Web 2.0 is excessively hyped? Possibly. But that doesn’t mean we should stop looking at new ideas in this space. Most of what Web 2.0 and other related fields such as blogging, rss and internet multimedia are doing today is living up to the claims and hopes of 1999. Between RSS and AJAX, for example, we appear to have solved the problem that Pointcast and other “push technology” startups were trying to fix.

Furthermore, as the BW article itself points out, one key difference between now and 1999 is that today companies can be started for far less and hence exits are consequently easier. If you have a company founded on $250,000, selling it for $5 million gives you a 20x return. Whereas a company founded on $5 million needs to be sold for $100 million for the same return. There are still plenty of hardware companies raising $5 million and more in financing but there aren’t that many Web 2.0 companies doing so. As a result I feel that the bubble is far less dangerous.

Every year Redherring, Tornado Insider, Deloitte, among others, announce best startups or fastest growing companies. Of course this exercise is quite tricky and we suspect that rather than applying clear criteria, the selection process is reduced to a combination of a few things such as amount of funding, big name investors and certainly a buddy network. While this brings up some good ones (good companies also attract good company), it also includes companies that should really not appear on those lists. Fundamentally at least there is a networking opportunity during the ceremony event. Unfortunately, these events are then used to make some money (entrance fees are a few thousand EUR). Our suggestion is to provide the winners with some free support which would have more practical value than putting an award logo on their websites. BTW, the former is exactly what Nice Ventures does with its Product Marketing award for European high-tech startups.

The Nokia 770 tablet was always a bit of a test product rather than one that has the full Nokia marketing muscle behind it. Despite that it has apparently been more popular than expected, having been sold out a few times.

Another indication that the 770 is looking good is this WSJ report via CIO.com that a  second edition is to appear and that this will include a Google talk client to allow for voice and messaging services.

It is of course also interesting that Nokia chose Google over Skype, possibly the fact that Google has not (yet) got a way to connect to the PSTN is the reason - after all Nokia’s major customer the MNOs would probably be rather unimpressed with a Nokia tablet that supported a mobile Skype client.

Mobile phone designers from Motorola, HTC and Samsung are in a competitive race to announce every other month or so new records on who has the thinnest phone. Now Samsung is leading with its latest 7mm slim model X820. It seems that things can’t get much thinner any more but I would not bet on that… What Samsung might still need to create, though, are more creative names for their phones or does SGH, SPH, SCH get you excited? The new ad agency they signed on in the US might find some better ones.