Celebrity CEO Series: John Little and Portal Software proves that you don’t have to make money to make money
Besides, $220 million is quite a premium for a company that lost $75 million last year, said Patrick Kelly, partner and founder of analyst firm OSS Observer. In fact, Portal hasn’t had a profitable year from a revenue standpoint since its very successful initial public offering in May 1999.
from the April 13th, 2006 Connected Planet article “Oracle pays premium for Portal” by Tim McElligott
Now if one were to just read the above paragraph excerpt from the McElligott article, in which Oracle Corporation paid $220 million for a company that had consistently lost money, two thoughts might immediately come to mind; 1. the company being acquired after a highly successful IPO sounds a lot like today’s Groupon in that the latter’s high market valuations does not reflect its losses and weak balance sheet, and 2. If some CEO could get $220 million for a company that loses money then that must be some executive and as such why is he or she part of this Celebrity CEO Series.
Both good points to be certain.
In terms of the Groupon comparison, a company about which I have written extensively (Madoff and Blodget cross swords over Groupon), I have long since stopped being surprised by the financial exploits associated with the markets and how like the Air Supply hit song Making Love Out of Nothing at All, companies can be heralded as golden despite the absence of any tangible monetary proof.
This absence of substance of course applies to Portal Software and in particular its founder John Little who, in a relatively short time period went from appearing on the cover of Forbes Magazine in 2000 under the banner “The Billionaire Next Door,” to a 2001 Forbes article that announced that the company had lost one-third of its market cap in a single morning.
Within this context, one might argue that when compared to billions a $220 million price tag is tantamount to chump change along the lines of the nickels and dimes one would use to buy something at a neighbourhood garage sale.
Obviously the authors of the Financial Post article from whom we have gleaned our list of Celebrity CEOs feel the same way, as they included John Little’s Forbes Magazine cover shot with the words “TECH WRECK” stamped across the image of the once prosperous CEO.
The question is simply this . . . was John Little really a Tech Wreck executive or was he, like so many CEOs caught up in the wave of the overly enthusiastic market that was the dot.com boom, merely one of its victims?
In this regard, the Forbes article “The Moral Limits of Wealth” sheds an interesting light on not only John Little but other CEOs and high tech entrepreneurs who with seemingly little effort realized enormous wealth almost overnight.
Take Little for example.
In the article Little recounted the story of a gentleman sitting next to him on a flight reading the very Forbes magazine on which John graced the Billionaire Next Door cover. Not recognizing that the person sitting beside him and the man on the cover were one in the same, the passenger went into a tirade about being “so sick of these rich Internet brats! I’ve got years of experience. I work ten hours a day, and these 25-year-olds make millions overnight while I’m struggling to feed my family.”
While no blows or verbal barbs were exchanged between the two, according to Forbes, the Portal CEO was furious. As Little later shared “The guy undoubtedly thought I got the idea for my company last week, and this week I’m worth a billion dollars. Actually, I’ve been in this business for 14 years. I’ve worked my butt off, and finally it’s come together.”
In this instance I truly understand how Little feels in that when you, in relative obscurity, put in all of the effort and all of the hours while assuming the lions share of the risk to build a vision into a reality, and then have it finally pay off the last thing you want to hear is some pontificating loud-mouth lamenting his lot in life. Of course, and due to the years of toiling in anonymity, the majority of people would not have heard of John Little or Portal Software until he hit pay dirt. In other words, people only see the immediate headlines as opposed to what went into making those headlines in the first place.
Unlike one Ottawa high tech big hitter, who’s nose got out of joint when upon meeting him for the first I did not immediately recognize his name nor genuflect at the prospects of collaborating with him, Little appears to be more visionary purist than egotistical wannabe captain of industry. At least this is my take from the interviews I have read involving Little.
This of course brings us back to the original question . . . is John Little really a Tech Wreck CEO? My answer would be no.
Think of it this way, if the real estate market tells you that your $150,000 home is now worth $12 million, are you going to argue with the market? No, you sell your house for the $12 million. Not long afterwards, and resulting from a “market correction,” the house’s value drops back to the $150,000 mark (or less). Is that your fault? Worse yet, should you shoulder the blame for the decline?
The fact is that like most companies during the late nineties, Portal Software was never worth the purported megabucks and while some may contend this last point, the $220 million Oracle paid for the company back in 2006 appears to be spot on.
If you accept the above as being reasonable, then John Little was a good CEO who pursued his vision with both energy and integrity, and as a result should not have been counted amongst the likes of Nortel’s Roth or Bre-X’s David Walsh.