hackoff.com: Chapter 12 - In Play, February 26 - May 28, 2002

From: Dom Montain [mailto:domm@hackoff.com]

Sent: Saturday, March 2 2:04 AM

To: Larry Lazard; Donna Langhorne; rroth@barcourt.com

Subject: meeting with Microsoft

Met with pete harkin as planned. Short story is that MS is not going to be a good prospect. Petehar is too dumb to know a good thing when he sees it but I don’t think they’d buy anyway.

Longer story:

Went thru the PowerPoint with petehar. He’s a director somewhere in the systems group that has responsibility for ecommerce servers or ecommerce use of NT servers anyway. They’ve reorganized so much since I left that I’m not sure what this means, but usually director at MS is like VP somewhere else. billg’s stingy with titles and I hear steveb is worse.

I knew petehar slightly when I was there. He was programming in the database group; some brain dead thing that never happened. But actually he has a business background. Has been a program manager most of his career there. Don’t know what he was before he came to MS.

He’s the kind of guy they’d send if they might be interested. There are other guys who go when they know they’re interested. They don’t worry much about polite, so they don’t send anyone if they know they’re not interested.

Of course he gave me the usual MS bullshit that it’s all going to be in the operating system anyway. Security isn’t a separate product — it’s got to be built in to work right and they just haven’t gotten around to doing that yet but three groups are working on it so its something that’s going to get solved. But maybe if we have something that would save them a little time, then maybe it would be of some interest. And maybe if we have some customers that are so dumb they’re using Sun Servers or “Linux crap” and maybe having some kind of deal with hackoff is a fast way to get them to switch over to Microsoft servers that they ought to be using anyway, then maybe there would be some value in it. But not a lot of value as he sees it.

I didn’t tell him but obviously our customers aren’t going to switch to MS servers for their ecomm apps just because MS buys hackoff. The customers have too much invested in their current platforms. IMHO, they want to go Linux if they’re going anywhere. But I didn’t tell him that. Still I don’t think he gave too much weight to customers, just something he mentioned.

So then he wants to know about the technology. And right away we have the problem we were afraid of. He’s dumb but he’s not that dumb. As I said in our meeting, I’m not really afraid that Microsoft’ll steal what we’ve done. What I’m really afraid of is that petehar goes and works for a hacker or, even if he stays at Microsoft, he writes a lot of email – they live on email, even more than us – all about our technology and some of that gets to a hacker or someone who is going to be a hacker.

I tell him we can’t tell him how it works. Would have to shoot him and all that if we did. He asks then how’s he know there’s anything to buy? I point out to him how many customers we have, how none of them who follow the directions ever got hit with anything major. That’s a big deal. They’re all targets. He says same is true with antihack customers.

I tell him what problems the antihack customers have. antihack’s slow with new protection for new problems. Their shield for Andromeda 1’s so bad that an eleven year old got through. Lucky he didn’t know what to do when he got in. Their KittyKat shield was so slow their customers were safe because they couldn’t take any orders anyway. Couple of months ago hackers DID get thru to a couple of antihack customers.

He says he knows all about those things but antihack’s got them fixed. No big deal. I ask him if he’s been talking to antihack since he knows so much about them. He says of course he can’t tell me or he’d have to kill me. He wants me to think he has but I don’t think so. He didn’t pick up any of their buzz-words.

But, still, he says our stuff’s the same as theirs so he still doesn’t know what it is that would make MS want to buy us. So I have to tell him a little more but not how it’s done. I tell him about some of the heuristic stuff but not what we’ve learned from it. I also go into some of our patents. That did get his attention but he said they have patents too. Did say they would never violate anyone’s legitimate patent. I think they got spooked by diskdoubler. But he also said that they wouldn’t hesitate to find good prior art to invalidate any patents that were too broad — a lot of those around these days, he said. That was a threat.

He wanted to know how much of our development is for a Microsoft platform, how much for UNIX, Linux etc. I told him about split-even. He drilled down on that so I had to tell him I meant 1/3, 1/3, 1/3. Wasn’t counting Linux with Unix. He said Linux is just another flavor of Unix but they have even less interest in buying us then because they think that no one’s going to use an open-source platform like Linux for something that has to be secure and Unix is dying.

He WAS interested to know that we assumed hackers are using Macs or Linux machines for their own development. Lots of the attacks, of course, come from NT servers they’ve hijacked. He wanted to know why the hackers don’t use Windows for their own machines so I told him 1) they don’t want to get attacked themselves; 2) they don’t like Windows. They don’t like Microsoft which makes them want to attack Microsoft product more, and they do that because they’re out there.

So ends up he says he’ll make a report but we shouldn’t hold our breath. Maybe if we were folding the company and wanted to sell some technology licenses or patents they’d have some interest but he doesn’t see why they’d do a whole company buyout. Don’t want to be in the business we’re in and — he said it again -- don’t see much difference between our technology and antihack.

From: Rachel Roth

Sent: Saturday, March 2 10:07 AM

To: Larry Lazard; Donna Langhorne; Dom Montain

Subject: RE: meeting with Microsoft

Thanks for the all the detail, Dom. It’ll be helpful to us going forward.

At least they tell us what they think. That may be a problem with others. We’ll follow up if you want us to in a week or so just to close the loop and to see if whatever he says in his trip report raised any interest. I’m SURE you did a good job selling our value even given the constraints.

From: Donna Langhorne

Sent: Saturday, March 2 12:04 PM

To: Dom Montain; rroth@barcourt.com

CC: Larry Lazard

Subject: RE: meeting with Microsoft

Dom:

Good job and good report.

Rachel:

We knew we’d have this problem in establishing value. Have your “resources” at Barcourt come up with anything to help us yet?

Donna

From: Dom Montain [mailto:domm@hackoff.com]

Sent: Thursday, March 7 1:31 AM

To: Larry Lazard; Donna Langhorne; rroth@Barcourt.com

Subject: meeting with Oracle

Met with three guys from there. Bizdev guy didn’t show. Short story is that they do not see a compelling need for the technology and do not distinguish between us and antihack. Like Microsoft, might buy patents and technology from the scrapheap. Could be interested just to keep us away from Microsoft.

Longer story:

Oracle sent product VP Mark Jopher, director Emile Cauve, and strategy director Francine Lauche. Jopher did most of the talking. Larry and I were there as well as Rachel Roth from Barcourt.

Larry presented the PowerPoint. Emile and Francine listened but didn’t ask questions. Jopher slept or pretended to sleep through most of it. He was awake at the end and immediately said that capability like this belongs in the database engine. It’s brain dead to have it anywhere else. Oracle hasn’t done that yet but, given their leading market position especially in e-commerce, it’s a natural for them and they’ll get around it sooner rather than later.

I brought up our patents and that we feel they are both broad and enforceable. He said that he was sure the approach they would be able to take in the database engine was so different from what anyone else would have to do that patents couldn’t possibly be a problem.

He liked the fact that we are cross-platform and not Microsoft-centric. One possible opening is that, when we gave them the impression that Microsoft is seriously interested, they became much more interested themselves. Maybe we could game this so each of them bids because they think the other one wants us. It wouldn’t be the first time they spent money to keep each other out of strategic spaces. Not sure how far we’d get with this.

They didn’t ask for the kind of technical detail Microsoft wanted but pushed back when Larry said our technology is unique and much better than anything else out there. Specifically mentioned antihack. In fact, they thought it was antihack which announced a managed service. When we set them straight on that, Jopher turned it around and said that the antihack stuff must be better because it doesn’t need active monitoring.

Rachel is going to followup with Francine. I’m supplying them with the public information on the patents. Larry’s trying to find a way to play the Microsoft card that isn’t in our hand.

From: Larry Lazard [mailto:larryl@hackoff.com]

Sent: Thursday, March 7, 2002 2:05 AM

To: Donna Langhorne; rroth@barcourt.com; Dom Montain

Subject: RE: meeting with Oracle

I agree with Dom that the Microsoft card may be our strongest play. However, after thinking this over, it is probably best played by Rachel. She should get back to them sooner than planned to give them a heads-up that they are competing with Microsoft here.

Rachel, you’ll know the best way to say this. Maybe you can’t tell them directly, which makes it all the more compelling. You’re just giving them a hint but can’t tell them the whole story. Maybe that makes them imagine more.

In fact, I like this so much that we should try with MS, too. Dom, do you want to call your guy? Or can we think of some way to do this through bankers, too?

###
Rachel calls Larry at nine the next morning. “Larry, three things. One: I think it is a really good idea to play Microsoft and Oracle off against each other. I mean that could really work.”

“Good,” says Larry. “Have you thought about what you’ll tell them?”

“Well, that’s thing number two. I’m not sure it’s appropriate for me to do this. I’m the banker and our role is sort of as honest broker. I mean…”

“I don’t know what you mean,” says Larry. “I don’t know what the fuck you mean…”

“Larry, there’s no need to be abusive.”

“Okay, let’s discuss this very calmly. Who’s paying you?”

“You are … I mean hackoff is.”

“Right. So who are you working for?”

“We work for you. But, like your accountants—”

“Rachel, let me ask you a different question: Did you forward our email to Harvey Maklin?”

“Of course. I told you that you would have the support of the whole Barcourt team.”

“And he just told you to call me and tell me that you guys shouldn’t get your hands dirty doing this, right? Before that, you thought it was a good idea, right?”

“Well, he didn’t say anything about getting our hands dirty.”

“So you want me to call Harvey and tell him to cut the crap, or you gonna do it? I don’t want to hurt your career or anything. I think you’ve done a good job for us so far. But we’re entitled to all the negotiating help we can get for the money we’re paying Barcourt and there’s no way I’m gonna let that asshole stop us from getting what we’re entitled to.”

“I can handle Harvey,” says Rachel. “Actually, I agree with you. I’ll handle him.”

“Knew you could do it,” says Larry with an audible smile. “Can’t cut his balls off, though.”

“Not sure I want to know, but why not?”

“Because he doesn’t have any.” Larry laughs, then stops. “What was the third thing?”

“Please don’t put stuff like this in email. Especially, don’t put in email that you’re asking me to lie to the prospects. If it’s not in email, I don’t have to forward it anywhere. If it is in email, we don’t know when it’ll resurface.”

“I guess you’re right,” says Larry. “Not asking you to lie, of course, just to bluff. That’s different. We all know that bankers never lie.”

“I’ll let you know how the calls with Microsoft and Oracle go,” says Rachel.

###

From: Donna Langhorne

Sent: Thursday, March 7 10:02 AM

To: Larry Lazard

CC: Dom Montain; rroth@barcourt.com

Subject: RE: meeting with Microsoft

Larry:

I think you and Dom are right. We ought to play the Microsoft-Oracle thing. Rachel should certainly be the one to spin the yarn. I’m still not satisfied, frankly, that we’re getting our money’s worth from Barcourt. This idea should have come from them.

Rachel, this is a real chance to add some value.

Donna

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