(cid:51)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)(cid:38)(cid:68)(cid:86)(cid:87)(cid:29)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:53)(cid:76)(cid:86)(cid:72)(cid:3)(cid:36)(cid:81)(cid:71)(cid:3)(cid:41)(cid:68)(cid:79)(cid:79)(cid:3)(cid:50)(cid:73)(cid:3)(cid:36)(cid:81)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:72)(cid:87)(cid:3)(cid:54)(cid:87)(cid:68)(cid:85)(cid:3)(cid:16) (cid:37)(cid:79)(cid:82)(cid:82)(cid:80)(cid:69)(cid:72)(cid:85)(cid:74)
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`(cid:51)(cid:68)(cid:74)(cid:72)(cid:3)(cid:20)(cid:3)(cid:82)(cid:73)(cid:3)(cid:27)
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`(cid:50)(cid:81)(cid:75)(cid:80)(cid:86)(cid:2)(cid:37)(cid:67)(cid:85)(cid:86)(cid:28)(cid:2)(cid:54)(cid:74)(cid:71)(cid:2)(cid:52)(cid:75)(cid:85)(cid:71)(cid:2)(cid:35)(cid:80)(cid:70)(cid:2)(cid:40)(cid:67)(cid:78)(cid:78)(cid:2)(cid:49)(cid:72)(cid:2)(cid:35)(cid:80)(cid:2)(cid:43)(cid:80)(cid:86)(cid:71)(cid:84)(cid:80)(cid:71)(cid:86)(cid:2)
`(cid:53)(cid:86)(cid:67)(cid:84)
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`(cid:43)(cid:86)(cid:85)(cid:2)(cid:85)(cid:67)(cid:73)(cid:67)(cid:2)(cid:86)(cid:71)(cid:78)(cid:78)(cid:85)(cid:2)(cid:81)(cid:72)(cid:2)(cid:74)(cid:81)(cid:82)(cid:71)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:74)(cid:87)(cid:68)(cid:84)(cid:75)(cid:85)(cid:2)(cid:75)(cid:80)(cid:2)(cid:67)(cid:2)(cid:74)(cid:75)(cid:73)(cid:74)(cid:15)(cid:84)(cid:75)(cid:85)(cid:77)(cid:2)(cid:68)(cid:87)(cid:85)(cid:75)(cid:80)(cid:71)(cid:85)(cid:85)(cid:2)
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`Such is the tale of PointCast's slide. In 1996. before Yahoo!. Excite Inc .• and others.
`PointCast recognized the power of delivering personalized information over the Net.
`Its software allowed consumers to customize news automatically through the push
`technology. Selected content would be culled from the Web and delivered to an
`individual's computer screen--all for free. PointCast made its money from
`advertisers.
`
`The idea caught fire. By the end of 1996, PointCast's network boasted 1.5 million
`users, $5 million in annual revenue, and a list of marquee advertisers. The company
`had attracted more than $48 million in funding from venture capitalists and
`corporations such as Softbank. Compaq Computer. and General Electric Capital
`Services. On paper, PointCast had achieved a valuation of $240 million.
`
`As ifthat wasn't enough. Microsoft Corp. added its muscle in December.1996, by
`agreeing to bundle PointCast with its Internet Explorer browser. Not long after. at
`PointCast's first trade show--Internet World--in the spring of1997 in Los Angeles,
`building inspectors almost shut down the company's exhibit because they feared the
`crowds surrounding the booth presented a danger. "We sat around the table and
`worried a lot about PointCast and push technology," recalls Timothy A. Koogle, CEO
`of Yahoo!, then a PointCast rival.
`
`That's when News Corp. decided to give PointCast the once-over. Discussions got
`under way between Hassett and Rupert Murdoch's son James, who was in charge of
`News Corp.'s new-media strategy. Hassett flew down to Los Angeles and first met
`with the young Murdoch on the set of a police show at Fox Studios in January, 1997.
`Insiders say a tentative deal was struck in which News Corp. would acquire
`PointCast for $450 million. But before the papers could be drafted, issues surfaced
`over PointCast's revenue projections and the price tag, insiders say. The offer simply
`went away. James Murdoch, president of News America Digital Publishing, denies
`that the offer evaporated. Instead, he says PointCast didn't grab it fast enough. "We
`wouldn't let our offer sit out there indefinitely," says Murdoch. "They did have an
`opportunity to take an offer. and they didn't take it."
`
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`"POOR BET." Either way, the failed pact was a blow, particularly as problems began
`to arise with PointCast's technology. Customers had begun to complain that the
`service was slow. It also was causing traffic jams on corporate networks because
`bandwidth was not big enough to carry all the information that users wanted.
`Customers began to abandon the service in favor of new offerings from the likes of
`Yahoo! and Excite. "The market is pretty unforgiving of missteps," says Jonathan D.
`Feiber, aPointCast investor and board member. "We just fell off the curve."
`
`The growing popularity of Web-based competitors put PointCast in a pickle--and
`illustrated why its entry to the market may have been premature. The company had
`already spent millions establishing a proprietary network and infrastructure to
`support its product. Shifting to the more efficient Web made sense strategically.
`
`But the task seemed nearly impossible. PointCast had built its entire business
`around proprietary software. "We placed a bet," says a former executive. "In
`hindsight, it was a poor bet because the Web allowed people to innovate more
`quickly than we could."
`
`Another insider says that the issue of moving to a Web-based service was divisive: "It
`became a religious war," recalls Jason B. Douglas, PointCast's former vice-president
`of products and programming.
`
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`Still, PointCast had a solid following and was on its way to tripling its revenue by the
`end of 1997. But investors worried about Hassett's leadership and ability to expand
`the company. over his vehement objections. and those of his co-founder and
`brother Gregory, the board started looking in June for a high-profile executive to
`replace Hassett. "It was time to bring in more seasoned leaders who could provide
`the right level of management for PointCast," says former board member Charles
`Geschke, president and chairman of software maker Adobe Systems Inc.
`
`For five months, no seasoned leader materialized. Insiders say the company. out to
`land only a star-studded media executive, overshot. "From the beginning, we were
`high on our own fumes," says a former employee.
`
`Being rudderless for so long cost the company dearly. When a CEO did surface in
`October, it was not a media bigwig. Instead, it was David W. Dorman. the former
`CEO of Pacific Bell. Dorman was greeted enthusiastically by the PointCast troops.
`His first companywide meeting gave many hope about the future as he expressed
`unbridled confidence in the company's mission.
`
`WINDOW SHOPPERS. That was before Dorman had a handle on PointCast's
`problems. Dorman says he soon realized that the troubles went beyond technology.
`Management was in turmoil, and spending was out of control. The company at
`times was blowing through as much as $2 million a month. "I was in firefight mode
`from the minute I walked in the door," Dorman says. In addition to addressing the
`software problems, PointCast needed to raise more capital. So the company filed to
`go public in May, 1998, at a valuation of about $250 million. PointCast quickly
`abandoned that plan in July, however, explaining that it needed to pursue strategic
`partnerships instead.
`
`PointCast spoke to scores of potential partners or acquirers, including Time Warner,
`Yahoo!, NBC. and Softbank. "We had no trouble getting people to look," says
`Dorman. "But people were scared off by the negative stigma."
`
`One group of lookers that wasn't scared was a consortium of the Baby Bells--with
`which Dorman had close ties. In August, Dorman flew to his hometown of Atlanta
`
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`for vacation and met with BellSouth Corp. executives. Dorman believed that
`Internet service providers could use PointCast to create a high-speed broadband
`portal to the Web to compete with At Home Corp. PointCast showed a prototype of
`such a service to BellSouth.
`
`HIGH HOPES. The timing seemed perfect. BellSouth and some other Baby Bells had
`been grappling with ways to promote the use of digital subscriber lines (DSL) as an
`alternative to high-speed cable modems used by At Home. So BellSouth, joined by
`Microsoft, Bell Atlantic. US West, and Bell Canada, launched a secret project.
`dubbed N ewnet.
`
`According to several sources, the plan called for the group to invest some $400
`million to launch the venture. On top of that. they would buy PointCast for about
`$100 million and use it as the entry point for the new consumer service. The telecom
`companies would provide the wiring, billing. and customer support. while Microsoft
`provided capital. technology. and online content. "This was going to be the third
`online network competing with AOL and At Home." says one insider. "This was
`going to be huge." BellSouth. US West, Bell Canada. and Microsoft declined
`comment.
`
`The partners signed a letter of intent on Dec. 16 and set a target launch date of April,
`1999. The Baby Bells also sank $15 million into PointCast. which was running
`dangerously low on cash. Marketing teams met and came up with a new name.
`Sources say the leading contender was Corazon, the Spanish word for heart. Dorman
`says he preferred the name Macrame.
`
`PointCast and Dorman had so much faith in their negotiations that the company
`signed an agreement preventing it from pursuing any other opportunities, at least
`until the end of January. It also required PointCast to retain 90% of its workforce,
`which kept the company from easing its cash crunch.
`
`But when the January date came and went, PointCast grew nervous. Microsoft,
`which was at odds over some of the technology and was frustrated by the slow pace
`of the deal, soon dropped out. Without a heavyweight partner. the Baby Bells
`
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`worried about their ability to compete effectively. They tried unsuccessfully to add
`heft to their team by recruiting SBC Communications Inc.
`
`Dorman's patience wore thin. Frustrated by seemingly endless delays, he
`announced his resignation on Mar. 4 and his intention to head a new joint venture
`between AT&T and British Telecommunications PLC. "I just couldn't go on any
`longer," he says. To many, Dorman's departure deep-sixed any hopes of keeping
`Project Newnet alive. Despite assurances that a deal was still on track, PointCast
`executives began crafting an alternate strategy. Good thing they did: On Mar. 17, the
`Bells notified PointCast that their plan was dead.
`
`Left at the altar, PointCast has begun the painstaking task of reconfiguring its
`business. It has laid off nearly a third of its 220 employees and is pursuing a
`narrower strategy. "PointCast intends to refocus itself and leverage its assets," says
`spokeswoman Wendy McCarthy. What are those assets? McCarthy says PointCast
`still has 1.2 million users, 6 million unique E-mail addresses, and 700 content
`partners.
`
`What it doesn't have is cash. PointCast is seeking at least $15 million to stay alive.
`Hassett, Microsoft, and Softbank, among others, have looked over the company. But
`the majority of shoppers have been wary. PointCast's tarnished image and a serious
`drop in ad revenue--from $18 million for all of 1998 to just $2 million in the most
`recent quarter--are turnoffs. Says Softbank Technology Ventures Managing Partner
`Gary Rieschel: "It's going to take a great amount of effort to turn the company
`around, and we didn't feel it was the best use of our time."
`
`Still, along with Hasett's bid, sources say multiple offers for the company are being
`considered. Should Hassett prevail, he says he has no intention of running the
`company himself, a la Apple Computer Inc. 's Steven P. Jobs. He's too busy with his
`new Web startup, PrizePoint Entertainment Corp. Rather, Hassett hopes to bring in
`new management and do what he says the company should have done long ago:
`become a Web-based service. "I believe we will come to terms one way or another,"
`predicts Hassett. For the sake of the Internet's latest fallen star, one of these deals
`may be the only way to keep it from fading away altogether.
`
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