From yesterday's Chicago Tribune:
Chicago Tribune Barbara Rose Column
Thursday, April 25, 2002 03:15:09 AM - Knight Ridder
Apr 25, 2002 (Chicago Tribune - Knight Ridder/Tribune Business News via COMTEX)
-- There's not much good news these days from Divine Inc., the former Internet
incubator turned bottom fisher, though you wouldn't know it from listening to
founder and CEO Andrew "Flip" Filipowski.
The 51-year-old never sounds more confident than when his back is up against a
wall, a position he's assumed for the better part of two years.
For 15 months he's been buying nearly broke software companies using Divine's
cheap stock while promoting a vision of Divine as an emerging giant that one day
will dominate its markets.
The company sells Web-based software and services to help companies communicate
with customers, suppliers and others.
"Our timing has been on target and the market and product line is a near perfect
fit," he wrote in an e-mail this week to employees announcing pay cuts affecting
half of Divine's 3,600 workers.
He warned that Divine can't count on the economy improving to buoy its business
and must cut costs even while finding new ways to grow.
The company's strategy, he wrote, "is now a fact inexorably divine and a path on
which we will relentlessly remain."
Investors--they include Filipowski, the company's second-biggest
shareholder--have paid dearly for his optimism.
Divine's stock, valued at $9 when the company went public 21 months ago, trades
for less than the price of a package of breath mints. A $100 investment at the
IPO in July 2000 was worth $3.45 Wednesday, when Divine closed at 31 cents.
Shareholders will vote next month on a reverse split to boost the stock price.
Losers include Chicago's elite--the likes of William Wrigley Jr., who invested
$17 million--and corporations such as Dell Computer Corp., which invested $100
million.
In all, Filipowski raised nearly $1 billion in 1999 and 2000. By the end of last
year, he had blown all but $140 million.
The marvel is not how Filipowski managed to lose so much. After all, hundreds of
Internet companies have failed. The wonder is how he manages to stay in
business.
Optimists count on the equivalent of lightening striking twice. In the late
1990s, Filipowski went on a buying spree at his prior software company, Platinum
Technology Inc., before selling the company to Computer Associates International
Inc. for $3.6 billion.
But Platinum was an established company with a proven product and loyal
customers. It flourished during a software boom. Divine is a patchwork of fallen
Internet ventures operating in one of the industry's deepest slumps.
Still, in the Boston-area where Divine has been snapping up companies,
Filipowski is known not as the founder of a failed incubator. He's a guy who
gives failing companies another chance.
"It's like when you get to the end of the CD and there's a bonus track," says
Boston Globe reporter D.C. Denison. "Flip comes in and says, `Okay, you wanna
try one more song?'"
His latest prize--Boston's Viant Corp., an Internet consultancy with dwindling
business prospects and 180 employees--isn't broke. In fact, the company has $116
million in cash. About $80 million of it will end up on Divine's balance sheet
if shareholders approve the deal.
The cash would give Divine breathing room if it fails to meet Filipowski's
latest target for profitability, in the fourth quarter.
Investors in both companies were steaming when the deal was announced April 5.
"A lot of people are upset, myself included," said a Divine investor during a
conference call. "(But) if you can deliver a profitable company that's in
position to really take advantage of a huge potential market, then I say, do
what you have to do to stay alive."
The investor paused. "Is that basically the game plan? Are we doing what we have
to, to stay in the game, so that we can get paid at the end?"
Filipowski's answer: "That is our stance. That is our objective, and we're doing
everything possible to make sure that it occurs."
In a divine world, there's always one more song.
E-mail Barbara Rose at berose@tribune.com.
By Barbara Rose |
