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Dell entering Smartphone market. Ron Garriques Likley To Oversee another flop?

StreetInsider indicates that Dell will be entering the US smartphone market with AT&T.  Does the phrase “too little, too late mean anything”?

A friend pointed me to an article that was published on January 2, 2010 in the Austin American Statesman: “Whom to Watch in Business This Year”.  Lo and behold, there is Ron Garriques, listed as #2.

Here is the sentence that got my blood boiling: “Garriques made a name for himself at Motorola as the executive who drove creation of the Razr cell phone, which became a big hit”.

No he didn’t.

Ron was the guy who took the credit for the Razr.  He didn’t create the Razr, and he didn’t drive its success.  

This has been pieced together from various media reports.


Ron Garriques jumped ship from Motorola and joined Dell as soon as he saw the RAZR losing steam.

Let’s look at his record.

The RAZR was a big hit when it was introduced in 2004, but the guy who developed the RAZR was Geoffrey Frost, who was Executive Vice President and Chief Marketing Officer at Motorola, not Ron Garriques. Unfortunately for everyone in the executive team at MOTO, Frost died in 2005. Frost is credited with creating something cooler (and more expensive) than anything else out there. Everyone wanted it. Garriques competed with Ed Zander (CEO of Motorola, and former senior executive at Sun Microsystems) for the credit.  Zander won, and Garriques tried to manage the business.

In 2005, Motorola released the ill-fated ROKR phone.  It could download iTunes music. As the ROKR hit a flat note, Garriques suggested that it had a poor “message”, even though critics called the phone ugly and took a dim view of its puny 100-song limit. Garriques’ promised to make up for past mistakes with a black ROKR 2, and then a ROKR 3.  These phones struck some observers as resembling Sony's new Walkman with wireless music downloads to make phone companies happy.  They were to have a hefty 1,000-song capacity to appease users.

No one remembers that Motorola also released the Pebl and the Slvr (the candy bar version of the Razr) while Garriques was in charge in mid-2006. Both phones were huge flops. Garriques was quoted “I can envision Slvr being equal in 2006 to where Razr was in 2005."

In June 2006, Motorola introduced the Q phone. The reviews were simple: Nice phone, ugly software. Instead of developing software for the phone, Motorola (under Garriques’s leadership) reaped the dividends of Frost’s work as the company made billions in profit from overselling the RAZR for years.


In late November 2006, Garriques and Zander “engineered” the acquisition of Good Technology for $375mm. Motorola was trying to catch Research in Motion, and figured that the email software company would help them do it. Unfortunately for them, Kleiner Perkins (the VC backer of Good) and Dan Schader (the founder) had come to the conclusion that their efforts were not sufficient to catch RIM without a hardware platform. So they sold it to Motorola. Motorola mobile devices business president Ron Garriques said in a statement. "This acquisition will continue to strengthen Motorola as a leading provider of mobility devices and solutions both for enterprise customers and consumers."

Where was the management skill of Ron Garriques during all of this? His strategy was high volume and market share. In other words, ride the RAZR product down its cost curve. As a result, Motorola rode that one product way too long.

Then the buzz began to grow around Apple’s new phone – which we now know as the iPhone.

Around early November, 2006, Garriques was looking for new products to succeed the Razr line, and talked about an established goal of a 30% market share, slightly less than Nokia's 34% share.

In February 2007, Garriques resigned, effective immediately, and joined Dell. He did not want to get any of the blame for the sinking ship – even though the significant slide began and intensified on his watch.

Motorola announced first quarter results on April 20, 2007. The die was already cast. Motorola recorded a Q1 net loss of $181 million, compared with a profit of $686 million in the year-ago quarter. Handset sales slumped 15% on-year to $5.4 billion; the vendor shipped 45.4 million devices during the quarter, a slide of 2% on Q1 2006 and down 31% on Q4. Instead of cutting prices – and margins – as it did in achieving record volumes during Q4 2006, Motorola began sacrificing market share in order to defend prices and margins.

That's Ron's record.  Therefore, I'd be watching him in 2010 as well.  However, for different reasons than the Statesman would suggest.


Ron's recruiter/agent is the person I want to speak with and watch.  That guy works miracles.

Dell - ROTFLMAO!!

As Apple approaches $200 billion in market cap, I'm reminded of Micheal's famous, or infamous, comment about what he would do with Apple.

To paraphrase, he would close up the company, and return any excess cash to shareholders.

Today

Apple market capitalization is $194 billion, representing a multiple of 5.3x on trailing 12 month revenues.

Dell market capitalization is $29 billion, representing a multiple of 0.56x trailing 12 months revenues.

In other words, the market is valuing the entire company of Apple at 6.7x that of Dell.

However, adding insult to injury, the market is valuing a $1 of Apple revenue at almost 10x that of a $1 of Dell revenue.

ROTFLMAO!!!

Hey, Brad Feld – Get over Yourself.

I have to admit, that the kind of sh&t described below just makes my blood boil.

One of the comments from the website, TheFunded.com, indicates that “it’s all about Brad.” While he can be engaging, thoughtful and involved, he is also so full of himself that you want to puke.

Brad is an active blogger, and participant on Twitter. As a result, he appears to be very focused on building the brand of “Brad Feld” – which is OK, but at the same time, leads to instances of humorous gastronomical regurgitation (….aka…puking), and eyebrow raises that quietly enunciate the phrase…WTF!!

Case in point. A few days ago (Dec 20, 2009), Brad re-tweeted a comment from Bijan Sabet (a VC in Boston), that was titled, “We Gotta Do A Deal Together.” The focus of the blog was to lament the notion that no one ever really means that they want to do a deal with you, when they say, "We Gotta do a deal together." The phrase is used, more often than not, as a social equivalent to “have a nice day.” As a result, the six word phrase, “We Gotta Do a Deal Together”, is laughable.

Fair enough.

When Brad Feld re-tweeted that blog by Bijan, it would lead you to think that Brad agreed with Bijan’s sentiment.

Hey guys, I have news for you. Here’s another phrase: “What goes around, comes around”. In other words, if no one is offering or introducing deals to you, then perhaps you need to look at your own behavior.

Case in point. Yesterday, Brad Feld posts an article on his blog, ”Feld Thoughts” : It’s All About Brad ….(OK, so I added in the last part), titled, “Don’t Ask For A Referral If I Say No”

http://www.feld.com/wp/archives/2007/11/dont-ask-for-a-referral-if-i-say-no.html

WTF!!

Quote: When I say no, I try to do it quickly and clearly. I try to give an explanation, although I don’t try to argue or debate the deal. I’m sure that many of the things I say no to will get funded and some of them might become incredibly successful companies. That’s ok with me and – even if I say no – I’m still rooting for you. UnQuote

Quote: However, if I say no, please don’t respond and ask me to refer you to someone. You don’t really want me to do this, even if you don’t realize it. By referring you to someone else, at some level I am implicitly endorsing you. At the same time, I just told you that I’m not interested in exploring funding your deal. These two constructs are in conflict with each other. The person I refer you to will immediately ask me if I’m interested in funding your deal. I’m now in the weird position of implicitly endorsing you on one side, while rejecting you on the other. While this isn’t necessarily comfortable for me, it’s useless to you as the likelihood of the person I’ve just referred you to taking you seriously is very low. In fact, you’d probably have a better shot at it if I wasn’t in the mix in the first place! UnQuote

Excuse me?

So much of the start-up and VC business revolves around networking. More importantly, if you don’t know a VC, don’t bother sending him your business plan, and then expect to get a reply, let alone some thoughtful consideration. If you know someone, your chances of getting a reply (though not necessarily a thoughtful consideration, improve dramatically). As a result, the other part of the VC world, which few people on the company side seem to appreciate, or understand, is that every “VC” knows some stuff, but they DON'T KNOW a LOT more. Most have worked for a specific company in a specific industry, and are now "experts." Others come directly from B-school, and know....well, you get the ideal.

In other words, they have no clue about the solution you are proposing because they don't know anything about the space. That's valid, but it won't be admitted.

Even if they don’t know anything about your space, they might know another VC that does know something about the space, hence, the request for a referral. By declining to offer a referral, what Brad is really telling you is that he doesn’t know what his VC colleagues are interested in. In other words, how much interaction does he really have with his VC colleagues, and how often does he get deals referred to him…since he is not referring deals to others.

Am I nitpicking?

Perhaps.

Perhaps Brad brings in his other VC friends to participate in deals that he is comfortable with, as he is trying to build a syndicate (in other words, he doesn’t have enough money to fund the entire deal himself, so he tries to bring in his friends, and by the same token, he is looking to reduce his risk as he brings in other sources of capital that may know something more about the deal than he does).

On the other hand, perhaps Brad is so full of himself, that he can’t see that his behavior is actually counterproductive to his goal.

Here are some other comments that were published in response to his blog.

From “Art”: I'm assuming that you have a narrow field of things you invest in and that you know others who invest outside that field. If your reason for "no" was that it wasn't in your investment area, wouldn't a request for a referral to someone else be reasonable?

I have regularly referred people looking for work to others when I would not hire them myself. We just didn't have a good position for them and I knew others who did. Your claim seems to imply that your judgement (sic) on someone is omniscient - which I'm quite certain it is not and that you did not intend that.

From Dave: It seems like there would be no harm, though, in offering suggestions as to other possible targets. The cleantech example is an easy way out, but I suspect that many people are more on-target with their inquiries and the reasons you're not interested are more subtle. Any suggestions you provide (even local firms that are probably NOT targets for the deal) are valuable. That doesn't mean reasearching it, or providing a referral - just possible targets. And unless you know the person it's all that you can reasonably give them.

From Jeremy: As Dave/Art said, I thought this was perfectly reasonable (because you, inherently, know more people in the VC industry than I do). But, no worries, the email to you is now cancelled, since I have no desire to clog up your inbox when you're clearly writing this post to avoid just the kind of email I was going to send!

…and Brad’s reply: Art - you are partly correct. I'm definitely not asserting that my judgment on someone is omniscient. In fact, I'm often wrong (and I say so in the post.)

However, in contrast to a hiring situation, I don't usually have a good sense of who to refer a specific thing to. For example, I know 50+ people that are making cleantech investments, but I don't know enough about cleantech to have a point of view as to who fits where (nor do I want to spend the time figuring this out.)

In areas that I know well (e.g. Internet/software) there's plenty of the same dynamic. While something might be outside an area I know and I might know other VCs that might be interested in that area, unless the thing blows me away apriori, I'm effectively endorsing it at some minor level (even if I say "I have no clue but think you might be interested" to the VC I refer it to.)

It gets worse. Many VCs don't really pay much attention to over the transom emails. So - by making the introduction, it's no longer over the transom. Hence - the implicit (even if I don't mean to) endorse it. Selfishly, if it's not a fit or a stupid idea, then my future "referral credibility" decreases with the VC I sent it to (e.g. Feld becomes a random forwarder, not a forwarder of quality.)

It's fair to then put this back on me and say "so Brad, you don't want to decrease your credibility with your colleagues by forwarding random inbound around to help entrepreneurs you don't know." That would be a fair statement.
I suppose that Brad’s “referral credibility” would also be hurt when he sends a prospective deal to a fellow VC because he thought that the entrepreneurs “appeared credible”, or “have an interesting business model”, or “you might find this interesting” – though he doesn’t know anything about the space. If you don’t know anyone that might be interested, how about being honest – “I don’t know anyone that would be interested.”

Here’s some news for you Brad: Admitting that you don’t know everything is…actually, liberating. It actually encourages people to offer to help. Perhaps you should think more about the concept of “not knowing everything”.

Isn’t being a VC about “taking chances” and “building companies from nothing.” Do you think it’s more important to build credibility with the entrepreneurial community, (who will thank you for the referral, and may ultimately introduce you/invite you into the next deal – which may be 1,000 times bigger than this one you turned down), or is its more important to build “referral credibility” with your VC buddies?

Here's another thought. (You can have it for free, as I'm feeling very charitable today). Perhaps you should understand that you are VERY LUCKY to be in the position that you are in today. Perhaps you should think more about the ways that you can "give back", and how many simple, unrequested acts of kindness you can do in one day.

Go spend Friday morning (Christmas Day) serving meals in a soup kitchen, rather than navigating the back bowls of Vail.

....there but for the grace of God.....

As long as “it’s all about Brad”, I doubt that you will get to this epiphany.

WOW!!! Could Hector Ruiz be a bigger scumbag than Bernie Madoff???

IF the allegations are true, then Hector will surely rank right up there with Ponzi-boy as the poster child of breaching a fiduciary duty. Ponzi-boy breached his duty to his investors. If the allegations are true, then Ruiz breached his fiduciary duty to his shareholders.

This is shaping up to be an amazing story - if true.

Like I said, "Wow"!!!!

Here is the story from the Wall Street Journal - which will be in print tomorrow AM (October 28).

WOW!!!!

http://online.wsj.com/article/SB125668266149911475.html?mod=djemalertNEWS

Ex-Chief of AMD Is Linked to Galleon
By ROBERT A. GUTH and DON CLARK

One of the technology industry's highest-profile executives has become ensnared in an alleged insider-trading case that is shaking the corporate and financial worlds.
Hector Ruiz, former chairman and chief executive officer of AMD, speaks during a session entitled 'The Power of Collaborative Innovation' on day three of the World Economic Forum in Davos, Switzerland, on Jan. 25, 2008.


A criminal case filed by the Manhattan U.S. Attorney's office earlier this month alleged an unnamed Advanced Micro Devices Inc. executive shared confidential information about the chip maker with a defendant in the case. The AMD executive is Hector Ruiz, then AMD's chairman and previously the company's chief executive, according to a person familiar with the matter.
Mr. Ruiz, who isn't a defendant, didn't return calls seeking comment. A lawyer for Danielle Chiesi, a defendant in the case and the person to whom the person said Mr. Ruiz allegedly passed the information, declined to comment.
The involvement of Mr. Ruiz, 63 years old, adds the biggest name yet to the case, in which Raj Rajaratnam, co-founder of the hedge-fund firm Galleon Group, and five others including Ms. Chiesi face federal criminal and civil charges. All have said they are innocent. Galleon said Tuesday it has nearly completed liquidating its funds.

A complaint filed in a New York federal court this month alleged that the AMD executive now identified as Mr. Ruiz shared confidential information with Ms. Chiesi about a 2008 reorganization of AMD. The deal spun off AMD's manufacturing operations to a joint venture bankrolled by investors from Abu Dhabi. Mr. Ruiz became chairman of the new company, Globalfoundries Inc., and continues in that role.

Globalfoundries declined to comment. Drew Prairie, an AMD spokesman, said, "We are continuing to evaluate the matter and we are not aware of any allegation of criminal misconduct on the part of AMD or any current or former employees." He declined to comment on the investigation.

Galleon and a hedge fund where Ms. Chiesi worked, New Castle LLC, bought AMD shares in hopes of profiting when the deal was announced, according to the criminal complaint and a civil action by the Securities and Exchange Commission. They ultimately didn't profit, prosecutors say, amid a slumping stock market last fall.

More
• Deal Journal: The Hector Ruiz File
• WSJ Topics: Galleon Group

The U.S. doesn't allege that the AMD executive identified as Mr. Ruiz traded for himself or received any money for passing along information.
It isn't clear what legal liability, if any, he could potentially face for the allegations described in the criminal complaint. Other executives named in the case who didn't trade on the information or receive money for information were charged with conspiracy, and have denied wrongdoing. Court documents don't indicate whether prosecutors or SEC officials are considering additional legal actions related to AMD. Representatives of the Manhattan U.S. Attorney's office and the SEC declined to comment.

Mr. Ruiz is one of the chip industry's most respected executives, credited with pushing a series of changes to help AMD compete against Intel Corp.

Defendants besides Mr. Rajaratnam and Ms. Chiesi include Robert Moffat, a senior vice president at International Business Machines Corp.

Mr. Ruiz, who grew up in Mexico, learned English while doing chores for a Methodist missionary. He earned a doctorate in electrical engineering and worked at Texas Instruments Inc. before a 22-year stint at Motorola Inc. He joined AMD in 2000, and two years later was named CEO of the Sunnyvale, Calif., company, which he largely ran from offices in Austin, Texas. AMD reported losses for much of Mr. Ruiz's time as CEO but made progress in penetrating markets dominated by Intel.

Mr. Ruiz dispensed with some businesses while adding others, notably ATI Technologies, a maker of graphics chips. That $5.4 billion deal left AMD with heavy debt.

Mr. Ruiz concluded AMD needed to follow the lead of other chip designers in shedding factories. The criminal complaint that cites the unnamed AMD executive is based largely on recorded conversations during about four months in summer 2008 while AMD negotiated a spinoff of the operations. That venture would receive billions of dollars from government-owned investment firms in Abu Dhabi. AMD also had to negotiate with IBM over a license for IBM-owned technology.

The complaint against Mr. Rajaratnam also alleges he received information about the AMD transaction from Anil Kumar, who worked at McKinsey & Co., which provided consulting service to AMD. Through a lawyer, Mr. Kumar, a defendant in the case, has denied the charge.

According to the government complaints, Mr. Moffat, the IBM executive, took part in those negotiations, and later allegedly shared insider information about the spinoff transaction with Ms. Chiesi.

According to the person familiar with the matter, Ms. Chiesi appeared to collect information from Mr. Moffat and "the AMD Executive" now identified as Mr. Ruiz, and to share it with Mr. Rajaratnam and a co-defendant at New Castle named Mark Kurland. A lawyer for Mr. Kurland declined to comment.

In a recorded conversation on June 6, 2008, Ms. Chiesi gave Mr. Rajaratnam an update on the AMD "deal" based on a talk she said she had with the AMD executive, according to the criminal complaint. The complaint said that in August and September 2008, the executive now identified as Mr. Ruiz and Ms. Chiesi discussed such details as the timing of the transactions and how big an impression the spinoff would make on investors.

On Aug. 26, 2008, the complaint said she asked the executive if AMD would be left with less than $3 billion in debt, to which he replied "yes," and then confirmed that the deal would be announced in September.

In September 2008 the AMD executive called Mr. Chiesi and had a brief discussion of the spinoff, saying "you know, we're going to shock the hell out of everybody," and that the deal would likely come in October.

Both Galleon and New Castle bought AMD shares before the transaction was announced on Oct. 7 -- the date Mr. Rajaratnam had predicted in a Sept. 30 conversation with Ms. Chiesi, the complaint against her states. AMD's stock opened that trading that day about 25% higher than the previous day's closing price, the document adds.
But the trades took place when the stock market was falling amid the worsening financial crisis. Neither firm made money on the insider trading, the government complaints say.

Separately, Galleon's liquidation of $3.7 billion in securities in its hedge funds' portfolios is "more than 90% complete," a person familiar with the matter said Tuesday.

Update on Galleon Group

From Dealbreaker, and the "that didn't take long" category. Note the phrase at the bottom: "We could be closed by Friday. Too many of our clients are institutions that are prohibited from doing business with alleged felons.”

dealbreaker.com/2009/10/investors-pulling-money-from-g.php

Investors Pulling Money From Galleon Tech Fund, Galleon Risk Management Head: “We Could Be Closed By Friday”

Posted by Teri Buhl, Oct 19, 2009, 3:05pm

The Galleon Group said Friday that it “continues to operate and is highly liquid” but one of firm’s top lieutenants is admitting he doesn’t think the shop will last long.

Traders close to Sanjay Santhanam, a Galleon partner and head of risk management, told Dealbreaker he’s admitted defeat. The firm is already seeing investors withdraw their money out of Galleon’s technology fund, according to the Wall Street Journal.

The technology hedge fund run by Galleon Group founder and insider-trading suspect Raj Rajaratnam allows investors to withdraw their money monthly, a much shorter time horizon than many hedge funds, including others at Galleon. Rochdale Investment Management, an investor in a diversified hedge fund that is Galleon’s largest, has already said it’s withdrawing all its money from that fund.

When asked about investor withdrawals on Monday, a Galleon spokesman declined to comment.

The chief executive of Rochdale told Dow Jones Newswires on Monday it will liquidate its entire position in Galleon Group’s largest hedge fund, Galleon Diversified Fund. The statement came three days after Mr. Rajaratnam’s arrest on charges of insider trading.

Sources tell Dealbreaker that Santhanam has told people close to him: “We could be closed by Friday. Too many of our clients are institutions that are prohibited from doing business with alleged felons.”
2Recommend this! 41Comments

Only $20mm for Raj at Galleon Group ??? I’d guess that this number is very wrong.

October 19

There have been a lot of really good stories written about the “you scratch my back, I’ll scratch your back” insider trading scandal at Galleon since the story broke last Friday.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aoHhSaJptk8o

At the daily morning meetings at Galleon, Raj would ask questions of the analysts, PMs, and traders. Nothing unusual here, as this happens everywhere, every morning.

Question: How much of the questioning was the result of “knowing” the answer, and then leading the questioning so that everyone else got to the answer, that you already “knew”?

Any really good analyst will act like a prosecutorial attorney – you never ask a question of your witness unless you already know the answer. In other words, your lines of questions are narrow, focused, and will lead somewhere – to the answer that you already know.

Therefore, if Raj already knew the answers to his questions, he effectively is leading the team at Galleon to trade in certain way. As a result, it seems highly likely that the whole firm is benefitting from insider information. As the whole firm benefits, so do its portfolio managers, and Raj himself. At the end of the day, how much of Raj’s net worth of $1.3 billion was tied to illegal trading activity? My guess - a very large proportion, meaning that Raj’s personal gain from the illegal insider trading was worth a LOT more than $20 million.

The next question? How long does Galleon last as an independent entity? According to CNBC this morning, Raj is at work, in a “business as usual” mode.

I doubt that Raj and Galleon last the week.