From: Lorin Rivers (firstname.lastname@example.org)
Date: Thu Oct 26 2000 - 22:20:07 PDT
Thursday, October 26
Trilogy to rescue spinoff pcOrder
By Jerry Mahoney
Thursday, October 26, 2000
PcOrder.com Inc. moved back in with its parent Wednesday, the latest
corporate offspring that couldn't make it in the real world.
Austin-based Trilogy Inc. said Wednesday it would buy back all the
public shares of its highest-profile spinoff, pcOrder, a struggling
electronic commerce company whose software lets businesses buy and
sell computers and components over the Internet.
The move means 4-year-old pcOrder will again become a private
company. It's the third time Trilogy, a software developer, has had
to rescue or pull the plug on a spinoff: Earlier this year, the
company shut down two costly Internet ventures, CarOrder.com and
Trilogy, led by its swaggering chief executive, Joe Liemandt, came to
symbolize the explosion of the software industry in Central Texas.
Liemandt and four other Stanford University students founded the
company in 1989. It moved to Austin three years later and became
known for its unconventional hiring practices. They include a
grueling summer of indoctrination for new hires at "Trilogy
University," which Liemandt has described as a "three-month boot camp
for people straight out of college."
Liemandt, 32, was philosophical about the string of failures. "It is
important to understand, in a fast-changing environment, things are
some days bad and some days great, and we are absolutely in the
middle of it," he said Wednesday.
Trilogy's announcement was accompanied by pcOrder's third-quarter
report. The company reported $13.4 million in revenue, barely beating
the year-earlier quarter. Revenue dropped 13 percent from the second
PcOrder lost $200,000, or a penny a share, in the third quarter.
Excluding non-recurring sources of income, the company said it would
have lost $2.8 million, or 17 cents a share.
Details of the merger will be made public in early November. But
pcOrder, which had a spectacular debut in its February 1999 initial
public offering and typified last year's dot-com frenzy, is likely to
saddle many investors -- and some of the 230 employees with stock
options -- with significant losses.
Trilogy will pay $6.37 a share for stock that has closed as low as
$3.06 this year. Once the merger is complete, Trilogy will give
employees the difference between $6.37 and the price at which they
could have exercised their PcOrder options.
Employees who have signed on since July, when the stock price was
low, could make a little money. But longer tenured employees, whose
options have a higher price, will lose.
Among the winners is founder Christina Jones, 31, who has options to
buy as many as 650,000 shares at $3 each. At that price, she would
make $2.2 million.
The stock closed at $6.12 Wednesday, up 85 percent from Tuesday on
news of the Trilogy offer.
Trilogy, which owns 62.5 percent of the company's shares, will end up
with about $38 million, according to Brad Whitt, an analyst for
Southwest Securities in Dallas. Trilogy will pay $40 million to buy
out the shares, and the company has about $78 million in cash and
Liemandt blamed some of pcOrder's losses on the disappearance of
dot-com e-tailers who were among the company's customers.
PcOrder also fell victim to increasing competition. Its stock price
started to slide after a February announcement that one longtime
customer, computer products distributor IngramMicro Inc., had signed
a deal that some investors thought would cut into pcOrder's revenues.
Company officials said that fear never was realized, but the
perception of more companies in the marketplace hurt pcOrder.
Other Trilogy spinoffs haven't made it either. Trilogy invested at
least $75 million in CarOrder.com, the 1999 startup that aspired to
be an online automobile broker. The company planned to buy auto
dealerships and sell cars on its Web site. Brian Stafford, the brash
young chief executive, said last spring that his company had letters
of intent that would enable it to buy more than two dozen
dealerships. But the company never announced a single purchase.
Texas law bans direct sales of vehicles by non-dealers. Without any
dealerships, CarOrder had to pay retail prices for every car it sold,
taking a loss on almost every one. The company shut down in August.
Liemandt declined to comment on pcOrder's future. Employees will be
offered jobs at Trilogy, but the next career step for Jones is
Jones, who often was cast as a symbol of youthful entrepreneurialism
and who spoke at the Republican National Convention in the summer,
said she will help blend pcOrder into Trilogy. She declined to
speculate on what she will do after that.
The merger with Trilogy, Jones acknowledged, "isn't what we
envisioned when we started four years ago."
But, she added, "I have zero regrets. We experimented with new
You may contact Jerry Mahoney at email@example.com or 445-3642.
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Lorin Rivers 512.263.1233 x712 v Product Manager 512.263.1441 f REAL Software, Inc. mailto:firstname.lastname@example.org PMB 220 http://www.realsoftware.com 3300 Bee Caves Road, Suite 650 Austin, Texas 78746 REALbasic: the visual, object-oriented BASIC development environment for the Macintosh
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