X

PointCast struggles with Bells, buyouts

Departing CEO David Dorman says the company's plans to create a high-speed Net alliance were set back in January, leaving the firm open to a new round of buyout possibilities.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
4 min read
PointCast's departing CEO David Dorman said the company's plans to create a high-speed Net alliance were set back in January, leaving the struggling Internet firm open to a new round of buyout possibilities.

Dorman's resignation from the "push pioneer," just a month after the sunset of an exclusive negotiating period between PointCast and a loose coalition of Baby Bells, could spell bad news for the group's budding high-speed Net venture.

Various Internet companies have approached PointCast with buyout offers since the end of the agreement on January 31, and Dorman said he is confident one of the deals will come through.

PointCast has been holding talks with a consortium of local telephone companies since last fall. The group's plan, tentatively dubbed "Project Newnet," was for a high-speed Internet access venture--a telco version of the @Home cable service.

Under a lock-up agreement with the consortium, PointCast could hold buyout talks only with these potential telco partners. Sources said one sticking point in the talks involved getting geographically diverse parties to agree to terms for a national broadband venture.

Although non-exclusive talks with the telcos continue, during the past month PointCast has been approached by and is considering offers from certain Internet firms, Dorman said.

"I expect a deal will take place within a month, but I've been expecting something to happen for the past five months," Dorman said.

If deal does come through, it will be completed without Dorman at PointCast's helm. Although he has agreed to remain as chairman of the board, he has already stepped down as chief executive, and will take the helm of a new AT&T-BT joint venture on April 1.

Dorman's legacy
It was a year and five months ago that Dorman stepped through the doors of PointCast with the intent to put the company on the fast track to an initial public offering.

But today, in the wake of his departure, most of Dorman's initiatives remain incomplete, analysts say.

PointCast, which withdrew its IPO plans last July, has seen its subscriber base stagnate at 1.2 million members for more than a year.

"He did nothing for the company, nothing at all. He squandered the opportunity," said Maureen Fleming, an analyst with the Gartner Group.

Dorman, however, contends he leaves behind a cohesive management team, a product with a solid technology platform, and a company that has enough financing to have the luxury to consider its various options.

"When I joined the company, I had inherited a platform that was unstable, and a management team who, while talented on an individual basis, were largely at each other's throats and didn't work well with each other," Dorman said.

The company made strides to change its offerings, added new channels, and looked to garner more business in the corporate market. Despite those efforts, PointCast didn't draw any more customers to its service.

"Dorman was in the business of acquiring subscribers and it didn't happen when he was there," said Patrick Keane, senior analyst with Jupiter Communications.

Meanwhile, the company has yet to achieve a buyout deal or IPO to repay its investors. Prior to Dorman's arrival, the company reportedly stepped away from a $400 million deal from News Corporation. Last May, the company filed for a public offering that it hoped would raise $51.7 million. But several months later, it pulled the offering, citing its desire to hold discussions with strategic partners.

No deal has since been announced, leaving some industry watchers skeptical whether one will ever happen.

PointCast talked with media companies and some telcos after it canceled its IPO plans, Dorman said. One was NBC, which PointCast approached with a request for $20 million in financing, in exchange for a 17 percent stake in the company. That would have given PointCast a valuation of roughly $120 million. NBC declined the offer.

Conflict of interest?
Despite his departure, Dorman will remain PointCast's chairman and continue to work with the company to close a deal with the consortium, or another partner.

But that may raise another issue. As Dorman takes his new post, the Baby Bells may not feel comfortable sitting at the table with an executive from rival AT&T, and Ma Bell may not want one of its top guns to help the Bells in any way.

"If it is a problem for me to be there, I will resign from the board and as chairman," Dorman said. "I would not let me become a problem for PointCast." He added he would also step down if his new employer disagreed with the arrangement.

Analysts said the idea of an AT&T executive negotiating a deal to create a Baby Bell-led competitor sounded unlikely.

"This would stick in the craw of [AT&T CEO Michael] Armstrong," said Craig Clausen, senior vice president of the New Paradigm Resources Group, a Chicago-based telecommunications consulting firm. "It's very hard to believe that he's going to let someone else do something for the Bells."