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Gaining acceptance

Seated behind the wheel of his white BMW, David Dorman cruised into the parking lot of PointCast's sleek Sunnyvale, California, headquarters last November 14.

 
CNET News.com Newsmakers
February 27, 1997, Dave Dorman
Gaining acceptance
By Dawn Yoshitake

Staff Writer, CNET NEWS.COM

Seated behind the wheel of his white BMW, David Dorman cruised into the parking lot of PointCast's sleek Sunnyvale, California, headquarters last November 14.

Striding up to the gleaming glass building, PointCast profile the tall Georgia gentleman swung open the lobby doors and began his transition from telco executive to CEO and president of a pioneering push technology company.

It's been 100 days since Dorman, former chairman, president, CEO of Pacific Bell, arrived, and PointCast's new chief has begun to reflect on what he has accomplished thus far, what surprises his new role has dealt him, and where his company now stands in its competitive battle against giants Microsoft and Netscape.

For one thing, the 44-year-old executive who came to PointCast looking to make his imprint on a Silicon Valley start-up with growth and market potential has had to make the adjustment from being the "boy wonder" at his former button-down telco stomping grounds to being the "elder statesman" in the more youthful and casual environment of his new domain.

Dorman, who once worked as a programmer, spent three years at Pacific Bell,


where he was credited with forming the first Baby Bell Internet access provider. Pac Bell's parent company, Pacific Telesis Group, last year merged with SBC Communications, where Dorman briefly served as an executive vice president. Earlier in his career, he joined long-distance provider Sprint, back when it was a start-up. He rose up the company's ranks dramatically during his 13-year stint, starting in a sales position and ultimately becoming president of Sprint Business.

Although PointCast initially was seeking an executive with media industry experience, directors involved in the company's CEO search said Dorman was picked for his Internet experience and his skill with growing start-ups, managing multibillion-dollar companies, and handling media budgets. He was selected to replace cofounder Chris Hassett, who is now chairman of the six-year-old company.

NEWS.COM: So tell me, David, since you've been here, how have you been surprised by the good, the bad and the ugly?
Dorman: he first thing is I've come from a business background where I've been in a couple of start-ups before, but it's been a while since I've been in a business where you have to manage your cash so carefully, and I'm realizing that in a start-up environment your primary objective is to make money.

I think sometimes Silicon Valley ends up distorting people, particularly when the market has rewarded companies so early in their life cycle in the IPO world--before profits were ever made. There were a number of legendary stories in the Valley where companies never made money and in some cases never shipped a product, but yet were acquired for hundreds of millions of dollars, and I think that breeds bad habits. I'm someone who thinks about building a business as predicated on having earnings and returning money--sort of the old-fashioned way. And so, for me, that's been a real focus--making sure that we have a path, that we see that our goal is to be profitable, and to do that on a predictable basis and at the same time recognize that we're willing to sacrifice when we become profitable for growth and market share and those kinds of things. That's been more of an adjustment in terms of my thinking and the people around here. It's sort of like profitability is sort of an elusive thing and you don't think much about it...you put that off and really you're looking at other things. I don't think that way, so that's one interesting phenomenon.

I think the good is that we have a very That's an interesting switch, being viewed 
      as the elder statesman, vs. the boy wonder. bright group of people, a very energetic group of people. It's obviously a young company and, for me, coming from the world of Pacific Bell and being sort of the youngest guy there--I became president at 39 and that was really unusual--whereas here [at PointCast], I'm the fourth oldest guy in the place at 44. That's an interesting switch for me, sort of being viewed as the elder statesman, vs. being boy wonder where I was before. So that's kind of fun.

And in terms of the ugly? Or skeletons found in the closet?
I wouldn't say skeleton in the closet. I just think it's really tough when you have a situation where you're replacing a founder, a CEO, that's always tough. Chris poured his life into this place--worked very hard--and I think he had lots of close relationships here. So you're trying to step into the shoes of someone who has sort of grown up with the company. I don't think that was a skeleton in the closet--I obviously knew it, but it's hard. You have to work really hard for people to accept you and that this guy is going to add value. There's a skepticism, particularly when you get hyped coming in. I'm sure a lot of our people here look and say, "Well, who is this guy? He's a phone guy--what does he know?" And obviously I spent time doing other things. So I think that was a tough thing to do, to gain acceptance, and I think I've done that. I'm trying my best to meet as many people as possible all the time at every level of the company.

NEXT: Getting things synchronized

 

  Stats
Age: 44

Claim to fame: PointCast's great white hope

Former life: Backing a renegade Pac Bell president and CEO prior to SBC buyout

Blue ribbon panel: Venture capitalist, President Clinton's Advisory Committee on High-Performance Computing and Communications, Information Technology, and the Next Generation Internet

 
CNET News.com Newsmakers
February 27, 1997, David Dorman
Getting things synchronized

When you arrived 100 days ago, you had three areas that you wanted to focus on: growing the subscriber base, improving editorial content, and offering more personalized information. What have you accomplished in these areas since then?
First of all...we now know a lot more about the viewership. One of the things I kicked off was an in-depth study of who our viewers are and where they are, how they use us, what their principal actual use of PointCast is--where they spend the most time, what sorts of things that they need. And then we've taken viewer surveys that we've done before for requests for new things to make sure that our product-development efforts were joined with what viewers were asking for. That's been a major focus of my first 100 days--getting those things synchronized.

The second thing is in corporations. There was an effort underway when I got here to verticalize content--the Insider program, as we refer to it, where we have ten vertical markets that we're focusing on, with the idea in each of those vertical markets being that we have a promotional partner, a sponsor. For instance, KPMG is a sponsor of what we call Banking Insider. Coopers and Lybrand is a sponsor of our Telecommunications Insider. In working with those sponsors we've created a set of rich vertical content for those industries, which you can't get in other places on the Internet. Some of it's proprietary and paid for, and so it's published that way. That's been an effort which we are just now launching. I think we have three of those Insider client kits now available and being distributed, and we'll have the other seven rolled out over the course of the rest of the year.

On the third area, the personalization issue, we're continuing to add new content all the time. I think the total number of channels that we provide, if you take what we have ourselves, plus what the partners have been able to procure, I think we're up over 50 possible channels you can select from. So a lot more personalization is available today than what we had even just two months ago. We want to take that further. With our connections channel, you have the ability to subscribe to Web sites, of which we have an operating relationship with over 1,500 Web sites out there. I think that, plus the fact that our users control the number of channels they subscribe to (up to ten)...and the number of times they update day-to-day, and how they update...we're trying to give as much flexibility as possible.

Regarding the subscriber area, what change has there been in the numbers?
Since I've been here, we've had a positive trend upwards, not as fast as I would like, but I think we understand what we can do to grow the number. I'm not the least bit embarrassed by the number of subscribers we have. We have, at this point, over 1.3 million users. And that's a number that, if you compare it to subscriptions of things like BusinessWeek, Newsweek, Fortune, Forbes--those kinds of magazines and other daily newspapers and that kind of thing--we fare very well against other media.

We believe that, within the business marketplace, setting aside the consumer work at home or sort of the ISP-served I'm not saying there's some excuse that we should 
  ship bugs in anything, but the reality is 
  you're always making trade-offs. marketplace, there are probably on the order of 25 million computers out there in businesses. That's our target--our first-level target market. So we've got a lot of market opportunity to expand where we are, and I think for a company our size we need more distribution capability. The Insider example is a great one, working with corporations to be able to get at large pockets of PCs. If you take my old employer as an example--the typical telephone company has tens of thousands of desktops that are in existence--we can knock off some pretty big numbers that we need to be able to sell the corporations on the benefits [of subscribing to PointCast]. It's different than sort of organically going to the Internet and selling a user one at a time, vs. what you have to do to work in the enterprise accounts. I guess the point is that we've taken a real tough road, but one that I think is very durable once you achieve success.

At this point in time, what was the subscriber number you wanted PointCast to be at?
I'd love to say that I've got 2 million subscribers today, but we're not embarrassed by the number we have. Because of the media's play, PointCast achieved a million subscribers probably later than we thought we did. That was because our tools and our ability to count the number of subscribers weren't as good in the early days as they are now. If you look at where we are, probably we got a lot of credit for stuff early-on that we really didn't deserve. So our ramp has been positive, there's no question about it.

I guess the point is we're not like a Hotmail or a Web-based service where someone can just kind of cruise in from the Web, register, and who knows if they ever go back there again? People using our service have to install a piece of software and register that software and then communicate with our service regularly for us to count them as an active user. We're pretty rigorous in the way we describe what a subscriber is and what our traffic is. I think it's maybe a bit different than what others are doing.

NEXT: Testing the IPO waters

 

 
CNET News.com Newsmakers
February 27, 1997, David Dorman
Testing the IPO waters

Where you are in terms of your revenue growth and profitability?
We are tracking along at a growth rate which is very comparable, I think, to what other public new media companies have experienced during their first year or so of existence. So I don't have any sort of worries in the context of whether or not we can create revenue and, therefore, revenue momentum.

What has your revenue growth been?
We had very good sequential growth throughout 1997, and sort of nominally, we're looking to double revenues between 1997 and 1998. That's sort of the ballpark of what we expect to do.

Was your quarter-to-quarter revenue growth in the 30-percent range?
It was probably a little bit more than that when you start looking at toward the end of the year. Obviously, the fourth quarter for media companies is sort of a seasonally high quarter. But if you tracked us and looked at the publicly traded new media companies--the search engines, for example--I think we tracked pretty well in terms of our growth with those kinds of folks. We're the largest private new media company, no doubt about that. There are so many companies, as you know, that are traffic companies that don't have any revenue.

And profitability?
At this point I won't make any sort of predictions, but we're not looking four years from now to be profitable. We may not achieve that in '98, but we'll get pretty darn close in terms of break-even. We think that those kinds of results are what's expected by the market--and it gives us a lot of choice of whether to go public or to continue to rely on private financing.

Are you still looking to do an IPO in '98?
I wouldn't rule it out. It's just that I can't say for certain at this point. Right now, the market is sort of attractive and you have to look at the timing of this, and who can see the market from day-to-day that accurately?

I don't think we've got any problems generating interest on Wall Street. I have been visited personally by senior partners of every banking firm you We're looking to double revenues between 1997 and 1998. can think of. In fact, I challenge you to name one that has not been here. Most people in the investment community believe that PointCast has a very sellable story.

You want to be in a position to do an IPO when it makes sense to do that for your business and for your shareholders. What I'm trying to communicate is that we've got choices.... Back in November, when I got here, the market was pretty choppy for IPOs. Most of them that came out in the fourth quarter sort of traded around their opening price and maybe went down a little bit. Well, now here we are in the first quarter, and it's Yee-ha! time again. It's sort of difficult, when a market's got that kind of volatility, to be spot-on and picking the right time to go, but we are seriously reviewing our alternatives and thinking about that all the time. Right now we just completed a round of private financing about a month ago. So we have ample cash reserves to be able to finance the business, and what we want to do in the near term. But that doesn't say that because the market's great we wouldn't want to go out and do an IPO, either.

Are you going to wait until you release one quarter of profits before you do an IPO?
Personally speaking, I think that's great, if you can, but I don't think it's requisite. I think, from my point-of-view, knowing when it's going to occur and feeling comfortable that you can achieve profitability on the plan that you have--it's important to be able to do that. And when you go public you need to be able to see it and know it's there and be committed to delivering it. I think you'd have to do that to be able to get people invested in your business.

In addition to having the bankers come by, what about buyers?
We represent a fairly unique set of assets, both in terms of our intellectual property, our customer base and its traffic, and the demographic we represent with that customer base. It's very difficult to reach business people in their office with media--very difficult. So when you start asking yourself what universe of companies might be interested in a PointCast, it's pretty darn broad, from large media companies to new media companies to technology companies. It's a pretty big universe of possibilities. So I think I'd be surprised if we aren't attractive to a lot of people. Because there was so much hype associated with our launch and coming into being, I think the expectations have been set early by hype--very, very high. I told someone the other day it's as if this whole expectation for our company was like we were going to be the next Microsoft or something. Clearly, this is a business that's going to be successful, it's going to be a good business, a good platform to build new businesses off of, but we have to be realistic about what the business is. It's a media opportunity that can expand pretty nicely, but I don't have distorted visions of what this is going to end up being. It's a value-creating opportunity, either as a standalone company expanding and doing new things, or as a part of something else. My job, as the steward of the shareholder, is to determine what the maximum value-creation for the shareholder is. Is it doing what we're doing on a standalone basis--acquiring others, being acquired? All those kinds of things have to be fitted into the mix. I can't really say beyond that general statement.

NEXT: Meeting the demands of the use

 

 
CNET News.com Newsmakers
February 27, 1997, David Dorman
Meeting the demands of the user

In looking at the competitive landscape, everybody usually points to Netscape and Microsoft as being the two giants that are out there and that are going to swallow up this industry and you. How do you think PointCast is positioned?
I think that what we do has been proven by the fact that both Netscape and Microsoft were sort of predicted to be the end of PointCast a year ago, We've been more successful [because of] an 
  integrated client/server application. with the announcement of Active Desktop and Channel Definition Format with Microsoft and then Netcaster for Netscape. I think what they've learned is that a piece of client software alone, running on a PC, whether it's embedded with a browser or not, isn't sufficient by itself given the way the Internet works, and the way information is published to provide adequate, smart-agent capability to meet the demands of a user, which require that the information be (a) timely, (b) efficient and (c) unobtrusive. In other words, users want to know that it's agile and functions in the background, without interfering with what else you're doing on your PC.

I think the reason we've been more successful is that we have an integrated client/server application, whereas in the implementation for Microsoft and Netscape, they have a tool that allows the user to go out and get things from the Web, but the compression of that data, the refreshing of that data, is left up to the individual publisher of the Web site. In PointCast's case, not only are we going to the Web and pulling out HTTP-formatted information, but we're pulling FTP information that's published, as well as proprietary news feeds, and we're synthesizing all that information into a database and then compressing it so that the least amount of bandwidth necessary is used. And we're only sending that which was changed.

We're doing that work at the server level so that we don't overutilize resources, both at the computer itself as well as within the bandwidth that's connected. So the reason I think we will endure, be successful, and grow is that we recognize both sides of that is important. We're using the Internet as a vehicle to deliver information, but we're not relying on the Internet for all of our resources. So that integration between client and server is very important, and I think that, in the case of both Microsoft and Netscape, that's not their core business. It's not that they don't have server products and also client products, but that their resources are focused more at enterprise applications, not media. And yes, Microsoft has MSN, but that's a different business for them. They're more focused on the online service business and looking more like an AOL sort of environment.

So we're occupying a niche that would take more investment and more focus on their part to go after. Based on the size of the market, and, obviously, if we continue to grow and get very successful and build a bigger and bigger base, I'd expect them to become more interested in what we're doing. But today, I think they've got such bigger opportunities in their core businesses that, to me, it looks like a distraction for them.

Who do you line up as your competitors?
Quite frankly, since my revenues come from advertising and that's where we are deriving most of our business benefit, I consider my competitors those people who are matching demographics with us in attempting to get marketers to buy their media product to reach that particular demographic. So I sort of feel like, ultimately, we will be successful by demonstrating that we reach this business demographic more effectively than other people. That's sort of the way I like to think about it. And there are going to be a lot of different ways that the Internet is used to try to accomplish that. We're one of them today. I don't see anybody else in the Internet space as actively focused on the business market as we are. I don't think AOL is, I don't think Yahoo is. So that's good news, I guess, in that context.