Palm's IPO: A who's who of Silicon Valley

While many day traders, retirees and others will be angling to make money on the Palm stock, the real winners will likely be Silicon Valley's old guard.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
4 min read
By the time you read this, the stock of Palm Computing, the company that makes the popular handhelds, might be cruising past $120 on its first day of trading.

And while many day traders, retirees and others will be angling to make money on the stock, the real winners will likely be Silicon Valley's old guard.

In many ways, the Palm IPO represents a vindication of a way of doing things that has transformed San Jose from a flat, smelly, uninspiring plain of prefabricated tract homes into a flat, smelly, uninspiring plain of multimillion-dollar mansions that only happen to look like prefabricated tract homes.

For Palm, which is being spun off from 3Com, isn't an upstart outfit staffed by twenty-somethings, surly programmers and cheesy marketers. Instead, the company is managed by a coterie of executives who could staff their own Santa Clara County Valley Rotary club.

Palm's board of directors, for instance, includes Jim Barkskdale and Mike Homer, who came from Netscape and before that did time at McCaw Cellular and Apple, respectively. Gordon Campbell, founder of the early graphics company Chips and Technologies, sits on the board too, as does David Nagel, who oversaw the notorious Copland project at Apple.

Biographies of leading executives included in Palm's Securities and Exchange filings show stints at Hewlett-Packard, Sun Microsystems, Cypress Semiconductor, Motorola and law firm Gray Cary Ware & Freidenrich. Ages for executives and directors listed on the S-1 form range from 51 to 38.

3Com chairman Eric Benhamou owns 1.8 million shares of 3Com. As for the newly public company's CEO, "Mr. (Carl) Yankowski will receive an employee stock option grant equivalent in value to $48 million based on the price per share in this offering, or no more than 2 percent of the shares outstanding at the time of this offering," according to Palm's filings.

The biographies are impressive, but also homogeneous. There's no "Prior to joining Chipcom Inc. as a group manager of industrial relations, Mr. Bercow stood on a bucket in tourist areas and imitated a statute. Before that, he had a paper route." By the same token, there are also few outside influences. Yankowski spent 15 months at Reebok, while one of Palm's elite sales executives had experience at chemical giant Olin. Other than that, everyone else has spent their careers almost exclusively in the 408 area code.

Although few like to admit it, the technology industry is largely an old-boy affair, with a few exceptions. It's an established old-boy network that does allow women (Donna Dubinsky, who founded Palm), immigrants (Benhamou), squirrelly research scientists, executives who dress up for the Renaissance Faire and people with really obvious comb-overs. In other words, people who aren't ordinarily associated with clubby networks.

But a self-perpetuating network nonetheless exists. Once one gains entrance to the select circle, it can lead to lifetime employment.

The existence of the network dawned on me years ago when writing up a story on venture capital. I asked a number of VCs what the single most important factor in determining the success or failure of a new company was. The people running it, they all said. Management counts more than technology or patents.

So how do you know who's a good executive and who isn't? The answer again was universal. They all said they only invested in companies where they already knew the people running the company or where they could replace the existing management with people they knew. Where meritocracy ends and schmooze-ocracy begins remains a hazy line.

Clubby, however, doesn't necessarily mean conspiratorial. Palm, after all, has energized an entire industrial segment. Handhelds have also changed the way people organize their day and, with the advent of wireless, may change how we communicate in the future. It is a dynamic, life-altering invention that will likely rank right up with Pop Tarts in terms of anthropological significance.

It is also a fairly large and ever-expanding network. One of the quickest ways to join is to get a job at a company that happens to take off. Your neighbors will know your net worth faster than you can calculate it. One quick stock turn and suddenly you're a genius.

Another sure-fire bet: Graduate from Stanford--or just pretend that you did. San Jose's fetish for Stanford associations far outstrips the university's ability to crank out graduates. So, for now, being a member of the Stanford University Extension class of Nov. 22, 1988, will suffice.

Nonetheless, it's sort of like rooting for the conquistadors over the Incas. They might be outnumbered, but they aren't the underdog.

Michael Kanellos grew up in flat, smelly, uninspiring Reno, Nev.