How to Read a 10Q: LoudCloud
Posted Thu May 3 11:00:03 2001 by sbaldwin |
By Steve Gilliard
Source Document: http://www.sec.gov/Archives/edgar/data/1100813/
000101287001500434/0001012870-01-500434.txt
We offer businesses a new class of Internet
infrastructure services using our Opsware technology,
which automates formerly manual tasks, such as
configuring and managing a customer's operations
infrastructure, thereby reducing the amount of manual
intervention required. These services, which we call
Smart Cloud(TM) services, include those required to
deploy, maintain and grow Internet operations. This
fully outsourced solution enables our customers to
increase or reduce their Internet operations capacity
as business needs dictate. Our Smart Cloud services
enable our customers to benefit from reliable,
high-quality Internet operations, which can grow to
accommodate increasing business needs, without
undertaking the difficulty and expense associated with
building the required expertise in-house.
| We are a high falutin' Web hostin' kind of company.
You will pay us a lot of money to use our software,
which seems to have had its genesis in technologies Netscape
was using in 1996. We want you to contract out your
Web hosting needs and rely on us. Did we say we were
based in California? Did we say our CEO has no real
experience in business, unless you count hype? Oh, we didn't? Sorry |
We provide our Smart Cloud services through the
Loudcloud Infrastructure Network, which allows us to
consistently deploy operations capacity for our
customers across multiple locations and to maintain
that infrastructure through a centralized network
operations center. Central to the operation of our
Loudcloud Infrastructure Network is our Opsware
technology, which is located in a number of
interconnected third-party data centers.
| Which costs a whole lot of money to use, costs it's likely we're gonna pass on to you, someday soon. |
Even as companies have increased their investments
in Internet infrastructure, the complexity of
successfully deploying and maintaining Internet
operations continues to increase. In particular, the
software infrastructure required to deploy and
maintain large-scale Internet operations has become
increasingly complex. For example, businesses
deploying large-scale Internet operations can choose
from multiple software applications with varying
levels of functionality, including transaction
processing, personalization and enterprise systems
integration. In addition, with increasing
globalization, businesses often must maintain their
operations in multiple locations and design their
infrastructure to accommodate local standards, while
remaining synchronous with operations in other
geographies.
The in-house expertise required to meet these
challenges is significant and typically requires a
host of technical specialists, including network
administrators, systems administrators, database
administrators, security experts, monitoring and
management experts, project managers, software
operations specialists, troubleshooting specialists
and performance engineers. It is often difficult, time
consuming and costly to hire and retain these experts.
| And
it costs a lot of money to outsource as well.
As eWeek wrote in their latest issue, many companies made the mistake
of outsourcing to MSP's which then went out of business. There is no
assurance, despite spending
millions to outsource your IT needs with any MSP. that
in the end, you'll have to have in-house resources
anyway. |
Additional Services
Access Control Cloud(TM) Service. Our Access
Control Cloud service enables customers to utilize
data stored in our Directory Cloud service to
implement authentication and authorization services
for their web sites. Using this service, customers can
securely manage access to their web site resources and
allow their end users to have a single sign-on, while
centralizing the administration of privileges. Our
Access Control Cloud service uses Netegrity's
SiteMinder product.
Content Distribution Cloud(TM) Service. Our Content
Distribution Cloud service allows customers to reduce
the time required to download content from their web
sites, thereby enhancing the end-user experience.
Powered by Akamai's FreeFlow service, our Content
Distribution Cloud service can increase the number and
diversity of users supported by a particular web site
by routing Internet users to the closest, most
available server from which the desired content may be
accessed.
Directory Cloud(TM) Service. Our Directory Cloud
service provides customers with the ability to
centralize user and group information in a single
directory store that can be rapidly accessed by
applications deployed by customers. This service uses
Sun Microsystems' iPlanet Directory Server software.
File Transfer Cloud(TM) Service. Our File Transfer
Cloud service enables customers to receive files via
file transfer protocol and to store these files in a
reliable, secure repository. Access is restricted to
designated directories and files for specific
customers, which enhances the security and integrity
of sensitive data.
Global Recovery Cloud(TM) Service. Through our
Global Recovery Cloud service, we create a standby
site architecture for our customers, which provides a
geographically distinct, yet fully functional site in
standby mode. Through our Opsware automation
technology, we can rapidly transition to the standby
site in the event of a natural disaster or data center
failure.
Global Response Cloud(TM) Service. Our Global
Response Cloud service allows customers to monitor the
amount of time it takes for their Internet pages to
load. Customers can use these metrics to proactively
change site design and content to improve performance,
thereby helping to maintain a positive end- user
experience. Customers can measure performance from
various geographic locations, compare performance to
competitors or to key indices and track performance
across various networks. This service uses Keynote
Systems software.
Mail Cloud(TM) Service. Our Mail Cloud service
provides a secure, outbound e-mail service that
enables businesses to communicate effectively with
their customers and partners. This service relieves
customers from managing, securing and scaling complex
Internet mail routing technology.
Storage Cloud(TM) Service. Our Storage Cloud
service enables customers to access multiple storage
solutions for both content and database class
solutions. This service offers customers two highly
available storage architectures: network attached
storage and storage area network solutions. This
service uses high performance fibre channel
architecture.
Streaming Cloud(TM) Service. Our Streaming Cloud
service enables customers to provide high quality
broadcasting of video-on-demand content to their end
users. Our Streaming Cloud service speeds the delivery
of streaming content and optimizes the quality of the
video to promote a high-quality end-user experience.
This service uses Akamai's FreeFlow service.
Stress Cloud(TM) Service. Our Stress Cloud service
enables customers to determine and improve the
reliability and scalability of their Internet
architecture. This service simulates production-level
traffic to customer sites for an analysis of capacity
bottlenecks in the architecture both before and after
deployment. Our Stress Cloud service uses Mercury
Interactive's Loadrunner software.
Transaction Response Cloud(TM) Service. Our
Transaction Response Cloud service provides customers
with the ability to monitor and measure their site's
performance. Through online reports and alerts,
customers can track the performance of their site in
real time. This service uses Mercury Interactive's
Topaz software.
General Support Services. We offer general support
services for customers that want to use technology
that we do not currently support. If a customer
selects general support services, the customer is
responsible for procuring and managing the necessary
software above the operating system level while we
physically maintain and monitor the server operating
environment.
| All
of these services are relying on specific proprietary technologies,
which, if the company decides to change the software, could cause a
daisy chain reaction to the companies relying on them. Put another way,
all of these clouds might float away from your company. Also, if you
like one solution, Loudcloud could change to another solution without
asking or getting your agreement. You buy their solutions, you're going
have to live with their choices. One has to ask how much will deploying
these solutions cost across the board and why they can't be used in
house. Look, this is just hopped-up Web hosting. Web hosting on the
industrial scale. If you rely on Loudcloud solutions, you are bound by
their decisions. That takes a lot of faith. |
Technology and Infrastructure
Central to the operation of our Loudcloud
Infrastructure Network is our Opsware technology. This
technology consists of software and systems that
automate the many tasks required to maintain the
Loudcloud Infrastructure Network. Our Opsware
technology requires no modifications to existing
customer code and provides the following
functionality:
Deployment. We designed our Opsware technology to
automate the deployment and configuration of our
customers' operational environments. For example, our
Opsware technology can automatically and remotely
configure servers as needed by a particular customer.
Our Opsware technology also consistently configures
the various components of the operational environment
to ensure, for example, that a customer's networking
devices are configured appropriately to interact with
the hardware running in the environment. We believe
that this functionality allows us to configure
equipment in less time and with more consistent
quality than if the process were done manually. In
addition, our Opsware technology permits us to deliver
our services in multiple locations, without having to
maintain a full operations presence in each location.
Scaling. Our Opsware technology maintains a central
repository of data pertaining to the operations of our
customer environments. Because our Opsware technology
maintains this customer-specific data, whenever a
customer requires additional capacity in the
environment, our Opsware technology can automatically
deploy new servers and configure them to the
specifications of the customer's existing environment.
This functionality, in conjunction with our
procurement process and vendor relationships, enables
us to offer our customers the ability to deploy the
capacity that their environment requires and adjust
capacity as their needs change. Further, our ability
to re-create a customer's environment allows us to
consistently manage a customer's multiple sites across
a number of geographies and to extend the Loudcloud
Infrastructure Network by rapidly cloning
installations in new geographies.
Advanced configuration management. We have built
into our Opsware technology advanced configuration
management functionality designed to enhance the
consistency and reliability of our Smart Cloud
services. For example, our Opsware technology
maintains a repository of customer data and operations
configurations, as well as their cross-system
dependencies, to enable us to re-provision a customer
in a new environment in the event of a failure in the
customer's existing location. This same functionality
also allows us to roll back a customer's operational
environment to a previous version in the event that a
change to the operational environment--for example,
introducing a new version of application server
software or updating new customer code-- adversely
affects the performance of the environment.
Ongoing monitoring and maintenance. Using our
Opsware technology, we provide comprehensive
monitoring and maintenance of our customers'
environments, from the network layer through the
application layer. The metrics that our Opsware
technology monitors are designed to maintain and
verify the integrity and quality of the infrastructure
and customer data and to proactively detect
performance problems. In addition, the technology
assists us in preventing, detecting, responding to and
auditing security breaches. We have designed our
Opsware technology to extend the scope of monitoring
capabilities beyond those generally provided by
standard monitoring tools. We provide a comprehensive,
uniform approach to monitoring across multiple levels
of the Internet infrastructure to help identify
performance bottlenecks and detect and diagnose
failures. In addition, through the myLoudcloud portal,
our customers can access a variety of reports and
services which enables them to view information and
monitor the performance of the infrastructure we
provide them.
| What
happens to the user when they buy into internal software which happens
to conflict with Opsware? Are they going to be tied to Opsware
exclusive solutions across the board? This is a stealth issue. It
doesn't hit you over the head until you find Opsware and
Opsware-friendly solutions borged throughout your company's IT
structure. When you buy into a solution like this, it may seem simple
at first, but it could tie your company to Loudcloud in ways you had
not planned. |
Customers
Our customers include established enterprises,
application service providers and Internet-based
businesses. Currently, our customers include BlackHog,
Blockbuster, Brocade Communication Systems, Fannie
Mae, Flywheel Communications, Ford Motor Company,
Juniper Financial, The News Corporation Limited, The
Post Office (U.K.), SkillsVillage.com, Univision
Online and USA Today.
| Not
exactly what they had in mind. Anyone with brains realizes that this
company was supposed to serve a raft of e-commerce shops where the
company wanted to focus on keeping their in-house IT needs under
control. When the company was created, it was clearly designed to serve
a market whose demise is now amply chronicled on Fucked Company.
Without the dotcom base of clients, Loudcloud faces IT departments
looking at both the bottom line as well as the quality of the services
provided. Keep in mind, this is Web hosting, not nuclear science. This
is a glutted market with plenty of room for a shakeout. |
Data Center Providers. We have contractual
arrangements with several data center providers,
including AT&T, Equinix and Exodus Communications. We
utilize the facilities of our data center providers to
deploy our customers.
| Exodus has had their problems as well of late. |
Internet Systems Integrators. We have entered into
joint marketing and lead referral relationships with a
number of Internet systems integrators, including
Accenture, AnswerThink, Cognizant Technology
Solutions, Lante, Oracle Consulting, Organic,
Proxicom, Razorfish and Zefer. Lead referral
relationships are those relationships through which we
compensate a third party for providing us a qualified
sales lead. In addition, we have entered into an
agreement with Viant through which we and Viant will
offer integrated business management, application
management and infrastructure services
| What
is this? The Fucked Company Hall of Shame? It is a good bet that many
of these companies will not live to see the World Series. Making deals
with them might not be the wisest course. |
Sales and Marketing
We sell and market our services in the United
States and Europe primarily through a direct sales
force and indirectly through our sales and marketing
channels. Our sales and marketing channels are
comprised of those companies with whom we have
developed sales referral programs, including
Accenture, Akamai, AnswerThink, BEA, Cisco, Cognizant
Technology Solutions, Compaq, Emerging.com, Lante,
Oracle Consulting, Organic, Proxicom, Razorfish, Sun
Microsystems, Viant and Zefer. We have a European
sales office in the United Kingdom and sales
representatives located in France and Germany.
| Doesn't
this seem like a potential conflict of interest? Someone goes to a
consultant and asks for a range of options, and guess who pops up in
the mix? Should a consultant have a stake in any solutions they offer
to the client? |
Many of our competitors have longer operating
histories, significantly greater financial, technical,
and other resources, or greater name recognition than
we do. Our competitors may be able to respond more
quickly to new or emerging technologies and changes in
customer requirements. Competition could seriously
harm our ability to sell additional services on terms
favorable to us. Competitive pressures could cause us
to lose market share or to reduce the price of our
services, either of which could harm our business,
financial condition and operating results.
| If this is the case, then why use Loudcloud? Andreesen's scary business skills? |
Employees
As of March 31, 2001, we had 627 full-time
employees. Our future success will depend upon our
ability to attract, integrate, retain and motivate
highly qualified technical and management personnel,
for whom competition is intense. None of our employees
is covered by a collective bargaining agreement. We
believe our relations with our employees are good.
| As of May 1, subtract 122 people from that. |
We paid to the underwriters underwriting discounts and
commissions totaling $12,075,000 in connection with
the offering. In addition, we estimate that we
incurred additional expenses of approximately
$1,600,000 in connection with the offering, which when
added to the underwriting discounts and commissions
paid by us, amounts to total estimated expenses of
$13,675,000. Thus, the net offering proceeds to us
(after deducting underwriting discounts and
commissions and offering expenses) were approximately
$158,825,000. No offering expenses were paid directly
or indirectly to any of our directors or officers (or
their associates), or persons owning ten percent (10%)
or more of any class of our equity securities or to
any other affiliates.
| It's
good to underwrite IPO's. Even if the company has no track record worth
mentioning. Oh, and my bet is that Loudcloud won't be issuing a second
round any time soon, if ever. |
We generally guarantee 100% scheduled uptime to our
customers on a monthly basis. We reduce revenue for
estimated credits given for unscheduled downtime at
the end of each month. We do not currently resell
equipment or software to our customers. Furthermore,
bandwidth billings to customers are included in net
revenue and bandwidth costs to third-party suppliers
are included in cost of revenue
| Generally?
Well, that's nice. I'm paying out the ass for this service and they
kinda promise 100 percent uptime. That ain't 100 percent of anything.
Mean Time Between Failure Rate is the standard here and usually goes to
99.999 percent of the time. |
In February 2001, we entered into a marketing alliance
agreement with Accenture. Accenture is entitled to
receive marketing assistance fees and has been issued
a warrant to purchase up to 250,000 shares of our
common stock. Warrants issued to Accenture vest
contingently. A specified number of warrants fully
vest and become immediately exercisable and
non-forfeitable upon the signing of a contract between
us and a new customer referred to us by Accenture. The
warrants can be earned through the termination of the
agreement in February 2004, and vested warrants expire
on February 28, 2006.
| And
Accenture will not specifically recommend Loudcloud to their clients if
it doesn't fit their business model. No conflict there. |
Net revenue. Net revenue was $15.5 million during
the year ended January 31, 2001. We did not generate
any revenue during the period from inception to
January 31, 2000. Net revenue increased as a result of
the deployment of customers and an increased demand
for our services due to the growth of our direct sales
force.
As of January 31, 2001, we had an accumulated deficit
of $239.0 million, which includes approximately $144.0
million related to non-cash deferred stock
compensation and a non-cash deemed dividend on Series
C preferred stock.
We expect to increase our operating expenses in the
future. To achieve operating profitability, we will
need to increase our customer base and revenue and
decrease our costs per customer. We may not be able to
increase our revenue or increase our operating
efficiencies in this manner.
| Are
you kidding me? This is a company which took in $15m and lost $239m?
One could conclude that Opsware is not exactly blazing a trail in
hosting services. My God, this company is spending money left, right
and center. They're canning people. This pattern is very familiar, no? |
We have rapidly expanded our business since we were
founded in September 1999. We have increased our
number of employees from 71 as of January 31, 2000, to
586 as of January 31, 2001, and to 627 as of March 31,
2001. This growth has placed, and will continue to
place, a significant strain on management systems and
other resources. We expect our business to continue to
grow in terms of number of customers and number of
services we offer. There will be additional demands on
our customer service support, research and
development, sales and marketing and administrative
resources as we try to increase our service offerings
and expand our target markets. The strains imposed by
these demands are magnified by our limited operating
history. We may not be able to successfully manage our
growth.
| Well,
no. Actually, it means that the company is ramping up so quickly that
there were squeezing into space. All on revenues of $15M a year. They
can't go back to the capital markets, and while the 122 sacrificed on
May 1st to the alter of profitability many slow down the burn, the
company will be in serious trouble if their services do not seem to
have much appeal to their target client base, what's left of it, that
is. |
Potential customers may choose not to purchase
operations services from a third-party provider due to
concerns about security, reliability, cost or system
availability. It is possible that our services may
never achieve market acceptance. We have a limited
number of customers and have deployed our services a
limited number of times.
We generally do not customize the delivery of our
services beyond the technology platforms that we
currently support, and we do not provide general
systems integration work for our customers. Some
businesses may prefer more customized applications and
services than our business model contemplates. If we
do not offer the desired customization, there may be
less demand for our services.
| So
this warranted the spending of hundreds of millions of dollars for a
technology and business model which has oodles of competition, while
barely delivering the services that the company promises? This is not a
recipe for ongoing success. Hmmm, customized models? Now why would
anyone want that? One size fits all, right? |
Our future success depends on our ability to identify,
hire, train, integrate and retain highly qualified
technical, sales and marketing, managerial and
administrative personnel. As our customer base and
revenue continue to grow, we will need to hire
additional qualified personnel. In particular, we need
to hire a sufficient number of technical operations
personnel in order to deploy customers on a timely
basis.
| http://www.loudcloud.com/silverlining/index.html
When you finish reading and laughing, you'll see this is no longer a
problem for this company. Seems they have a lot of people to spare,
which means they shouldn't have been hired in the first place. |
As of March 31, 2001, our executive officers,
directors and their affiliates beneficially own, in
the aggregate, approximately 46.2% of our outstanding
common stock. These stockholders are able to exercise
significant influence over all matters requiring
stockholder approval, including the election of
directors and approval of significant corporate
transactions, which could have the effect of delaying
or preventing a third party from acquiring control
over us and could affect the market price of our
common stock.
| Because at $6, they couldn't give it away when they launched. This stock has moved less than Jabba the Hut. |
In September 2000, the Board of Directors approved the
2000 Employee Stock Purchase Plan. A total of 1.5
million shares of the Company's common stock will be
made available for sale under the Purchase Plan. In
addition, the Purchase Plan provides for annual
increases in the number of shares available for
issuance under the Purchase Plan on the first day of
the Company's fiscal year beginning in 2003 in an
amount equal to the lesser of (i) 5.0 million shares,
(ii) 2% of the outstanding shares of the Company's
common stock on that date, or (iii) a lesser amount
determined by the Company's Board of Directors. The
Company's Board of Directors or a committee of its
Board administers the plan.
As of January 31, 2001, the Company had granted stock
purchase rights and options for 122,033 shares of
common stock to consultants of which 6,500 remain
subject to repurchase at a weighted average exercise
price of $1.2967 per share. These options were granted
in exchange for consulting services to be rendered and
vest over a period of three to four years. These
options were exercised by the consultants, but are
subject to repurchase. The Company recorded a charge
to operations related to these shares of $2.6 million
and $12,000 for the year ended January 31, 2001, and
for the period from inception (September 9, 1999) to
January 31, 2000, respectively.
| Note
the difference. 1.5m for all the employees, 122,033 shares for a few
consultants. Hmmm. the consultants get access to nearly 1/10th of the
stocks that the entire company's workforce can get access to. Amazing. |
Name
Age Position
Marc L. Andreessen........ 29 Chairman of the Board of Directors
Benjamin A. Horowitz...... 34 President, Chief Executive Officer and Director
Timothy A. Howes.......... 37 President of Product Operations and Chief Technical Officer
In Sik Rhee............... 29 Chief Tactician
Jonathan G. Heiliger...... 24 Executive Vice President
Roderick M. Sherwood III.. 47 Executive Vice President and Chief Financial Officer
Michael I. Green.......... 53 President of Field Operations
Charles J. Katz, Jr. ..... 53 Executive Vice President of Corporate Affairs and Secretary
John L. O'Farrell......... 42 Executive Vice President of Business Development
Shellye Archambeau........ 38 Chief Marketing Officer
William V. Campbell....... 60 Director
Michael S. Ovitz.......... 54 Director
Andrew S. Rachleff........ 42 Director
Who is missing from this board? Let's see, Jim Clark and Jim Barksdale.
Marc Andreesen benefited from the myth of the boy genius. The kid
who beat the University of Illnois to the marketplace. The geeky,
isolated Andreesen was about as capable of running a business in his
early 20's as you are of flight. The Jims were the men who launched
Netscape and kept it going until AOL flipped it. Andreesen was allowed
to play along, but he was the mascot, with less real influence than
Shawn Fanning had at Napster. What was important was that Andreesen
made good copy.
Andreesen and his Netscape crony, Horowitz, are now playing with
their own company, without the guiding hand of Barksdale or Clark..
Which means that while they have experienced directors, they are
risking everything on Andreesen's ability to manage the company.
In a Wired article on Loudcloud last year, they debated on what to
call their meeting rooms. They finally settled on "rap artists".
Exactly the kind of maturity and taste one expects of a CEO and his key
staff. |
Why Loudcloud is in Trouble
- The IPO wasteland
The company issued their IPO during the disaster of March, 2001.
They had wanted to issue at $17 a share, but no one would touch it at
that price. Instead, they issued at $6, and it lay there, limp. Their
ability to raise money is constrained by a dead IPO market, and their
own losses. No one wants to touch a company losing money. The days of
hype are over, the Jims have moved on to other things. Andreesen's
public track record is good. He is still sought after by the media, but
within the industry, he is accorded scant respect, and the last, buggy
release of Netscape, 6, is derided as one of the greatest software
flops since Microsoft Bob.
What is amazing is that the company issued an IPO in the first
place. In fact there was no choice. The company was losing money and
had to go to the capital markets to get more, and in this climate, that
is a one-shot deal. No one really trusts Andreesen and his team to pull
off miracles. What is missing is the experienced leadership by
successful managers who are less concerned about decorating their
lobbies than making a profit.
- The environment for hosting apps has changed
Two years ago, Loudcloud would have been able to get customers from
hundreds of dotcoms, all too eager to dump their IT and hosting issues
onto a willing provider. There is much less support for the ASP/MSP
environment now that many are failing and failing badly. Both Info Week
and eWeek ran articles on how the failure of ASP's have forced
companies to bring IT support in-house. They trusted outside vendors
only to be screwed. All that money was lost and they had to spend it
internally anyway. The fear was that companies would not be able to
hire and retain IT staff to support these operations. Well, it may not
be much of an issue now.
There is no evidence that Loudcloud actually has the capability to
deliver these services over the long term or that their software is
actually as scalable as they claim. They clearly expected to enter an
economy where they would be able to pick and choose companies to work
with to develop their strengths. The reality is that the survivors
don't have the money to pay out for these services and the recent crash
means that there are more people to hire to work in-house on these
solutions.
Conclusion
The reality is that Loudcloud shows many of the signs of a failed
Net company. They offer a service which few people want and or need,
one which is untested, and lead by a CEO whose main experience after
college is being told how bright he was for getting to know NCSA's
software and selling it for private profit. In reality, without the
Jims to make Netscape into a company, Andreesen might have gone down as
the Internet's Sgt. Bilko a long time ago. Now, Andreesen, who spent
most of the 90's playing businessman, is now expected to turn a Web
hosting company into the next big thing.
What has happened to the market is that management is slowly
realizing that there is a need for in-house expertise. It isn't just on
the hardware and connectivity side, but on the content and design side
as well. Companies realize that using outside vendors for critical
services is risky for several reasons, among them that outside vendors
can fail. The collapse of DSL and ASP companies have made outsourcing
core services, and that is the market that Loudcloud is trying to reach
- a very risky one.
Also, Loudcloud wants to sell to new companies, companies without
infrastructure. The messy part of IT systems is legacyware and
Loudcloud is not about to customize Opsware to deal with that. The
problem is that there going to be more legacy work than new companies
for the expected life of Loudcloud.
The problem with their sales strategy is that by making overt
alliances with companies and even more disturbingly, allowing Accenture
to buy shares in the company. Their alliances with consultants is the
kind of thing that creates conflicts. There is an assumption that a
consultant has no vested interest in any of the solutions they
recommend. But if the company offering the advice has a financial
stake, not only in the use of their services, but which products the
client chooses, it's no longer a level playing field. Alliances seem
like a good idea until the client sues when the relationship goes
south.
Also, companies buying into Loudcloud solutions could face longterm
problems with integrating systems, relying on their technological
choices and basically turning over most aspects of their IT operations
to a vendor.
Loudcloud has arrived late into a new market without experienced
managers. Their clients, established companies, know what few people
realize: that Netscape was a failure. Despite the help of the Jims, the
company was a dog and that was without Gates's help. It was first to
market, but when they had to compete head to head with Microsoft, they
didn't only get cheated, Internet Explorer's code was better. IE might
have won without the help of marrying it to the OS.
One of the great secrets of the Internet is that Netscape was a
failure saved by a sale to AOL. Yes, you can argue that Microsoft
strong-armed their way into the market, that they broke the law, but
Netscape's product declined in quality sharply after version 3.0. just
as Internet Explorer's quality improved. Netscape's Web server was
beaten witless by Apache, the Linux-based Web Server. They tried to
make their money on applications and that is where they got screwed,
and badly. Opsware is the legacy of those efforts.
With the real legacy of Netscape known among the client base that
Loudcloud has to reach and outsourcing companies failing all over the
place, it would take an exceptional offering to interest clients and
Loudcloud doesn't appear to be that offering.
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