Qualcomm’s former exec chair will exit after exploring an acquisition bid

There’s a new twist in the BroadQualm saga this afternoon as Qualcomm has said it won’t renominate Paul Jacobs, the former executive chairman of the company, after he notified the board that he decided to explore the possibility of making a proposal to acquire Qualcomm.

The last time we saw such a huge exploration to acquire a company was circa 2013, when Dell initiated a leveraged buyout to take the company private in a deal worth $24.4 billion. This would be of a dramatically larger scale, and there’s a report by the Financial Times that Jacobs approached Softbank as a potential partner in the buyout. Jacobs is the son of Irwin Jacobs, who founded Qualcomm, and rose to run the company as CEO from 2005 to 2014. Successfully completing a buyout of this scale would, as a result, end up keeping the company that his father founded in 1985 in the family.

“I am glad the board is willing to evaluate such a proposal, consistent with its fiduciary duties to shareholders,” Jacobs said in a statement. “It is unfortunate and disappointing they are attempting to remove me from the board at this time.”

All this comes following Broadcom’s decision to drop its plans to try to complete a hostile takeover of Qualcomm, which would consolidate two of the largest semiconductor companies in the world into a single unit. Qualcomm said the board of directors would instead consist of just 10 members.

“Following the withdrawal of Broadcom’s takeover proposal, Qualcomm is focused on executing its business plan and maximizing value for shareholders as an independent company,” the company said in a statement. “There can be no assurance that Dr. Jacobs can or will make a proposal, but, if he does, the Board will of course evaluate it consistent with its fiduciary duties to shareholders.”

Broadcom dropped its attempts after the Trump administration decided to block the deal altogether. The BroadQualm deal fell into purgatory following an investigation by the Committee on Foreign Investment in the United States, or CFIUS, and then eventually led to the administration putting a stop to the deal — and potentially any of that scale — while Broadcom was still based in Singapore. Broadcom had intended to move to the United States, but the timing was such that Qualcomm would end up avoiding Broadcom’s attempts at a hostile takeover.

BroadQualm has been filled with a number of twists and turns, coming to a chaotic head this week with the end of the deal. Qualcomm removed Jacobs from his role as executive chairman and installed an independent director, and then delayed the shareholder meeting that would give Broadcom an opportunity to pick up the votes to take over control of part of Qualcomm’s board of directors. The administration then handed down its judgment, and Qualcomm pushed up its shareholder meeting as a result to ten days following the decision.

“There are real opportunities to accelerate Qualcomm’s innovation success and strengthen its position in the global marketplace,” Jacobs said in the statement. “These opportunities are challenging as a standalone public company, and there are clear merits to exploring a path to take the company private in order to maximize the company’s long-term performance, deliver superior value to all stockholders, and bolster a critical contributor to American technology.”

It’s not clear if Jacobs would be able to piece together the partnerships necessary to complete a buyout of this scale. But it’s easy to read between the lines of Qualcomm’s statement — which, as always, has to say it will fulfill its fiduciary duty to its shareholders. The former CEO and executive chairman has quietly been a curious figure to this whole process, and it looks like the BroadQualm saga is nowhere near done.

Enterprise subscription services provider Zuora has filed for an IPO

Zuora, which helps businesses handle subscription billing and forecasting, filed for an initial public offering this afternoon following on the heels of Dropbox’s filing earlier this month.

Zuora’s IPO may signal that Dropbox going public, and seeing a price range that while under its previous valuation seems relatively reasonable, may open the door for coming enterprise initial public offerings. Cloud security company Zscaler also made its debut earlier this week, with the stock doubling once it began trading on the Nasdaq. Zuora will list on the New York Stock Exchange under the ticker “ZUO.” Zuora CEO Tien Tzuo told The Information in October last year that it expected to go public this year.

Zuora’s numbers show some revenue growth, with its subscriptions services continue to grow. But its losses are a bit all over the place. While the costs for its subscription revenues is trending up, the costs for its professional services are also increasing dramatically, going from $6.2 million in Q4 2016 to $15.6 million in Q4 2017. The company had nearly $50 million in overall revenue in the fourth quarter last year, up from $30 million in Q4 2016.

But, as we can see, Zuora’s “professional services” revenue is an increasing share of the pie. In Q1 2016, professional services only amounted to 22% of Zuora’s revenue, and it’s up to 31% in the fourth quarter last year. It also accounts for a bigger share of Zuora’s costs of revenue, but it’s an area that it appears to be investing more.

Zuora’s core business revolves around helping companies with subscription businesses — like, say, Dropbox — better track their metrics like recurring revenue and retention rates. Zuora is riding a wave of enterprise companies finding traction within smaller teams as a free product and then graduating them into a subscription product as more and more people get on board. Eventually those companies hope to have a formal relationship with the company at a CIO level, and Zuora would hopefully grow up along with them.

Snap effectively opened the so-called “IPO window” in March last year, but both high-profile consumer IPOs — Blue Apron and Snap — have had significant issues since going public. While both consumer companies, it did spark a wave of enterprise IPOs looking to get out the door like Okta, Cardlytics, SailPoint and Aquantia. There have been other consumer IPOs like Stitch Fix, but for many firms, enterprise IPOs serve as the kinds of consistent returns with predictable revenue growth as they eventually march toward an IPO.

The filing says it will raise up to $100 million, but you can usually ignore that as it’s a placeholder. Zuora last raised $115 million in 2015, and was PitchBook data pegged the valuation at around $740 million, according to the Silicon Valley Business Journal. Benchmark Capital and Shasta Ventures are two big investors in the company, with Benchmark still owning around 11.1% of the company and Shasta Ventures owning 6.5%. CEO Tien Tzuo owns 10.2% of the company.

With great tech success, comes even greater responsibly

As we watch major tech platforms evolve over time, it’s clear that companies like Facebook, Apple, Google and Amazon (among others) have created businesses that are having a huge impact on humanity — sometimes positive and other times not so much.

That suggests that these platforms have to understand how people are using them and when they are trying to manipulate them or use them for nefarious purposes — or the companies themselves are. We can apply that same responsibility filter to individual technologies like artificial intelligence and indeed any advanced technologies and the impact they could possibly have on society over time.

This was a running theme this week at the South by Southwest conference in Austin, Texas.

The AI debate rages on

While the platform plays are clearly on the front lines of this discussion, tech icon Elon Musk repeated his concerns about AI running amok in a Q&A at South by Southwest. He worries that it won’t be long before we graduate from the narrow (and not terribly smart) AI we have today to a more generalized AI. He is particularly concerned that a strong AI could develop and evolve over time to the point it eventually matches the intellectual capabilities of humans. Of course, as TechCrunch’s Jon Shieber wrote, Musk sees his stable of companies as a kind of hedge against such a possible apocalypse.

Elon Musk with Jonathan Nolan at South by Southwest 2018. Photo: Getty Images/Chris Saucedo

“Narrow AI is not a species-level risk. It will result in dislocation… lost jobs… better weaponry and that sort of thing. It is not a fundamental, species-level risk, but digital super-intelligence is,” he told the South by Southwest audience.

He went so far as to suggest it could be more of a threat than nuclear warheads in terms of the kind of impact it could have on humanity.

Taking responsibility

Whether you agree with that assessment or not, or even if you think he is being somewhat self-serving with his warnings to promote his companies, he could be touching upon something important about corporate responsibility around the technology that startups and established companies alike are should heed.

It was certainly on the mind of Apple’s Eddy Cue, who was interviewed on stage at SXSW by CNN’s Dylan Byers this week. “Tech is a great thing and makes humans more capable, but in of itself is not for good. People who make it, have to make it for good,” Cue said.

We can be sure that Twitter’s creators never imagined a world where bots would be launched to influence an election when they created the company more than a decade ago. Over time though, it becomes crystal clear that Twitter, and indeed all large platforms, can be used for a variety of motivations, and the platforms have to react when they think there are certain parties who are using their networks to manipulate parts of the populace.

Apple’s Eddie Cue speaking at South by Southwest 2018. Photo: Ron Miller

Cue dodged any of Byers’ questions about competing platforms, saying he could only speak to what Apple was doing because he didn’t have an inside view of companies like Facebook and Google (which he didn’t ever actually mention by name). “I think our company is different than what you’re talking about. Our customers’ privacy is of utmost importance to us,” he said. That includes, he said, limiting the amount of data they collect because they are not worrying about having enough to serve more meaningful ads. “We don’t care where you shop or what you buy,” he added.

Andy O’Connell from Facebook’s Global Policy Development team, speaking on a panel on the challenges of using AI to filter “fake news” said, that Facebook recognizes it can and should play a role if it sees people manipulating the platform. “This is a whole society issue, but there are technical things we are doing and things we can invest in [to help lessen the impact of fake news],” he said. He added that Facebook co-founder and CEO Mark Zuckerberg has expressed it as challenge to the company to make the platform more secure and that includes reducing the amount of false or misleading news that makes it onto the platform.

Recognizing tech’s limitations

As O’Connell put forth, this is not just a Facebook problem or a general technology problem. It’s a social problem and society as a whole needs to address it. Sometimes tech can help, but, we can’t always look to tech to solve every problem. The trouble is that we can never really anticipate how a given piece of technology will behave or how people use it once we put it out there.

Photo: Ron Miller

All of this suggests that none of these problems, some of which we never could have never have even imagined, are easy to solve. For every action and reaction, there can be another set of unintended consequences, even with the best of intentions.

But it’s up to the companies who are developing the tech to recognize the responsibility that comes with great economic success or simply the impact of whatever they are creating could have on society. “Everyone has a responsibility [to draw clear lines]. It is something we do and how we want to run our company. In today’s world people have to take responsibility and we intend to do that,” Cue said.

It’s got to be more than lip service though. It requires thought and care and reacting when things do run amok, while continually assessing the impact of every decision.

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