Liberate Technologies

» see liberate.com as it lived, on the wayback machine

~ the eulogy ~

Interactive television in the sense Liberate meant it could only happen where a cable operator owned the box under your television and wanted software in it. Turkey did not have that arrangement. The box in a Turkish living room was a satellite decoder, its menu belonged to whoever sold you the subscription, and nobody involved imagined a browser in there. So this is a company whose entire market was a business relationship that did not exist where I was.

It started as Larry Ellison being wrong in an expensive and interesting way. Oracle set up a division in late 1995 to build software for the network computer, a stripped-down machine with no hard disk that would pull everything it needed off a server. Oracle spun the division out as Network Computer, Inc. in April 1996. In August 1997 it merged with Navio Communications, a Netscape-backed company chasing the same idea from the other direction, and in May 1999 the combined thing renamed itself Liberate Technologies.

The pivot was smart. The network computer had failed on the desk, but there were already tens of millions of dumb terminals in American homes attached to a cable line, and the operators were about to replace all of them with digital boxes. Liberate wrote the software layer for those boxes: an HTML browser, an application platform, a way for the operator to put email and shopping and program guides on a screen people were already looking at. Comcast, Cox and the European operators signed on. The IPO on 27 July 1999 raised a hundred million dollars.

~ the dossier ~

~ the origin ~

For about two years Liberate was the company that had gotten the timing right. Everyone agreed the television was the next screen. The set-top box was going to become a computer, the cable operator was going to become a portal, and the software underneath would be worth whatever the licensing seats added up to. Liberate was on the shortlist for essentially every large digital cable rollout in North America and had a real business in Europe.

The problem was that the operators moved on their own schedule and their schedule was slow. Boxes shipped late, trials stayed trials, and the seats that were supposed to convert into per-subscriber license revenue stayed in the future tense. That is a survivable problem for a private company and a fatal one for a public company that has already told the market what the next four quarters look like.

~ the unraveling ~

What happened next the SEC eventually laid out in detail. The chief operating officer and head of sales, Donald Fitzpatrick, working with sales vice president Thomas Stitt, inflated Liberate's reported revenue across four consecutive quarters in the 2002 and 2003 fiscal years, by as much as seventeen percent in a single quarter. The centerpiece was a round-trip: Liberate supplied a customer with the money the customer then used to buy Liberate software, and the resulting number went on the revenue line as a sale.

Liberate restated in September 2003. The shares came off NASDAQ, an SEC investigation opened, and the company that had been selling operators a decade-long platform commitment was now a company operators had to explain to their own boards. On 30 April 2004 it filed for Chapter 11. The bankruptcy court dismissed the case on 8 September 2004, which left Liberate solvent, listed nowhere and with nothing much to do.

~ the actual end ~

It was sold in halves. On 10 January 2005 Liberate agreed to sell substantially all of the North American business to Double C Technologies, a venture majority owned by Comcast with a minority stake held by Cox, for roughly 82 million dollars. That closed on 7 April 2005. The international assets went to SeaChange International the same month for 23.5 million. The customers had bought the vendor, which is what happens when a supplier becomes cheaper than the switching cost.

~ the next chapter ~

The idea did not die with the company, it just moved. Everything Liberate was promising in 1999 exists now: an application platform in the box under the television, a store, a browser of sorts, video on demand ordered from a remote control. It arrived about eight years late and it arrived from the streaming companies and the console makers rather than from the cable operator, who ended up as the pipe after all.

The other inheritance is smaller and meaner. Liberate is a reasonably clean demonstration that when a market is late, the pressure lands on the sales organization, and a round-trip deal is what that pressure looks like when it finds someone willing. The software was real. The customers were real. The quarter was the thing that was not.

@}-->--

              )
             (_)
            .-'-.
            |   |
            |   |
            |   |
            |   |
          __|   |__   .-.
       .-'  |   |  `-:   :
      :     `---'     :-'
       `-._       _.-'
           '""""""

« previous  ·  random  ·  next »