Terry Cunningham’s Adventures: Crystal and Coral8 (Part 4)

SM: Tell me about selling Crystal to Seagate. Did they come to you?

TC: Yes. We were doing our thing out of Vancouver. We had grand visions of being a huge company. I remember thinking if we ever got to $20 million I would die a happy man. I look back now and think, you can’t even get by on $20 million in revenue.

A friend of mine worked at Seagate and called me one day. They wanted to talk to me because they were going into the software business. I was laughing and told him they were a hard drive company, so what software could they possibly need? He was the product manager at Borland and had moved across the street to work at Seagate.

Seagate felt there was an opportunity to do data-related software and build a great software company. There were a number of meetings and we started getting along quite well. I enjoyed the Seagate folks; they were smart and a little crazy. My biggest hang up was trying to understand what they knew about running a software company. Steve had to explain to me that I was missing the point. They did not want to run the companies; they just wanted to own them. I said OK and they paid $20 million to buy Crystal.

SM: How much revenue were you doing at the time?

TC: We were doing $5 million-$6 million. It was a decent multiple. Dad got paid so everybody was happy. My buddies from engineering school all had a bet going to find out how long I would last at Seagate. Some had my time measured in minutes.

SM: Was there a methodology to the purchases Seagate was making?

TC: There was. First there was a data management umbrella concept, which dealt with all things data such as storage management backup, network management and analytics. There was a loosely coupled idea that there was data which needed to be stored, moved and analyzed. I ended up being the spin doctor who had to tell the story cohesively to enable other people to understand.

It seemed as though every time we bought a company there was an egomaniac who was saying “you are going to do it my way or else”, and eventually they all disappeared. I was the only one standing. I ended up running the whole thing. The merge and purge involved 13 acquisitions. I was responsible for gluing it all together. The result was $350 million in revenue with 30% EBITA.

SM: Talk a little bit about the process. What did you learn out of it?

TC: I am going to write a book about it. The basic idea is that we had an idea of the way data should work in the enterprise. We had a basic ability to deliver it. Storage management meant we could protect it and back it up. Network management knew which devices were on the network and where the data was, essentially being the genesis of storage area networks. Analytics were about being close the end user as well as the the back end storage.

The process of merging and purging was the most amazing. Some of the companies had multiple products. Some were good, some were not. I spent 9 or 13 weeks of every quarter on the road  talking about the vision. I was showing how it all fit together and tried to convince everyone to play together. The negative part was the back-row boys. They were the guys sitting there going “this is bull, this guy is a moron”, which led us to coin the phrase “participating skeptic”. If you are in, I don’t care how skeptical you are as long as you are engaged in the process. Arguing with me right now about why this won’t work is fine. If you are sitting in the back row whispering with your buddy then you are out. I will hunt you down and fire you.

There was plenty of dead wood. These were folks vesting and waiting for us to go public. We had Goldman and Morgan joint booked for what was going to be the largest software IPO in history. We were going to raise $400 million dollars, and Seagate Software was going to be a very big spinout. The merge and purge was the exercise of buying 13 companies in 18 months, and we were left with all of these parts. We had 13 marketing departments and 13 VPs of marketing. We ended up with a philosophy that the development center stayed and everything else consolidated and centralized.

This segment is part 4 in the series : Terry Cunningham’s Adventures: Crystal and Coral8
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