THE UNRAVELING

Still, it's a humbling finish for a company once led by David Dorman, a telecom veteran now heading AT&T's and British Telecom's multibillion-dollar global joint venture. In May 1997, News Corp. considered offering as much as $450 million for PointCast; the board deposed CEO and founder Chris Hassett after that deal failed to materialize.

The following year, the company filed for a public offering that would have valued it at $250 million. But Mr. Dorman, who succeeded Mr. Hassett as CEO in November 1997, saw a bigger deal -- a partnership with several regional Bell operating companies to reshape PointCast as the front end to a high-speed digital subscriber line service.

That deal promised a big payoff: @Home Network, a high-speed Internet service backed by cable operators, now enjoys a market capitalization close to $20 billion. Arriving at a deal with the Bell consortium could have brought similar riches. But the Bells dithered, and PointCast's additional partners, such as Microsoft, only complicated matters.
The deal finally fell apart early this year when Microsoft pulled out. The remaining partners couldn't find other companies to revive the group.

In the meantime, Web portals added millions of new users. Yet PointCast's traffic flatlined, hobbled by a client that took a long time to download and by the growth of Web sites that matched its news offerings. Distracted by the Bell deal, PointCast's employees worked on a next-generation product -- while the existing client software languished. It proved easier for Web-based competitors to update their offerings on the fly, free of the complexities of PointCast's client-server network.

NOW WHAT?

For PointCast's new owners, the challenge is to bring the company back to Internet speed.

So far, signs look promising. Technically, Launchpad Technologies, a San Diego-based company incubated by Idealab, is acquiring PointCast. But the combined company will be based in PointCast's Sunnyvale offices. Idealab partner Larry Gross will run PointCast, and Launchpad's Francis Costello will move to Sunnyvale to be the company's chief operating officer. (Mr. Koen will become a member of Launchpad's board of directors; none of PointCast's venture backers will have representation on the new board.)

Idealab chairman Bill Gross says that the merger will bear fruit quickly. The companies will combine Launchpad's eWallet software, a downloadable client that promises to ease online shopping, with PointCast's next-generation information client.

"We hope to have something in 60 to 90 days," says Bill Gross. "PointCast had already made a wonderful new thin-client version of the client. We're going to be adding to that."

PointCast's mistake, according to Bill Gross, was failing to make more of the assets it had. "They really didn't monetize the customer attention they had," he says. "They never asked anyone to buy anything!"

In today's world, e-commerce links seem to be a given. But when PointCast was entertaining offers from Rupert Murdoch, Amazon.com hadn't gone public yet. The world changed fast -- but PointCast didn't change fast enough.
 

Source: Owen thomas, Redherring, May 12, 1999