Competition. While MarkLogic is not a search engine we did end up competing with Fast at several major media (i.e. publishing) accounts, so they had my attention.
Seen this before. Fast reminded me of MicroStrategy, against whom we successfully competed at Business Objects, but whose tactics caused me more than a bit of angst over the years. (One might argue this comparison was prescient.)
Speaking out. I felt that despite the presence of evidence (e.g., financial analyst reports from a Scandinavian bank that did some pretty convincing analysis) that things were awry that everyone (i.e., industry analysts, customers) seemed to turn a willing blind eye first to the indicators of the problems and then to the problems themselves — either dismissing them entirely or as characterizing them as simple “accounting issues.”
Knew the right way. Also, from my near-decade’s worth of experience at Business Objects, I had a strong sense for what I felt was the “right way” to run a European software company. Basically, play by the same rules as everyone else — dual list on the NASDAQ and report financials under GAAP.
Anyway, with the Microsoft acquisition, I figured the story was done. While I was always amazed at the valuation — particularly for a company in the midst of an accounting scandal — the problems were well publicized and I figured Microsoft had to have looked into every angle.
Even as it agreed in January to plunk down $1.23 billion to buy a promising but problematic search company in Norway, Microsoft knew that the company had some accounting matters to address.
Now, it appears, the acquired company, Fast Search & Transfer, may have some criminal matters to work out: Suspicions about the Norwegian search-engine company’s revenue reporting are now in the hands of the Oslo police.
Norway’s financial supervisory authority, Kredittilsynet, said its review of Fast Search’s previously disclosed accounting problems not only appeared to have violated accounting standards, they may have broken the law too.
In its haste to grab Fast Search, however, Microsoft looked past the company’s problems: They include, but aren’t limited to, accounting irregularities that began to appear as Microsoft began to look over its books.
In the second quarter of 2007, Fast Search reported an operating loss of $38 million on revenue of only $35 million—a full $20 million below forecasts. The loss widened in the following quarter, leading the Norwegian stock exchange to delist Fast Search on December 12.
That same day, Fast Search said it would review its accounting for all of 2006 and 2007. The latest unaudited results show revenue growth of 7 percent for last year, which is far below Goldman’s forecast.
Kredittilsynet, the supervisory agency, was equally determined. It referred Fast Search to investigators at Økokrim, the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime.
Økokrim last week concurred that the nature of the irregularities and the amount by which Fast Search apparently inflated its accounts were serious matters warranting prosecution. But the agency said it was too busy to open a criminal investigation.
Rather than let the matter rest, the market supervisor turned it over to the Oslo police for investigation. Aftenposten, a Norwegian newspaper, characterized Kredittilsynet’s decision to involve the police as an unprecedented step in that country.
I’m Dave Kellogg, advisor, director, consultant, angel investor, and blogger focused on enterprise software startups. I am an executive-in-residence (EIR) at Balderton Capital and principal of my own eponymous consulting business.
I bring an uncommon perspective to startup challenges having 10 years’ experience at each of the CEO, CMO, and independent director levels across 10+ companies ranging in size from zero to over $1B in revenues.
From 2012 to 2018, I was CEO of cloud EPM vendor Host Analytics, where we quintupled ARR while halving customer acquisition costs in a competitive market, ultimately selling the company in a private equity transaction.
Previously, I was SVP/GM of the $500M Service Cloud business at Salesforce; CEO of NoSQL database provider MarkLogic, which we grew from zero to $80M over 6 years; and CMO at Business Objects for nearly a decade as we grew from $30M to over $1B in revenues. I started my career in technical and product marketing positions at Ingres and Versant.
I love disruption, startups, and Silicon Valley and have had the pleasure of working in varied capacities with companies including Bluecore, Cyral, FloQast, GainSight, MongoDB, Pigment, Recorded Future, and Tableau.