IPOs Hit Governance Pothole ...

...as high-tech start-ups grapple with complex compliance issues that are slowing their efforts to go public. You might not think that it matters much, but without the incentive to strike it rich on Wall Street, entrepreneurs and venture capitalists may opt for corporate takeovers as the less onerous way to cash out. That changes the nature of innovation in technology because bigger companies often buy little ones not

to capitalize on new products but simply to squelch them so they no longer pose a competitive threat. New public companies have long been the source of IT's ability to help businesses compete. Think of Intel, Sun, Cisco, Microsoft and others. Without the IPO market, we might still be running CP/M on Zilog chips using Hayes modems. Michael Howard, CEO of OuterBay Technologies Inc. in Cupertino, Calif., observes that in addition to investors demanding better financial performance from pre-IPO companies than ever before, Uncle Sam has tossed a big, expensive compliance hurdle in front of start-ups. "In order to go public today, you also have to be ready to spend millions for governance," he says. Konrad Feldman, the CEO of another pre-IPO company, New York-based Searchspace Corp., agrees. "The costs of going public [are] potentially an issue because they are costs you can't control," he says. "You must comply." Ken Schneider, chief technology officer and vice president of operations at Brightmail Inc. in San Francisco, acknowledges that some start-ups might lack the resources to meet new governance standards. But, he adds, "well-managed companies usually have their [compliance] act together before they get to the IPO stage." Brightmail has just filed papers with the U.S. Securities and Exchange Commission to go public. • But going public isn't slowing antispam work at Brightmail. The next release later this year of its BrightSig algorithms will be able to detect spam that can trick standard Bayesian filters by inserting "good" words into the tops and bottoms of messages, which is where the filters do their analysis. You can expect less spam as a result. • The folks at Postini Inc. in Redwood City, Calif., also think they're pretty good at fighting spam. Apparently, the U.S. Patent and Trademark Office thinks so, too, because it issued Postini a pretty broad patent that will be announced today. According to company founder Scott Petry, the patent, among other things, grants the company rights over modifying Domain Name System records to redirect e-mail to a managed service provider, as well as an MSP's ability to let end users configure their antispam preferences. Although he says Postini "will not be a predatory patent company," antispam MSPs better take a close look at the patent. Petry believes the patent will give Postini a competitive edge and be seen as a bonus by Wall Street when the company files to go public. • One of the great serial start-up execs in Silicon Valley, Judy Estrin, is at it again. She has helped found three successful start-ups -- Bridge Communications, Network Computing Devices and Precept Software -- and wants to hit the jackpot again as chairman and acting CEO of Precision I/O Inc. in Palo Alto, Calif. Next week, the fledgling operation will announce that it has received $10 million in venture capital. Estrin says Precision I/O software will open the networking-server bottleneck that has emerged with 1 Gigabit Ethernet and will become untenable with 10 Gigabit Ethernet. The product, which she declined to name, will offload from the operating system the handling of network protocols. Expect more news this summer. • Apple Computer Inc. starts shipping the two-CPU version of its Xserve 1U (1.75-in. high) server in April to complement the single-CPU units it began shipping this month. Apple says the combination of its QuickTime Streaming Server software and the Xserve's dual Gigabit Ethernet and fast Error-Correcting Code memory (which wasn't available in previous Xserve servers), plus unlimited user licenses for Mac OS X, will make the server perfect for large-scale streaming video operations because one Xserve can handle 10,000 simultaneous streaming sessions. If only there was something worth watching.

Serial Success

Serial Advanced Technology Attachment (SATA) technology gets a boost on April 5 when Advanced Technology and Systems Co. in Irvine, Calif., releases its L Series of SATA 15-drive arrays. The arrays offer both Fibre Channel and UltraSCSI host connectors. Each SATA drive has a capacity of 120GB. Pricing starts at $8,855.

Copyright © 2004 IDG Communications, Inc.

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