"It's always darkest before it's pitch black"

Owen Thomas · 10/09/08 07:00PM

Bad times have hit sunnily optimistic northern California. Does it matter if the mayhem on Wall Street had any real connection with the tech-powered Silicon Valley economy? Some of the region's most influential power brokers believe it will — and by pushing others around, they can make perception reality. A helpful insider has provided notes from a recent meeting of Sequoia Capital, a backer of Apple, Cisco, and Google which has risen to become the Valley's preeminent venture-capital firm. Michael Moritz had summoned CEOs of Sequoia's portfolio companies to tell them to prepare for a long, hard downturn. The bottom line: All startups must become cash-flow positive — in other words, earn more than they spend. Or in other, other words, act like the real businesses they always should have emulated. Here are what our tipster claims are notes from the meeting, apparently forwarded by one of the attendees:

Sequoia calls off the boom

Owen Thomas · 10/08/08 11:00PM

The good times are over, the partners of Sequoia Capital are telling the entrepreneurs they fund. Quite literally: They sent a summons to a summit meeting with a picture of a gravestone with the writing "R.I.P. Good Times," rival venture capitalist Om Malik reports. There, partners including Michael Moritz and Doug Leone told CEOs of companies in their portfolio that they should steel themselves for a prolonged downturn, make their businesses self-sustainable, and cut all unnecessary costs.I would be more impressed if Sequoia hadn't pulled this act before when the last bubble burst. True, they called the movement of the market. But it's conventional wisdom today that the economy is tanking. But what does the economy have to do with the startups Sequoia funds? The whole point of venture capital is to nurture companies that need capital. Part of the art of investing in startups is knowing when to push them out of the nest. Templated cost-cutting advice, applied across Sequoia's portfolio, is hardly a value-add. And it's not clear how this was bad advice a year ago. Sequoia's portfolio should have been keeping a close eye on costs then as now. The IPO market is definitely ailing now, but it's hardly been healthy over the last few years. Large acquisitions have been scant since MySpace and YouTube got bought. The chaos on Wall Street doesn't change the bleak outlook for exiting startup investments profitably that existed beforehand. So what's really going on here? Consider two of the companies that heard Sequoia's speeches last time around: PayPal and Google. They both spent and grew aggressively in the face of a local recession. They both managed to IPO when few tech companies were going public. And they both delivered handsome profits to Sequoia. I'm just guessing at Moritz's game, but here's what I suspect is going through his head: He could have delivered a cost-cutting sermon a year ago, true. But his entrepreneurs are far more likely to listen to it now. And the rest of Silicon Valley is listening, too. He's made his bit of noise, knowing full well word would leak out, and put a scare in all his competitors. How convenient that this scare-tactics summit was held just a month after Sequoia raised $1.7 billion in new funds. While everyone else is hunkering down, Sequoia will cull the weaklings from its portfolio, double down on the winners — and profit before anyone realizes the good times are back. Well played, Michael, well played.

Wilson Sonsini lawyers' bonuses slashed by half

Owen Thomas · 09/29/08 03:40PM

Wilson Sonsini, the giant law firm which grew fat in the '90s tech boom, has struggled ever since. Its involvement with many companies implicated in stock-options backdating scandals has tarnished its image, even as the faltering market for tech IPOs shrank a once-lucrative business for the firm. So who's paying the price? Wilson Sonsini associates. Above The Law reports that the firm has instituted a new bonus plan. Bonuses awarded for hours billed, the traditional measure, have been cut by half; the rest of the "bonus opportunity," as Wilson Sonsini management puts it, will come from "qualitative performance factors." By "qualitative performance factors," read "subjective judgments one's boss can make at a whim." The Valley has yet to go through an economic downturn, but some of its lawyers are already feeling the pinch.

AOL asks bloggers to stop blogging, cuts costly products

Nicholas Carlson · 07/25/08 10:00AM

Perhaps readying itself for a sale to Microsoft or Yahoo, Time Warner company AOL began cutting costs yesterday. One memo, from Kevin Conroy, AOL’s EVP of Products and Marketing, told employees AOL will "sunset" products Bluestring, Xdrive and AOL Pictures. MyAOL will go into maintenance-only mode and investment in AIMWorld — we've never heard of it either — is done. In a second memo, AOL subsidiary Weblogs Inc asked its pay-per-post bloggers writing for, The Unofficial Apple Weblog, and DownloadSquad to stop filing until July 31. (Photo by AP/Sakuma)

Microsoft cuts internal spending

Nicholas Carlson · 05/30/08 10:40AM

In April, Microsoft CFO Chris Liddell said the company was not feeling the effects of any economic slow down. Now its is, reports Global Equities Research analyst Trip Chowdhry.

Cisco preparing for downturn?

Jordan Golson · 03/27/08 07:20PM

Cisco has told some managers to limit expenses and use up accumulated vacation days. In February, Cisco cut growth targets to 10 percent from 15. CEO John Chambers also warned that the current slowdown in growth could last from two to five quarters. Why not just offer buyouts to employees who are unhappy with the company? That seems easier.

Cisco cuts mid-year bonuses

Owen Thomas · 02/20/08 02:40PM

Shareholders have already figured out Cisco's not meeting expectations. Now employees are feeling it, too. In good times, Cisco employees get a mid-year advance on their annual bonus, paid in March. But managers have just informed their charges that they're getting half the usual amount. Cisco bonuses start off ranging from 4 percent to 60 percent of one's annual salary, depending on pay grade, and are determined by a maddeningly abstruse formula:

Yahoo's endless sprawl

Owen Thomas · 01/22/08 07:00PM

Yahoo's ambitions have long exceeded its abilities. Its large global audience and corps of engineers has lulled it into thinking that anything one can code is actually worth doing. The cold numbers of website traffic logs tell another story. It's hard to get people to try new things; even harder to get people to stop doing them after the experiment proves a failure. Such management discipline escapes Yahoo. The Everything Yahoo page chronicles, alphabetically, all of Yahoo's projects. Even several dead ones. After the jump, an annotated list of everything — and we mean everything — Yahoo.

AOL cancels concert funding as it cuts Virginia ties

Nicholas Carlson · 12/13/07 10:00AM

Earlier this year, AOL reps told Loudoun Summer Music Fest organizer Tracey Parent they'd pony up the usual $80,000 for the show in next year's budget. That's no longer the case, local paper Leesburg Today reports. And that's a surprise how?

VeriSign ends quest to obscure corporate mission

Mary Jane Irwin · 11/14/07 04:30PM

VeriSign, the company trusted with protecting our data when we go on online shopping sprees, has decided to clip its wings after revenues fell 6 percent in the third quarter. It's dropping new ventures, like mobile banking technology and Internet telephony, which it acquired in moments of irrational exuberance, in favor of focusing on its traditional enterprises. VeriSign's domain-name registry and e-commerce services accounted for 60 percent of its profits last quarter.

CNET looking to shed dead weight

Mary Jane Irwin · 10/26/07 01:59PM

You may recall CNET Networks sold Webshots to American Greetings yesterday at the fire-sale price of $45 million. Well, it's not stopping there. In an effort to build the "media company of the future," CEO Neil Ashe said, "it is also important to sell some of our properties and we won't shy from it." Important in the we-lost-$16-million-in-the-third-quarter kind of way. Remember when CNET had a monopoly on tech news and reviews online? Now it's holding a slew of Baltic and Continental Avenues, like and MySimon. Time to trade those in for some hotels on your more rentable domains, Neil.

EarthLink puts more than San Francisco's Wi-Fi network on hold

Mary Jane Irwin · 08/29/07 11:27AM

Earlier this month, Internet service provider EarthLink held San Francisco's proposed citywide Wi-Fi network hostage while asking the city to pony up some extra cash. Turns out that wasn't strong-arm tactics — EarthLink is in a world of financial hurt. To cauterize the bleeding, it's cutting 900 employees. Among the victims is Don Berryman, the president of municipal Wi-Fi networks. EarthLink won't be filling the position.

Why Yahoo won't pay your bills

Owen Thomas · 07/06/07 11:20AM

Another one of Yahoo's sprawling properties has gotten the axe: Come mid-September, Yahoo Bill Pay is shutting down. You didn't even know Yahoo let you pay your bills? Exactly. The service, notable when it launched for undercutting banks' online bill-payment fees, has become outmoded. Almost all banks now offer free Web bill payments. And Yahoo, spurred by gadfly executive Brad Garlinghouse's now-famous peanut butter memo, is trying to pare down its offerings to products where its vast user base actually gives it an advantage, like social media. Even so, while a smart business move, the shutdown is equally a sign of Yahoo's diminished ambitions. Barely able to manage itself, Yahoo can hardly be expected to manage your finances.

'Newsday' Takes Papers Out Of The Newsroom

Doree Shafrir · 07/03/07 11:00AM

A Long Island correspondent reports that Newsday has stopped giving its reporters free newspapers, and that's rankling some of the reporters—especially those who live in the five boroughs, where they can't get home delivery. Sniff! Our tipster writes: