Silicon Follies

Chapter 38: TeraMemory stock catches fire; productivity plummets

Published July 24, 1999 4:00PM (EDT)

Barry loved breakfast meetings, especially on Mondays; while the rest of the world was still shaving and thinking about the weekend, he was doing deals. He gripped his knife, ripped another section from his panettone French toast, and moved in for the kill.

"So, Bob, you want to sell stand-alone bean-counting boxes the rest of your life, or do you want to come with me and conquer the world?" he asked, chewing vigorously.

Robert McConnell, president and CEO of McConnell Decision Systems, herded his oatmeal tentatively around the bowl. "Barry, I'll level with you: I'm usually pretty skeptical about unproven technology, especially something as ambitious as this WHIP scheme of yours. But my people seem to be pretty excited about your little swindle, so I'll tell you what: If you can get the components ready, along with a good technology transfer package, by Q2, I'll fold your stuff into Topaz," he said, referring to MDS's highly anticipated, mid-size server technology offering. "But I want a front-row seat at the WHIP IPO. I'll need an early in to cover my development costs."

Barry lifted his chin slightly, swallowing like a lizard. "Breakfast is on me, Bobby. You got a deal."

- - - - - - - - - - - - - - - - - - - - -

By afternoon, the word was spreading quickly among the inhabitants of planet TeraMemory:


From: afisher@teramemory.com

To: jmurton@teramemory.com

Subject: MDS deal

Jerry:

Things are really picking up momentum. Barry just did a huge deal with MDS to include WHIP in the Topaz server line. This is going to be mega. You know how things go in the server market. With MDS on board, everyone else is going to fall in line behind them. I think MDS is smart. They know WHIP will come to eat their lunch if they're not on board.

By Tuesday morning, word had filtered out beyond the castle walls and into the hands of a major market research firm. Nothing else travels with the velocity of a secret:


From: rburns@teramemory.com

To: rlageman@regisquest.org

Subject: Big news at Tera

Just got the inside scoop: Tera is partnering with MDS. WHIP's going to grab a big piece of the mid-range server market, and MDS wants to be on the right side of the fence. There's even been talk about a merger/takeover, I hear. It's all pretty hush-hush.

Hush-hush, indeed. By Wednesday, the story had found its way to the San Jose Mercury's "Good Morning Silicon Valley" column, one of the juicier conduits for industry gossip:

Shares of Mountain View, Calif., enterprise solutions giant TeraMemory Inc. rose sharply Thursday on rumors of a merger with McConnell Decision Systems.

MDS Vice President Sanjay Sridhar, previously a senior exec at Indian computer major Wipro, declined to comment when asked whether the troubled company had plans to merge. Sridhar said MDS was looking at various opportunities but declined to elaborate on them. "Frankly, it's too premature to say. I'm unable to say anything at this time," Sridhar said.

Speaking hypothetically, he said a company could be turning itself around and courting a merger at the same time. "At any particular point in time, there are multiple strategies that are adopted," Sridhar said.

Needless to say, this was all the confirmation the industry needed. Of course the rumors were true; in this business, "too premature to say" translated to "most emphatically yes."

This news of yet another TeraMemory conquest quickly commanded the interest of Wall Street. An analyst for the mighty Morgan Sacks' "New Internet Aggressive Growth and Income Fund" brought the story to the Thursday meeting. With a few keystrokes, the portfolio managers picked up a half a million shares of TeraMemory by two o'clock that afternoon, New York time.

The purchase stimulated the participation of the market's "momentum players" -- a sophisticated Wall Street designation for copycats -- by the end of the trading day. TeraMemory made the "Nightly Business Report," which announced a "one-day, 56 percent rise of TeraMemory shares based on merger/takeover rumors."

By Friday, the hyperbole had come full circle. TeraMemory's cubicle productivity dropped to zero as employees monitored the Web at five-minute intervals, checking the value of their stock options. As the price hit 28, the programming staff found it increasingly difficult to nest their parentheses. At 40, the call queues in Product Support grew ever deeper as the T-shirted, headsetted techs floated away on reveries involving Ferrari Testarossas and Atherton real estate.

Tera's rocketing share price even suspended the traditional corporate antipathies and class tensions. Engineers and marketroids, until now sworn enemies, high-fived each other in the hallways. VPs and janitors greeted each other with enormous grins and, "Hey, millionaire." There was palpable electromagnetic charge in the air, and it was stronger than any wireless WHIP transmission.


By Thomas Scoville

Thomas Scoville is either an Information Age savant or an ex-Silicon Valley programmer with a bad attitude. He is the author of the Silicon Valley Tarot.

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