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Orphan divisions of large tech firms are seen returning to their glory days if extracted and nurtured
As the larger companies in technology sputter and miss earnings targets, some tech acquisitions specialists are taking aim at smaller units that are no longer considered core to the giants or must be sold to raise cash.
These buyers hope to profit from the kinds of problems that have hit a number of large software companies and drew attention when second quarter earnings targets proved elusive at several. In early July, Veritas Software Corp., Sybase Inc., PeopleSoft Inc., Siebel Systems Inc., and BMC Software Inc. reported earnings losses.
Venture capitalists Terry Garnett and David Helfrich are among an emerging breed of entrepreneurs who have launched funds to invest in unwanted divisions or parts of divisions of larger companies. Their fund, Garnett & Helfrich Capital, starts off with a $250 million shopping purse, and they plan to look for orphan units, unhappily nested within larger enterprises. The fund's largest investor is Harvard Management Co., the investment arm of Harvard University.
Garnett is a former senior executive of Oracle Corp. who has also worked as a general partner at Venrock Associates, the venture capital arm of the Rockefeller family foundation. Helfrich was a member of the founding team at Copper Mountain Networks Inc. He has also worked at 3Com Corp. and Ascend Communications.
Garnett says he expects to parcel out the $250 million in six to eight buyouts...