For Crying Out Loudcloud

Friday's Loudcloud (LDCL Quote - Cramer on LDCL - Stock Picks) embarrassment -- after trimming both the share price and total proceeds, the stock opened at $6, wobbled for a while, then closed at a sort of mercy-killing $6.15 -- will be generally attributed to the lousy IPO environment.

Also In This Column

Zodiac Networks

More sophisticated analysis pointed to the general lack of interest in YAIIP -- Yet Another Internet Infrastructure Provider. The institutions weren't interested; to a large degree, neither were retail buyers. So, the argument goes, the issue sat there like roadkill all day. Even a big, Goldman Sachs/Morgan Stanley Dean Witter-orchestrated prop-up buy Friday by founder Mark Andreessen and a couple of venture capital friends couldn't help much. Or maybe they did help -- helped to keep it from sagging below the offering price and closing down the first day.

(Monday was another story: Much of the day Loudcloud was trading around $6, right at the IPO price, although it dipped at one point to $5.75 and closed at $6.07)

Everyone knew last week that the IPO environment was lousy. Everyone knew there was little interest. Heck, even the smallest E*Trade investor could get an allocation on this one.

But the offering went out the door anyway -- principally, because even without prospects of a first-day pop, Loudcloud needed to do this deal. It needed even the reduced net cash the lowered offering price would bring.

The show must go on. And it did.

I want to suggest that there was another, more subtle and more interesting reason why this duck died on the doorstep: the Andreessen Factor. Or more to the point, the failure, maybe the absence of, an Andreessen Factor.

That sounds odd, I know. The "halo effect" of Andreessen's presence at the helm, even on the board of, even as a passive investor in a company, has been presumed to be great. After all, this is the guy behind the company that kicked off the Great Internet Wealth Machine.

Heck, this is the guy who invented the Web browser.

So how could there not be a halo effect when he's around? Aren't his pockets absolutely spilling over with pixie dust, that magic stuff you sprinkle around, then poof! And a new company becomes a smash success?

Excuse me, Mark & Co., but that's just not the case. Friday was another reminder.

Let's examine the fact file on Mark Andreessen for a minute.

1. Yes, he helped invent the graphical Web browser. Not the Web, not browsers in general (anybody remember Lynx?), but yes, as an Illinois college student, he and a few friends developed the early Mosaic browser. The first graphical browser. And by all contemporary accounts, he was the most equal among equals in that effort.

   It was a great idea, and a decent first iteration of that idea. Mosaic wasn't very good, but like most software, especially where the Web has been concerned, they tossed it out there in what amounted to a public beta version, listened to users' comments, then started making it better.

   Mark up one for Mr. Andreessen.

   Spyglass (subsequently bought by Open TV about a year ago) went on to make a business out of Mosaic, licensing it to (among others), the big meanie, Microsoft -- which after some subsequent litigation, settled in favor of Spyglass, went on itself to make it into the smash success that Internet Explorer has become. That wasn't Mark's doing; he was long gone.

2. We don't owe Netscape to Andreessen, but to Jim Clark. And especially, to good old Barks -- Jim Barksdale, who did nearly everything right after coming to the company from Craig McCaw's cellular operations (and before that, from FedEx).

   After his unhappiness at Silicon Graphics, Clark was casting about for something to do with his restless millions. He heard abut this college kid at the University of Illinois at Champaign/Urbana who'd developed this Web "viewer." He sat down with Andreessen, talked about the future of the Web and decided to form a company around the idea of a graphical Web browser.

   That company became, after a name change, Netscape. Its Web browser (also built on the bones of Mosaic) became Navigator. In August 1995, it changed the world as we know it, by going public at $28 ... with a first-day IPO that opened at $71, hit $75 and finally closed at $58.25.

   The Internet Era had truly begun.

   But let's tell the truth here: Though yes, Andreessen was part of Netscape -- a co-founder with Clark -- and yes, its product grew out of his college work, he was a relatively small cog in the machine Clark created. Clark treated Andreessen generously, I believe; but Netscape's team of engineers was large.

3. Andreessen hasn't been an engineering or business genius. Some engineers become great businessmen; some become great engineers, the kind of leaders other engineers claw and scratch to work for. Clark certainly sits in that second category; he was adored by the engineers at SGI, some of whom followed him out the door to Netscape (and then again, later, to WebMD).

   By all accounts from the "Netscapees" I've talked with, the key engineers who worked with Andreessen at Netscape -- then (in some cases) moved along with him to America Online after it bought the company -- Andreessen isn't that kind of guy. It's not that he's disliked, just that he isn't seen as an engineering -- or business -- leader by former colleagues.

I find little basis for the blind assumption that Mark's presence in a company -- let alone his role as chairman, as at Loudcloud -- ought to give investors great expectations. I think we've seen waaaay too much of this stuff, where investors flock to new companies because their founders have had great success before.

Heck, even Clark hasn't had a hit since Netscape. And I think Clark's a real genius, brimful with the Right Stuff.

I don't mean to put Andreessen down. By all accounts he's an interesting, competent guy. But I don't know how much value he really adds at Loudcloud, beyond getting his phone calls answered and getting in the door of corporate IT managers. I think it's clear he didn't add much IPO star power to Loudcloud last week.

As the market showed...

Lesson learned? Probably not.

It's In the Stars

That said, I do want to put on your look-ahead radar another new company in which Andreessen is involved (but not as the top guy), which I believe may have great promise. It's Zodiac Networks, still in stealth stage (meaning they won't tell you what they're doing), but likely to make a big splash, maybe later this year.

My understanding of Zodiac is that it uses the peer-to-peer ("P2P") model made famous (infamous?) by Napster, combined with the "push" approach of former highflier PointCast.

With Zodiac's product-in-the-making, you'd be able to identify the kinds of content you'd like to see, then Zodiac would go out, round up that data and "push" it down to your PC, where you could read it at your leisure.

At the same time, Zodiac understands the performance advantages of the kind of edge-of-the-network technology Akamai (AKAM Quote - Cramer on AKAM - Stock Picks) is selling, because that information on your PC would then be made available by Zodiac, P2P fashion, to other PC users with similar interests.

In other words, your PC would become an always-on caching station for content.

I have lots of worries about security in peer-to-peer environments; many open all the ports on your personal computer to outsiders, just inviting disastrous hacks. But secure P2P is possible, and maybe that's a part of the Zodiac puzzle, too.

Andreessen has been joined at Zodiac by Barksdale, and much-liked Mike Homer, also a former Netscape exec.

Benchmark Capital Barksdale's VC shop, The Barksdale Group, and some other former Netscapees are funding Zodiac in its stealth stage. If they get this working -- and truly solve the P2P-ports security problem -- we can expect some big noise from the company, probably later this year.