27th January, 2009
Mr. Steven A. Ballmer, CEO,
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-7329
USA
Re: Blinkx
Dear Mr Ballmer
Like many people who have been in the IT industry for a very long time, it was with great regret that I read last week about Microsoft’s first layoffs in the company’s history. It is surely a sign of the times that a company so central to the computer/information revolution and as iconic as Microsoft should be so impacted by the current global economic downturn.
However – and with the greatest possible respect, Mr Ballmer – I cannot help feeling that part of the reason for the deterioration in Microsoft’s financial position is that it seems to have lost its sense of direction. It has lost Windows market share to Apple. MS Office is losing ground to OpenOffice and others. IE is under attack from new browsers such as Chrome, which gained a 1% market share in about 24 hours after its release. Microsoft is trailing a distant third in search behind Yahoo and Google. Lastly – but not least – surely it is only a question of time until a Linux distro comes along which is easy enough to install and intuitive enough to use to undermine, perhaps fatally, the Windows franchise itself.
In Short, Mr Ballmer, from where I’m standing it looks like Microsoft is losing the war in its traditional battleground of computer OS and apps.
If that is true, the obvious thing to do is to open another front in the computer wars. And in my view the obvious battle to choose is video search.
I am a shareholder in Blinkx, of which I’m sure you will have heard and which claims to be – and I’m sure is – “the world’s largest and most advanced video search engine”. It has currently indexed some 32 million hours of online video (about two-thirds of all such video – and almost certainly more than 32 million hours by the time you read this), as well as releasing innovative products such as Ad Hoc and, soon I’m sure, Transaction Hijacking to enable different aspects of video search functionality. I’m sure you are aware of Blinkx, as it is has an agreement in place with MSN UK as well as many other media partners such as BBC News etc. It has more than 500 partners in total (and will have added more by the time you read this, I’m sure).
However, for shareholders such as myself there is one major problem. The management team – and in particular the CEO Suranga Chandratillake – seem to be, from where I’m standing, much more interested in the technology for its own sake than in delivering shareholder value. Mr Chandratillake is a technical genius, I have no doubt and am quite happy to concede: and yet I have very grave doubts about his abilities to lead a rapidly-growing company such as Blinkx.
This is not only my view, nor is it a conclusion to which I have come lightly or in the absence of any facts or evidence. I would cite not only the catastrophic (in my view) decision not to release the Transaction Hijacking product in time for Christmas 2008; I would cite also the disastrous ‘bid’ for the American company Miva, which Blinkx originally launched at 120c and then, when rejected, ‘revived’ at 55c a share (it is unclear among many owners of Blinkx stock whether or not this ‘revival’ constituted a second formal bid. This is not a matter on which Blinkx management has seen fit to enlighten shareholders). The uncertainty around this ‘revival’ of the Miva bid caused the Blinkx share price to crash by round 50% in mid-October when the bid was ‘revived’ – from c. 25p to c. 13p (the IPO price just over 18 months ago was 45p). It has not recovered since, leading to the very great dissatisfaction of many (not all, it must be said) Blink shareholders.
Of course I am disgruntled: my motive in writing to you is very obvious. But the current situation is one from which two out of three parties could gain, were Microsoft to launch a bid for Blinkx. Microsoft would win as it would gain at a very reasonable cost what gives every impression of being, with decent management, a world-beating video search engine. Blinkx shareholders would gain as they would receive a premium – most of them – to their purchase price. A bid of 60p a share or thereabouts would, I feel sure, gain the interest of the large institutional shareholders who bought in at the IPO and have since seen an approximate 75% drop in their investment (and this for the third-largest video search engine in America, after Yahoo and you-know-who).
Of course I am not unaware of the chaos currently raging in world markets – who could be? If I thought that Blinkx management cared about its shareholders or had a reasoned plan moving forwards I wouldn’t be writing to you. Sadly – and the non-conclusion of the Miva bid one way or another is, in my view, very clear evidence for this – the Blinkx management team seem concerned only with the Blinkx technology for its own sake. In my view they seem absolutely incapable of delivering shareholder value. The best bet for Blinkx shareholders seems to be a takeover of the company.
Yours sincerely
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