letter to Sir Martin Sorrell, CEO of WPP

Sir Martin Sorrell, CEO,

c/o WPP London

27 Farm Street

London W1J 5RJ

17th March 2009

Re: Blinkx

Dear Sir Martin

I am writing to you as a shareholder of Blinkx, the self-proclaimed “world’s largest and most advanced video search engine”.

Sadly the ability of Blinkx’s management to live up to such proud boasts has – so far at least – proven woefully inadequate. A series of unforced errors – the failure to release what many shareholders see as a key product, Transaction Hijacking, in time for the Christmas 2008 market; the willingness of the CEO Suranga Chandratillake to shoot his mouth off, making rash promises (in public, on the record) which are not subsequently fulfilled; and not least what looks from where I’m standing like an amateur and totally bungled approach for the US company Miva – has resulted in a tanked share price and a management team which seems to now have zero credibility with shareholders and the market.

I notice, Sir Martin, that according to a recent New Media Age, last year  WPP made 25% of its profits from digital media. I am writing to you today to suggest that WPP should think about taking over Blinkx.

You may recall, Sir Martin, that more than a year ago now Mr. Chandratillake was at the DLD08 conference when you asked him about the Blinkx business model. If your memory needs refreshing you can see a video of the occasion here on the Critical Distance weblog:

http://criticaldistance.blogspot.com/2008/01/blinkx-business.html

The exchange between yourself and Mr Chandratillake begins at about 43 minutes into the video, and at about 44m 20s Mr Chandratillake quite clearly says to you – in public, on the record and on video – that Blinkx is “very close to breakeven”.

I hesitate to accuse Mr Chandratillake of telling a deliberate untruth, Sir Martin – and of course there are many kinds of break-even (cashflow, operational, EBITDA etc) - but I believe I am correct in saying that in the year or more since DLD08 there has been no official announcement – either by RNS or in last October’s company numbers – that any kind of break-even has been achieved. You can perhaps draw your own conclusions as to what this has done for Mr Chandratillake’s credibility among Blinkx shareholders, some of whom bought on the back of that statement by him.   

A takeover of Blinkx would make a huge amount of sense for WPP. Blink has the technology: with decent management and a media visionary such as yourself at the helm, capable of playing at the top table, with the contacts and the drive to make company-transforming deals going forwards, Blinkx could become the Google of video search, worth tens of billions. That is the potential which persuaded me to buy into the company, and why I am so angry and bitterly disappointed at what I see as the total failure of the Blinkx management team to deliver even a part of that potential. Indeed, the share price is stuck at less than a third of the price at the IPO only 18 months or so ago. Even in the current market conditions, were Blinkx to have competent management, competent PR, a good stream of deals and steady newsflow – and from where I’m standing it does not look to have any of those things – I believe Blinkx as a company and as an investment should be far ahead of where it is now. 

As regards the pricing of any takeover: my own view is that you could probably acquire Blinkx for somewhere in the region of 60p a share. The price may currently be around 12.5p, but it seems unlikely that the large institutional investors who bought into the IPO at 45p (only 18 months ago) would be persuaded to sell for less than they paid then. However, in the current markets a return of 30% on their investment in under two years – at an offer price of 60p a share – would almost certainly gain a positive hearing.

My motive in this is transparent, Sir Martin: I wish to see a return on my investment, and have absolutely no confidence in Blinkx management to deliver one. I have held since shortly after the IPO and have watched with growing incredulity and anger as Blinkx’s management has made what I consider to be mistake after mistake. The decline in the share price supports my view.

In any case, none of that is your concern. But the chance to buy the next big thing in video search for a price in the region of £175m probably should be your concern. I would strongly recommend you take a close look at Blinkx.

Yours sincerely,