Dr Michael Lynch,
CEO, Autonomy Corporation,
Cambridge Business Park
Cowley Rd
Cambridge
CB4 0WZ
CC: Suranga Chandratillake, CEO, Blinkx
22nd June 2009
Dear Dr Lynch.
I am writing to you as a fellow shareholder in Blinkx. I believe that you personally have approximately an 8% holding in the company and that Autonomy owns approximately another 8% of shares.
I have held shares in Blinkx for more than 18 months now, and over that time have become increasingly concerned at what I perceive to be the company’s lack of strategy and focus. It is true, of course, that the company has indexed more than 35 million hours of online video: and yet Blinkx seems incapable of striking deals with large media organisations (Yahoo springs immediately to mind, but there are many others) who have the user traffic and eyeballs to enable profitable monetisation of that index. It is also true that Blinkx has some highly innovative products (AdHoc, Transaction Hijacking), but again I don’t see any announcements of strategies to monetise these. Nor do I see any advertising strategies to promote the Blinkx brand and services to a wider and more general public. Of course the global economy has been in a very dire state during that time, but even so one would have expected the (self-proclaimed) “world’s largest and most advanced video search engine” to have made considerably more progress than it has. It seems very much as thought Blinkx is losing ground to other video players - Hulu, Joost, Truveo and the rest. I no longer see the clear lead which Blinkx used to have over such competitors.
What I do see is an endless succession of what I consider to be paltry RNSs about partnerships with mostly small, mostly obscure websites of which hardly anybody has ever heard – the latest example of which is BobVila.com (contemptuously referred to among many shareholders as the ‘Bob the Builder’ RNS).
As Blinkx shareholders, I think we should be asking ourselves the following questions about the company’s strategy and product line:
These are just the most immediate of a long list of questions. I’m sure other shareholders would be able to add their own questions and concerns.
I’m afraid I lay the blame for what I perceive to be a lack of execution firmly at the door of company management and especially with Suranga Chandratillake, the CEO. I have absolutely no doubt of Mr Chandratillake’s technical abilities, but he is, in my view, woefully lacking in the areas of effective management, marketing, PR and investor relations. Having floated the company and been more than happy to take shareholders’ money at the IPO, Mr Chandratillake now seems to have nothing but contempt for shareholders (especially small shareholders, although of course in principle all shareholders should be treated alike).
It is a curious fact that despite a reluctance to communicate with shareholders, Mr Chandratillake always seems more than happy to make statements in public. Early in 2008, for example, he said to Martin Sorrell of WPP – in public, on video, on the record [1] – that Blinkx was “very close to break-even”. There are of course many measures of break-even, but I believe I am correct in saying that since that time there has been no official announcement that Blinkx has achieved any of them. Again, Chandratillake has stated in public that Blinkx will be profitable next year[2], without offering any hard evidence to support that view. He seems to expect us to take him at his word, and I am afraid that I for one am no longer prepared to do so. If the share price was a multiple of the IPO price Chandratillake could say and do as he liked – but it isn’t, and he can’t.
And yet even whilst he was making such statements, the utter fiasco of the ‘bid’ for Miva was unfolding: a formal offer of 125c a share (rejected) followed by some bizarre ‘advisory’ offer of 55c a share, followed by five months or so of doubt and uncertainty over whether there was any offer at all (during which time the Blinkx share price fell as low as 8.5p – and this against an IPO price of 45p, and for the self-proclaimed world’s leading video search engine!). Indeed it was only at the last set of figures that shareholders were eventually and officially informed that the ‘bid’ for Miva was at and end.
A complete shambles, in my view, from start to finish, both in terms of bid strategy and shareholder communication: and final evidence, to my mind, of Chandratillake’s complete unsuitability for the CEO role.
It is, in my view, time for Chandratillake to consider his position. I think he should step down from the CEO role to that of CTO, where his undoubted technical skills can best serve the company and shareholders. He has had more than two years now to execute on his promises and vision and look where we are: a share price at only a third of IPO, a frankly pathetic newsflow, no big deals on the horizon (that I know of), a total lack of coverage by market and sector analysts – all the evidence of a moribund and floundering company.
I enclose, by the way, a posting from glassdoor.com which you may find interesting. It is of course impossible to verify, and may have been posted by a disgruntled ex-employee, or indeed by someone who has never been an employee at all but is seeking to affect the company and its share price. However, to my mind it has the ring of truth: the situation it describes inside the company chimes with my perception of Blinkx management as arrogant, defensive, insecure, incompetent. If true it paints a deeply worrying picture, and one at which all shareholders should be deeply alarmed.
There are several deeply worrying and disturbing questions around Blinkx, not least this: if the company has as bright a future as Chandratillake is forever predicting, why doesn’t the company’s management team buy shares in the company in the open market? Don’t they want to be wealthy men and women when Blinkx becomes the Google of video search? They were happy to sell shares to the investing public at 45p in the IPO, but won’t buy any themselves at 15p, or even at 8.5p. Buying shares would send the clearest possible signal of confidence in the company’s future profitability by the management team. But such a simple, obvious move seems to be beyond Chandratillake – from where I’m standing the guy seems utterly clueless about how to inspire confidence or build the Blinkx brand. As someone who either directly owns or indirectly controls such a large stake in Blinkx, Dr Lynch, it must surely have struck you that the company’s CEO is not prepared to put his money where his mouth is and buy shares? Certainly if talking got the job done Chandratillake’s efforts would have ensured that Blinkx would be wildly profitable by now; but as things stand the markets seem to have rather lost faith in the wunderkind, wouldn’t you say Dr Lynch?
I would urge you to use all your influence – both as Chandratillake’s mentor and as a major shareholder in Blinkx – to persuade him to stand down from the CEO role and make way for someone with a more appropriate skillset (ie PR, marketing, investor relations, as well as deal-making at the top table) who can grow Blinkx to where it should be. Because another two years like the last two and I worry for the future of all our investments in Blinkx.
I also intend to write to the company’s large institutional investors seeking their support for Chandratillake’s removal.
Yours sincerely,
[1] http://criticaldistance.blogspot.com/2008/01/blinkx-business.html about 44 minutes and 20 seconds in
[2] http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=99728
| jarvis4 - 10 Jun'09 - 09:35 - 8270 of 8276 Poor volume, Compete showing a downward trend and complete silence on Zango, TH etc. I cannot understand the reluctance to keep shareholders informed about major developments such as Zango (news of which is in the public domain anyway but not a squeek from BLNX) whilst still formally releasing news that they have parnered with such as "Tiddlywinksforbeginners". When they have surpassed their annual targets and are - apparently - well on course, the fact that the sp languishes should be of concern to management, especially after the rise seen in general markets and AIM over the last few months. This insouciance towards the sp and shareholders is very worrying. Assuming they are beavering away with pencilled in dates for the release of significant news, they should release a trading update at the end of this month and seek to do so every three months thereafter. That way they might stir some interest and perhaps nudge the sp upwards. |
| twiga - 10 Jun'09 - 10:13 - 8271 of 8276 jarvis4,, thats exactly the problem with blinkx,, they started so positively releasing rns ,keeping everyone informed ,promising so much , blinkxtv/movies etc,,profit ,awards etc , now blinkxtv not even on homepage ,so unless you know it existed why would you look for it under blinkx remote now ,,( this is their lack of communication and promotion skills at their best ) they kept everyone guessing about miva , twice . now the saga with zango , did they buy it ,yes/no under a different name ? why ? whats happened to the ready to roll trans hijacking stuff .? what happened to expansion across multilanguages , spanish speaking countries ,east europe ,and asia . growth appears to be slowing down . as for trading volumes on their shares ,this year average below 1m daily . shareholders list out of date . Ps When you email to company or their advisors ,they either fail to reply or say they'll look at it ,or working on it . Blinkx need to get focused before they get left behind in the next stage of development from internet to tv. |
