First is that HP’s Enterprise segment is by itself potentially worth more than the entire company’s current market value–which is slightly south of $99 billion as I write.

Second, she sees the potential for HP’s enterprise operation to add $16 billion in incremental revenue over the next few years.

Third, Huberty sees sales of HP PCs and servers to businesses as about as good as they’re going to get. She puts it a little more diplomatically than that, saying “exposure to server and PC sales opportunities is at or near optimal levels in most accounts.”

But it’s her next point that gets my attention. Huberty says that the combined revenue opportunity for HP in storage, networking, services and software amounts to triple that in servers and PCs. She further estimates that the average corporate customer spends about $160 million on IT hardware, software and services. Of that, HP captures about 12.5 percent, but stands a good chance of boosting that to as much as 25 percent, which would put it on par with IT services giant IBM.

Doing it would require a significant shift in how HP does business, she says. “We believe HP will need to evolve its enterprise selling strategy from hardware-led to more services-led. This requires a meaningful cultural shift that could take several years, and likely face several road bumps.”

Such steep discounts are a cornerstone of Amazon’s strategy to gain traction in a market in which iTunes remains the dominant player. At the same time, a debate has arisen among music labels about whether such discounts risk undermining the value of their products.

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Goldman offered the news in a conversation at LeWeb, saying he’d maintain an advisory role, that he’s not leaving to start something new, that he’s not going to Facebook or Google and that he just needs “a bit of a break.”

Twitter has no lack of product leaders, including co-founder and former CEO Evan Williams, who recently relinquished the top job to make room for former COO Dick Costolo. Goldman had been a close friend of Williams, having first joined him as business manager of blogging software maker Pyra Labs, before it was bought by Google in 2003. Goldman has led product at Twitter since 2007.

Following Goldman’s departure announcement, a company spokeswoman said that Williams “is going to continue in his co-founder role and help with product vision.” She said that it was not yet clear whether the new head of product management would be an internal or external hire.

But, no surprise, sources familiar with the situation said Williams will likely assume the top product role, as it’s the best-fitting landing place for him at the company. The Twitter service was originally created in 2006 by company co-founder and Chairman Jack Dorsey and others when Williams was CEO of a previous start-up called Odeo. Dorsey left his operating role at Twitter in 2008 when Williams replaced him as CEO.

As the company verges on raising funding that would value the company at $3.5 to $4 billion, the departure of Goldman seems to underscore an issue that has plagued Twitter for a long time: Product development.

Aside from its well-documented reliability problems, new products and major upgrades at Twitter are few and far between.

While it is clear the people who founded and now lead Twitter have been passionate and visionary about personal expression and information-sharing in its simplest form, many techies say they are given pause by Twitter’s deficit of innovation since its first and most powerful iteration.

They assert that Twitter’s product launches to date–retweets, lists, some apps and its #newtwitter Web interface–are minor complements to the simple messaging system. In a tech culture that values shiny new toys, multiple people have said to me that Twitter is the least innovative of any other Internet contemporary.

For example, Twitter still doesn’t offer image hosting or its own link shortener, and still has yet to fully incorporate the search service Summize, which it bought in 2008. Perhaps that’s out of concern for displacing and angering its developer corps of companies, like Bit.ly, but since 25 percent of Tweets contain links, it seems obvious that Twitter should help its users shorten them to help fit into its 140-character limit.

The company tried to set a firm road map last April at Chirp, its first developer conference (pictured at left, the dudes of Twitter held a jokey Q&A session at Chirp).

But since then, eagerly awaited products like “Annotations” (a way to add more information to Tweets) have been delayed as the company concentrated on dealing with World Cup traffic and the release of its new Web site. Twitter is hiring as fast as it can, with its ballooning employee count, now at 325, relatively small for a product now used by eight percent of American online adults.

Still, many laud the sleek new Twitter Web site–for which Goldman, Williams and product manager Kevin Cheng led development. It was rolled out to admirable acclaim and user satisfaction.

But Twitter has only a few weeks to shuffle things around before it launches into the new year with no formal leader of its product team.

Fortune.com’s Dan Primack reports that Sequoia is leading a round that will add “between $25 million and $30 million” in funding at a valuation “in the ballpark of $135 million.”

Someone familiar with the transaction tells me that Primack’s numbers are “not a bad guess.” And it’s possible the numbers will end up somewhere higher than his report. Another source tells me that the round will end up bringing in between $20 million and $30 million, at a pre-money valuation of $120 million. That would put Tumblr’s value at $140 million or more.

In any case, it’s a lot of money. And as wise Om Malik says, “Investors are never the story.” (Except when they are. And what’s really relevant here is that at these prices, the list of potential Tumblr acquirers gets much smaller: Google, sure. Facebook, perhaps. Yahoo, theoretically, etc.)

The real story for Tumblr remains the one we’ve asked every other time the company has raised money ($4.5 million in 2008; $5 million earlier this year): How’s it going to make money? Founder David Karp has offered several different ideas in the past, but as far as I can tell, none of them have really taken off (the fact that big publishers like Newsweek now maintain Tumblr sites, which are free to set up, does not constitute a business).

Best I can tell, the real appeal for Tumblr is its go-go growth, and the fact that it’s doing it on a very light footprint. But don’t take my word for it: Ask Spark Capital’s Bijan Sabet and Union Square Ventures’ Fred Wilson, who have been the primary investors in the company to date and who both wrote glowingly about the company in recent days.

Presumably, the company’s pitch to investors went something like this: “Look at our hockey stick! Hockey sticks like this only come around a few times a lifetime–perhaps you’ve heard of Twitter?” That is: Buy now, and we’ll figure out money later.

And it looks like it worked.

At the company’s annual shareholder meeting Tuesday, Chief Executive Steve Ballmer and Chairman Bill Gates sought to calm investors, some of whom asked if the maker of Windows operating systems and Xbox game consoles would be more valuable as individual companies.

“Is it time to consider breaking this company up?” one investor, grousing over Microsoft’s share price, asked Mr. Ballmer.
Mr. Ballmer, who has run Microsoft for the past 10 years, dismissed the idea, saying it would reduce Microsoft’s value by making it more difficult for the company to compete.

“I obviously don’t think it is time” for a break up, Mr. Ballmer responded, noting that many of Microsoft’s products, including Windows and the Office suite, are sold to consumers and corporations alike.

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Now, on to real news: There is no official news about the streaming music service’s attempt to land on U.S. shores. Spotify has yet to land a single U.S. label deal, even though it continues to insist that it will get things settled in time for a 2010 launch.

But the company has made progress with the labels in recent weeks, according to multiple sources. That’s in part because it is now willing to hand over real money, either in the form of advances or as guarantees spread throughout the life of a multiple-year contract.

How much money? Depends on who you talk to: One source thinks Spotify is now offering “tens of millions” to the labels to get a U.S. deal done; another person familiar with negotiations thinks Spotify will eventually end up spending $100 million to get the big four labels–or at least three of them–in line for a launch.

But money alone won’t get Spotify into the U.S. Or put another way: The amount of money will depend in part on the real sticking point in the negotiations–the amount of free music that Spotify users can listen to before they need to become paying subscribers.

In Europe, where Spotify has been a very big success, listeners can stream an unlimited amount of music, on demand, without ever paying a cent. But in the U.S., rival streaming services like Rhapsody, MOG and Napster generally only offer a very brief trial period of a few days before requiring that a pay wall go up.

For the past two years, Spotify has insisted that free, unlimited streaming is the only way the service will work, because that’s Spotify’s most effective marketing technique. Subscribers who do pay up get benefits like ad-free music, and the ability to port their songs to mobile devices like iPhones.

But the labels, most notably Warner Music Group, have insisted that unlimited free streams only serve to strip away their product’s remaining value–if you can listen for free on Spotify, why would you ever buy another CD or iTunes single?

“[Spotify executives] are perennially underestimating label resistance to the free stuff,” says an industry source familiar with the discussions. “And it seems the checks are either not big enough or the labels really won’t give on free.”

Until that gap gets solved–either via compromise or cash–Spotify can’t come to the U.S.

The company had recently been discussing a mid-November launch date, but unless things move quickly, that can’t happen. And even people who are optimistic about the company’s chances concede it may not get it done in time for a pre-Christmas launch, which would force things back to 2011. Spotify declined to comment.

Among the four labels, Sony appears closest to a deal, sources say–a pact is “essentially signable,” according to one source, though another insists there is nothing “executable.” Sony declined to comment. In order to launch, though, Spotify will also need Universal Music Group, the world’s biggest music company, and either Warner or EMI Music Group.

Indulge yourself in a tiny bit of time travel here and check out this video, a condensed version of Costolo’s interview with Ad Age editor Abbey Klaassen from last week. This was when Costolo was still technically COO, and not CEO, but that’s not relevant here. The clip is well worth watching if you want to get a good sense of where Twitter thinks it’s at when it comes to ads.

And it gives you a good sense of where Twitter think it’s going, period. Check out the comps that Costolo throws out when he talks about his company: YouTube, Google (GOOG), Facebook. That makes plenty of sense–that’s why investors have put a $1 billion value on the company–but it also shows you how far the company has to go.

Bob Pittman’s Pilot Group, an early backer of Mark Pincus’s company, has sold the majority of its Zynga shares. I don’t have details on the size of Pilot’s stake or the value of the transaction, but it’s going to be a huge return by any measure.

Pittman, guided by his digital deal guy, Andy Russell, got in on Zynga’s $10 million A round in January 2008. Since then, Zynga has raised an astonishing $350 million, all while claiming it doesn’t need the money. Investors love the story and are reportedly valuing the company at $3 billion in secondary market deals.

If Zynga’s future is so bright, why sell now? No comment from Zynga or Pilot. But a person familiar with the transaction tells me Pilot is reinvesting its profits in another deal. And it continues to hold some Zynga shares.

So if this thing keeps going–bankers see Zynga as one of the most likely big-name tech IPO candidates in the next couple years–Pilot will still see more upside.

This morning, Yahoo is holding its annual investor day at its Silicon Valley HQ, starring CEO Carol Bartz and a panoply of top execs at the Internet giant.

While this kind of dog-and-pony show is typical for companies–an effort to get all chummy with institutional investors and financial analysts and convince them that there is a grand scheme for the road ahead–what’s really at stake is the need to cover over problems and play up the prettier parts.

That’s why–after a period of rather fallow deal activity–Yahoo (YHOO) suddenly started pulling out the shiny objects just last week, designed, in part, to show that Yahoo is on the move and pushing vigorously forward.

We have a plan, folks! Silver bullets all around!

That included its acquisition of both social media start-up Associated Content and Koprol, a social location service in Asia, as well as a big, noisy partnership with mobile handset giant Nokia (NOK) related to email and maps.

But while those are all well and good, they will have almost zero impact on Yahoo until they get revved up and results can be judged.

Thus, it’s probably more helpful for those in analog attendance–the press was not invited as we are apparently considered akin to skunks at a garden party–to focus on some key issues that are present and accounted for right now and to grill Yahoo about them.

To be fair, Yahoo is planning on covering the most important of these at the moment: The status of its partnership deal with Microsoft (MSFT), related to search and online advertising.

It will be interesting to see what advertising operations exec Mark Morrissey, the Yahoo-side integration lead, has to say about it all and what impact the company expects from it.

Some key questions that need asking:

How soon does it roll out–late this year or early next year?

How does Yahoo get search share up–via improvements to its homepage and user experience–to make this as lucrative as possible?

Will the deal, which is intended to result in bigger search-query volume, finally bring a key metric–revenue per search–up, especially after the Microsoft RPS guarantees run out in 18 months?

Do the cost savings of letting Microsoft’s Bing power Yahoo search compensate for trading away control of a key source of income and revenue?

And perhaps most of all, will any of this put a dent in the overwhelming search dominance of Google (GOOG)?

Here’s a really good analysis by Citigroup’s Mark Mahaney on this very subject, with lots of nice numbers to chew over:

yhoo search deal

Of course, there are a lot of other thing to look at, such as:

The continuing issue around the talent drain (Yahoo is smart to trot out lively new Chief Products dude Blake Irving, formerly of Microsoft, to counter the drip-leak-of-execs issue), an explanation of its penny-ante (but pricey) marketing efforts so far, a report on what’s most innovative in its oft-clogged product pipeline, a detailed assessment of the online display market and thoughts on increased competition in this key Yahoo arena from Google. Also: What’s up with mobile?

You can see the whole agenda for the day here, and BoomTown will be following the proceedings via a Webcast.

Also, as Yahoo notes on its Welcome page for the event: “Everything you’ll hear today–from looking back at what we’ve done to looking ahead at the incredible opportunities we’re tackling–add up to one thing: creating shareholder value.”

So analysts, let’s don’t forget about the stock price, which has stubbornly stuck in the $15 range for a long time now.

In fact, it is now almost the exact same price as it was one year ago and 75 cents lower than at its last investor day in late October last year.

Yes, definitely ask about that.

So are they getting their money’s worth? Maybe–if they’re not spending much more than a double latte per fan.

Each fan is worth an average of $3.60 a year, based on the number of media impressions he or she generates via Facebook users’ “newsfeeds,” according to social media consultancy Vitrue.

AllFacebook explains the math:

If a brand posts to their Facebook Fan Page twice a day and have a million fans, that’s 60M impressions per month in the collective “news feed”. Vitrue used a figure of $5 CPM (Cost per thousand impressions), so 60M impressions would result in $300K/month of media value. I.e., what the brand might have to spend elsewhere to get the same eyeballs. That $300K /month is $3.6M/ year, meaning that with 1M fans, the average value is $3.6 per fan.

Interestingly, Vitrue’s numbers don’t try to account for the secondary impressions fan pages generate, when fans’ friends see their activity. But I’m sure that Facebook, and the vendors who help the social network promote its fan pages, will point that out.

Want to buy an e-reader from Plastic Logic? You will have to wait until “sometime this summer.” Want to buy the whole company? That’s a different story.

That’s the message U.K. investor Hermann Hauser is delivering via the Financial Times (via Engadget). Hauser, who owns a chunk of Plastic Logic via his Amadeus Capital Partners, doesn’t come out and say the company is for sale. But he spends a chunk of the story explaining why someone would be smart to take the investment off his hands.

Why would that be? Plastic Logic, after all, has been in the e-reader business for years, but has yet to actually start selling one. It finally showed off its Que Reader in January and promised delivery in April. But last month, the company told customers the Que would be delayed until summer–practically daring them to buy a competing product from Amazon (AMZN), Apple (AAPL), Sony (SNE) or Barnes and Noble (BKS).

Hauser’s pitch: Plastic Logic is a technology company whose real value is the plastic chips that power the Que.

“Plastic Logic is using the simplest invention in plastic electronics, a single transistor that switches a particular pixel on or off,” says Mr Hauser. The real potential, he explains, is in creating plastic integrated circuits capable of complex functions, a feat that Plastic Logic co-founder Henning Sirringhaus has just achieved. Mr Hauser says: “Plastic electronics will spawn dozens of companies taking advantage of different aspects of integrated circuits in the same way that silicon has.”

How much is that worth? The FT helpfully suggests a buyer should pony up a multiple of the $200 million Hauser and others have bet on the company. But if that’s above your spending limit, you should be able to get a Que for less than $800 in a couple months.

“HTC disagrees with Apple’s actions and will fully defend itself. HTC strongly advocates intellectual property protection and will continue to respect other innovators and their technologies as we have always done, but we will continue to embrace competition through our own innovation as a healthy way for consumers to get the best mobile experience possible,” HTC CEO Peter Chou said in the statement.

“From day one, HTC has focused on creating cutting-edge innovations that deliver unique value for people looking for a smartphone,” Chou continued. “In 1999 we started designing the XDA and T-Mobile Pocket PC Phone Edition, our first touch-screen smartphones, and they both shipped in 2002 with more than 50 additional HTC smartphone models shipping since then.”

The statement continues with a list of HTC’s technological firsts:

• First Windows PDA (1998)
• First Windows Phone (June 2002)
• First 3G CDMA EVDO smartphone (October 2005)
• First gesture-based smartphone (June 2007)
• First Google (GOOG) Android smartphone (October 2008)
• First 4G WiMax smartphone (November 2008)

The implication here seems to be that these “firsts” somehow negate Apple’s (AAPL) claim that the company violated 20 of its patents. And while it’s certainly possible that this is the case, it’s hard to accept HTC’s argument without a list of patents to back it up. Harder still when HTC says nothing about its legal strategy for dealing with Apple’s assault.

Does HTC plan to countersue? Does the company have IP of its own with which to mount a defense? Or will it simply take Apple to the mat with its “strong disagreement” and toothless positioning statements like the one above?

Interesting to contrast HTC’s response to the Apple’s suit to Palm’s (PALM) immediate and aggressive riposte to Apple COO Tim Cook’s comments about companies that infringe on its iPhone intellectual property:

“Palm has a long history of innovation that is reflected in our products and robust patent portfolio, and we have long been recognized for our fundamental patents in the mobile space. If faced with legal action, we are confident that we have the tools necessary to defend ourselves.”

UPDATE: In an interview with Reuters, Jason Mackenzie, vice president for HTC’s U.S. business, said HTC plans to issue a formal response to Apple’s claims in a matter of weeks. He did not say what form that response will take.

Further Reading:

• Apple Sues Nexus One Maker HTC Over iPhone Patents
• Apple Sues HTC [Complete Court Filings]
• Why HTC, Apple? And Why Now?
• Apple vs. Google: Game On
• What, HTC Worry?
• HTC May End Up Bringing Knife to Apple Gun Fight

The presentation catalyzed a movement. Start-ups everywhere adopted a lean, low-burn, low-investment model. To this day, companies seeking funding at our venture firm, Andreessen Horowitz, proudly proclaim in their pitch decks that they are raising tiny amounts of capital so they can run lean.

On the one hand, it is a fact that capital invested is negatively correlated with returns in the venture capital industry. Pumping too much money into a small start-up is unhealthy for both the company and the investor. On the other hand, Facebook has raised several hundred million dollars and is on track to produce fantastic returns for all of its investors.

So what’s a start-up to do? Much of what has been written and said about lean start-ups makes good sense. However, that advice is often incomplete, and some of the things left unsaid are the least intuitive. In this article, I will articulate some of those things left unsaid in arguing the case for the Fat Start-up.

Here is my central argument. There are only two priorities for a start-up:
Winning the market and not running out of cash. Running lean is not an end. For that matter, neither is running fat. Both are tactics that you use to win the market and not run out of cash before you do so. By making “running lean” an end, you may lose your opportunity to win the market, either because you fail to fund the R&D necessary to find product/market fit or you let a competitor out-execute you in taking the market. Sometimes running fat is the right thing to do.

What the hell do I know?

“Al Pacino couldn’t be no gangsta, DeNiro in ‘Casino’ he no gangsta
Wanna be, wanna see, wan’ get a shovel
dig Tookie up n*&%^!, cause he know gangstas”

–The Game

At this point, some of you are asking yourselves, “What the hell does Ben know? If he were really smart, then he’d know that thin is in.” It turns out that I have some experience in managing a fat start-up through the dot-com implosion of the early 2000s. This chart offers a brief summary of equity market history when I was CEO of Loudcloud and Opsware (click to enlarge):

Note that the Nasdaq index is very highly correlated to the start-up funding environment. During the two years I was CEO of Opsware, the Nasdaq fell 80 percent, far more than it has fallen during the current 2008-10 downturn. So the 2000-02 environment was at least as traumatic as this one for Silicon Valley companies–and arguably much worse.

Here is a brief summary of Loudcloud/Opsware’s fund-raising history during that time:

• September 1999: Loudcloud founded
• November 1999: Loudcloud raises $21 million at a $45 million pre-money valuation (Benchmark Capital is the lead investor)
• January 2000: Loudcloud borrows $45 million from Morgan Stanley (MS)
• June 2000: Loudcloud raises $120M at a $700M pre-money valuation
• March 2001: Loudcloud goes public on Nasdaq, raises $160 million and is valued in the public markets at approximately $480 million. Total funds raised to this point: $346 million.
• August 2002: Loudcloud sells the managed services business to EDS (this was the only actual business we had at the time) for $63.5 million and becomes a software company (and changes its name to Opsware).
• September 2002: Opsware trades for 35 cents per share or approximately a $28 million market cap.
• September 2007: Hewlett-Packard (HPQ) acquires Opsware for $1.6 billion

During this period, Loudcloud/Opsware had over 20 direct competitors. Almost all the competitors from the Loudcloud era went bankrupt, including MFN/SiteSmith, Exodus, LogicTier, Williams Communication, Global Crossing, WorldCom/Digex and Storage Networks. Those that survived got bought with valuations of less than $100 million (e.g., Totality) or still have very low valuations (e.g., Navisite).

How did we do it?

“I had a dream I could buy my way to heaven
When I awoke, I spent that on a necklace”

–Kanye West

So how did we navigate through the great dot-com crash, crush the competition, emerge as the No. 1 company in our space and sell the company to HP for $1.6 billion? Did we “cut spending, cut now, and preserve capital?” Did we make cash preservation our No. 1 priority?

No, we didn’t. To underscore the point, here are Loudcloud’s average monthly cash burn figures for the quarters ending in:

• Apr 2001:  $39 million
• Jul 2001:  $35 million
• Oct 2001:  $29 million
• Jan 2002:  $25 million
• Apr 2002:  $22 million
• Jul 2002:  $19.4 million

As you can see, we were aggressively investing in the business throughout 2001 and 2002. While we did reduce our cash burn, we did not make cash preservation our No. 1 priority. As it was, over the course of the transition from Loudcloud to EDS, we sadly laid off 400 employees and transferred another 150 to EDS. However, we didn’t scrimp and save our way to a $1.6 billion acquisition: Instead, it’s what we chose not to cut that ultimately got us there.

Loudcloud was a Web-hosting business. Today, we’d call it a “cloud services” business, but people weren’t quite ready for the “cloud” in 2001. We supercharged our hosting business with software (called Opsware) that automated our Web-hosting operations. The other cloud services businesses of our day also had software investments. However, as the macroeconomic climate changed, they all “cut deep and cut now.” In the end, they ended up putting their software in maintenance mode and stopped building new features.

As we weighed a decision to make the same deep cuts in our own software R&D efforts (a move advocated by the intelligentsia of the day, as well as nearly every MBA we had working in the company), I faced a hard decision: Cut deep and get to cash flow break-even quickly or continue to invest heavily in software?

In the end, I decided to run fat so that we could continue to invest in the Opsware software. At the end of the day, I realized that much larger companies like IBM (IBM) could hire smart people and train them. But without a lasting technology-based advantage, it would be increasingly hard for us to defeat them and build our customer base despite early wins with Ford (F), Fox Sports, and the U.K. government (to name just three of our early customers).

Running fat meant that I laid off zero software engineers so that we could keep on investing in our technology, find our product/market fit, and build a lasting technological advantage.

Still, we had to reduce costs or we would clearly go bankrupt. With this new view of the world, I decided that rather than divesting our intellectual property, I would divest our business. Now, that may sound logical the way I’ve described it, but consider these facts:

• We were generating $65 million/year from the Web-hosting business.
• We were a publicly traded company with a market capitalization of close to $200 million.
• All of our investors (pubic and private) believed in and invested in the Web-hosting business.
• We had close to 500 employees at the time. Nearly all of them were supporting the Web-hosting business.
• We had no other business. We had software, but we did not have a software product and certainly did not have a software business.

Despite all of this, we sold the Loudcloud hosting business to EDS and became Opsware the software company. It was not clear that this was a good idea at the time. In fact, the market thought it was a terrible idea: Our stock promptly lost 80 percent of its value, putting our market cap at about $28 million. It’s worth pointing out that this was about $40 million less than the cash that we had in the bank.

During the transition, we shrank our payroll from 450 employees to fewer than 100. Even with this massive reduction in expenses, it would take another three quarters to reach cash-flow break-even, a milestone we finally reached in Q2 of 2003.

One could argue–and many did–that we should have cut a lot deeper than we did given that we only had one customer. Although EDS was a very large customer (it generated $20 million/year in revenue), a brand new software company doesn’t need 100 people. We could have taken steps to reach cash-flow break-even immediately (clearly, that might have helped us get above 35 cents per share). In other words, we could have “gone lean” by cutting deep, cutting now, and preserving capital.

But rather than do what seemed obvious, I decided to keep on investing. Here’s why: In an economic boom, cash is great, but not necessarily a meaningful competitive advantage. If every company is well funded, being super-well funded doesn’t help you win. In fact, being super-well funded can actually screw you.

But in a bust (like the one we were in), having a lot of cash can be a huge competitive advantage because you can use that cash to put enormous pressure on your underfunded competitors. And that’s what we did.

We spent aggressively to match our best competitor’s product, feature for feature. And we used our public currency to acquire important adjacent functionality (network, process and storage management) that our competitors did not have and couldn’t acquire because they didn’t have the cash (or the equity).

In doing so, we were able to beat a really high-quality start-up (Bladelogic) that did not have the massive technical and cultural baggage that came from exiting the managed services business. Bladelogic was eventually sold to BMC (BMC) for $800 million. But I’m firmly convinced that had we not spent the money, Bladelogic would have emerged as the No. 1 company in the space and gotten the $1.6 billion exit instead of Opsware.

In the end, by continuing to invest aggressively in our technological advantage despite a hellacious funding environment, we were able to turn a doomed business into a winning one.

That is the very short version of how we won the market during the great tech recession of the early 2000s.

So did we learn?

“Hegel was right when he said that we learn from history that man can never learn anything from history.”

–George Bernard Shaw (1856-1950)

Every start-up is in a furious race against time. The start-up must find the product-market fit that leads to a great business and substantially take the market before running out of cash. As a result, the top two priorities are always to:

1. Find the product that 1,000 enterprise or 50 million consumers want to buy and grab those customers before your competitors do.
2. Raise enough cash and spend it intelligently so that you don’t go broke along the way.

Clearly, you can’t succeed if you don’t achieve both priority No. 1 and priority No. 2. So why is taking the market more important than not running out of cash? Because the only thing worse for an entrepreneur than start-up hell (bankruptcy) is start-up purgatory.

What is start-up purgatory, you ask? Start-up purgatory occurs when you don’t go bankrupt, but you fail to build the No. 1 product in the space. You have enough money with your conservative burn rate to last for many years. You may even be cash-flow positive. However, you have zero chance of becoming a high-growth company. You have zero chance of being anything but a very small technology business (see Navisite). From the entrepreneur’s point of view, this can be worse than start-up hell since you are stuck with the small company.

You recruited all the employees, you raised all the money and you made all the promises. You either see it through or leave–without your good reputation. No one wants to work for an entrepreneur who quits his or her own company. This is start-up purgatory, where you work just as hard, reap none of the rewards, and watch all your best people leave you. It sucks to be you.

The Bottom Line

Spending a little or spending a lot is a means, not an end. Choose the right strategy to win the market or you may end up going straight to purgatory.

As you listen to the virtues of the lean start-up–lightweight sales, light engineering, and so on–keep the following in mind:

• If you are a high-tech start-up, your value is in your intellectual property. Don’t stare at your spreadsheets so long that you get confused about that.
• You cannot save your way to winning the market.
• The best companies can raise money even in this market. If you are one of those, you should consider raising enough to wipe out your competition.

Thin is in, but sometimes you gotta eat.

Ben Horowitz is co-founder and general partner of Andreessen Horowitz. He co-founded Loudcloud, later renamed Opsware Inc., in 1999 and served as CEO of the company before it was acquired in 2007 by Hewlett-Packard. He was most recently vice president and general manager of Hewlett-Packard’s Business Technology Organization Unit.

The most popular program in the category, Intuit’s Quicken, comes in a Mac version. But it isn’t as good as the Windows version, dates from 2006, and requires an often tedious and flawed process for converting your data from the Windows version.

As a result, many PC owners who consider buying a Mac but rely upon Quicken resist switching. Or, they resort to work-arounds, such as installing Windows on their new Macs or keeping around an old PC—solely to run the more robust Windows version of Quicken.

This week, Intuit (INTU) hopes to alleviate this situation with an all-new $60 version called Quicken Essentials for Mac, or QEM for short. The company describes QEM as the first version of Quicken developed specifically to run on a Mac, as opposed to being copied from a Windows product. It also says the product was influenced by a Mac-savvy team from Mint, a Web-based personal-finance service Intuit acquired late last year.

I’ve been testing Quicken Essentials for Mac, and have seriously mixed feelings about it. In general, it worked well and kept its promises, and it largely solves the crucial data-conversion problem. Unlike its predecessor, Quicken for Mac 2007, it looks and feels like a modern Mac program. It also can download transactions from over 12,000 banks, brokerages and other financial institutions—about triple the number supported by the prior Mac version and double the number supported by the base version of Quicken for Windows.

However, this program is still no match for the Windows version in the breadth and depth of its features, and is even a step backward in some features from the old 2007 Mac version. It is really a stripped-down version of Quicken, for basic tracking and managing of your finances. It isn’t likely to satisfy hard-core family financial planners, especially those who like to keep an eagle eye on investments or create detailed budgets and reports.

Most important, Quicken Essentials doesn’t display, or even allow you to enter or edit, individual transactions in investment accounts. It only shows a snapshot of the current status and value of the overall investment account and of the securities or funds it holds. It also lacks a bill-paying feature. And it can’t export your data to Intuit’s popular TurboTax program. Even the much-maligned older Mac version could do these three things.

While QEM is easy to use and has colorful, understandable charts and graphs that show your financial situation, its budget and reporting capabilities are rudimentary, and it has no planning features for helping you reduce debt or save for retirement.

The new team from Mint, now in charge of Intuit’s Personal Finance group, concedes that QEM lacks some important features, but says it hopes to add detailed investment-tracking and bill-paying to a future edition.

The company claims the new QEM will satisfy the needs of users who aren’t deeply into investment management or planning, or who are new to personal-finance software.

For my tests, I entered my own various bank, credit-card, retirement and brokerage accounts, and the program was able to automatically download transactions for my checking and credit-card accounts, and snapshot views of my investment accounts, in most cases. In a few instances, I had to go through an intermediary step of downloading a file from a bank or brokerage Web site, and then importing it into QEM.

Quicken Essentials can update each account separately, or all your accounts at once. But I couldn’t find any way to schedule automatic downloads of data.

The company boasts that one of its big advantages is that it automatically categorizes transactions you download. It knows a purchase at Safeway is probably “groceries.” It remembers these for the future, but won’t retroactively apply the categories to past transactions.

To me, the biggest plus in QEM is its greatly improved conversion ability. I was able to successfully convert files from Quicken for Windows, Microsoft Money and the older Mac version using sample data from those programs provided at my request by Intuit, since I don’t use these programs and lacked my own data.

Each conversion took 30 minutes or less. The process requires you to export your data from the other programs and then use a special conversion utility that comes on the QEM disk. You then import the files created by the converter into QEM. For conversions from Money, you need to have the program installed on your PC.

Some information, such as individual investment activity, and various reports and plans that QEM doesn’t support, won’t transfer. And, after the conversion, you have to reenter your log-in information for banks and brokerages.

Overall, I consider QEM just a start in bringing a better version of Quicken to the Mac. Devoted users of Quicken for Windows will likely still resist the Mac, or be forced to resort to work-arounds so they can keep using the Windows version.

Find all of Walt Mossberg’s columns and videos online, free, at the All Things Digital Web site, walt.allthingsd.com. Email him at mossberg@wsj.com.

]]> http://allthingsd.com/20100224/mac-quicken-gets-deductions-for-iffy-upgrade/feed/ 0 http://allthingsd.com/20100211/realnetworks-posts-q4-loss/ http://allthingsd.com/20100211/realnetworks-posts-q4-loss/#comments Thu, 11 Feb 2010 22:49:55 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=34783 RealNetworks investors hoping the company’s recent management changes herald an improvement in its financial performance should steel themselves for another unpleasant quarter or two. Reporting a worse-than-expected fourth-quarter net loss after market close today, Real said it expects revenue in the current quarter “to decline by up to 12 percent year-over-year and up to 15 percent sequentially.”

An ugly forecast, especially considering today’s financial report from the company: A loss of $13.3 million, or 11 cents a share, on revenue of $145.5 million–down five percent year-over-year.

“The severe recession in 2009 hurt both our revenue and profitability for the year,” Bob Kimball, president and acting CEO of RealNetworks, said in an earnings news release. “While we don’t expect that overall trend to change in the first quarter, we are aggressively moving to transform RealNetworks into a more simple and focused company that delivers value to its shareholders. The first step in Real’s simplification was announced this week with the separation of our Rhapsody music business into an independent company.”

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