Is Selling Out 'Selling Out'?

Great companies have to make tough choices. Grand Junction Networks and PointCast Inc., two high-flying Silicon Valley startups, faced the question of a lifetime — and arrived at opposite answers.

It was the fourth Monday of September 1995. Debra Pelsma and about 80 of her coworkers at Grand Junction Networks, a fast-growing startup based in Fremont, California, had been summoned to the manufacturing floor at their headquarters.

Impromptu staff meetings had been rare at the company since its founding in February 1992. There was too much work to do. But that work was about to pay off. Grand Junction was on the verge of a defining moment - an IPO. It had retained Goldman Sachs. It had filed papers with the Securities and Exchange Commission.

"I came in that morning, and something felt different," Pelsma remembers. "Then someone said, 'Cisco bought us.' " Cisco, of course, was Cisco Systems, one of the richest companies in Silicon Valley. "I asked what was going on. He said, 'Go look at the front of the office.' There were all kinds of suits out there and boxes that said Cisco. I was dumbfounded."

Howard Charney, Grand Junction's charismatic cofounder, president, and CEO, stood before his team - half of whom, thanks to this $345-million deal, had just become millionaires. He described the virtues of the life they would lead at Cisco. But there was no joy in his voice.

"There were tons of emotions spilled in that room," recalls Margot Gangola, the company's engineering manager. "We'd been working so hard." As her CEO was speaking, Gangola kept thinking, "Howard, how can you sell us out?"

It was the fourth Friday of October 1997. About 180 employees of PointCast Inc. had gathered at its headquarters in Sunnyvale, California. They'd come to meet their new leader - the CEO who would guide them to a public offering.

Just two nights before, Kevin Harvey, a member of the PointCast board and a partner at Benchmark Capital, had said again to David W. Dorman what he'd been saying for months: "We have an opportunity to build the biggest new-media company in existence." Dorman, the former CEO of Pacific Bell, a company with 50,000 employees, had leaned across the table, offered his hand, and said, "I'm in."

Dorman's decision was the latest in a series of decisions that had brought PointCast to the verge of greatness - or of oblivion. The company launched its Internet-based information service in February 1996. By the end of the year, nearly 800,000 people were using it. All those viewers attracted the attention of Rupert Murdoch, who approached PointCast's cofounder, Christopher Hassett, with a buyout offer worth nearly $400 million. PointCast said no. Three months later, PointCast said goodbye to Hassett. The board concluded that he didn't have the credentials to lead an independent company. Dave Dorman did.

"This is the best idea I have seen in years," the new CEO told his eager troops.

But achieving an IPO, he cautioned, meant getting "hot" and staying "focused." He repeated those words more than a dozen times. An IPO would validate all the hard work by PointCast's people. It would also vindicate Dorman's decision to walk away from a powerful job at a giant company. "Sure, I could be commanding vast armies," he explained later that morning. "But leaving California now would be like leaving Florence during the Renaissance. Young people are coming from all over the world to participate in this miracle. I had to be part of it."

It's decision time. What distinguishes the new world of business from any previous era - what shapes both its promise and its poignancy - is the freedom it offers. People have more choices than ever. But these choices require more - and tougher - decisions than ever.

Grand Junction and PointCast faced the same choice, the decision of a lifetime: Do we stand alone, or do we sell out to a powerful suitor? Yet they chose opposite paths and are living with those choices in ways neither anticipated. Their stories illuminate the decisions facing people everywhere - and offer lessons in how to wrestle with those decisions.

Their Stories

Grand Junction Networks
In September 1995, Grand Junction Networks was growing out of its skin.


PointCast Inc.
The secret to PointCast's success.


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