Wireless Start-Up Fails to Get Financing

Frontline Wireless, which wanted to build an innovative cellular network for both private use and local public safety agencies, has collapsed because it could not raise enough money to bid in the government auctions of wireless spectrum that start later this month.

The company’s failure raises questions about the ability of the auctions to raise the $14 billion or more that the federal government wants in exchange for the broadcast spectrum that will be freed next year by the shift from analog to digital television.

Last month, Frontline filed an application to participate in the auction. But it was not able to make the required deposit of $128 million that was due last Thursday, a person involved in the company said.

Frontline was one of the few newcomers to the wireless industry that have spoken publicly about making a major bid in the auctions. Some big companies, like Sprint Nextel and T-Mobile, are not bidding, although Verizon Wireless, AT&T and Google have indicated they would make offers.

Frontline was started by Reed E. Hundt, a former chairman of the Federal Communications Commission, along with veteran wireless executives and a group of elite Silicon Valley venture capitalists. The company was backed by L. John Doerr, the venture capitalist with Kleiner Perkins Caufield & Byers; James L. Barksdale, the former chief executive of Netscape Communications; and K. Ram Shriram, the former Netscape executive who was also an early backer of Google and is now a managing partner of Sherpalo Ventures.
The company’s chief executive was Haynes Griffin, the former chief executive of Vanguard Cellular Systems, which was acquired by AT&T.

Despite these connections, and a year spent lobbying to create a range of frequencies intended specifically for a combination of private service and public safety communications, Frontline failed in frenzied negotiations in recent weeks to find the financial backing it needed, according to a person who has been involved in the company.

“It was a funding issue,” said the person, who spoke on the condition of anonymity because of F.C.C. rules meant to limit collusion among bidders in the auction.

Mary Greczyn, a Frontline spokeswoman, read a statement that said the company, based in Greensboro, N.C., “is closed for business at this time.” She declined to answer any questions.
The minimum bid for the spectrum was set at $1.4 billion, although commission rules gave Frontline a 25 percent discount because it was a small business. Still, the winner of the auction will have to pay for its prize this spring, and it would then have to spend many billions of dollars to build out the network.

Because the range of frequencies that Frontline was bidding on is meant to be shared with local police, fire and emergency workers, the F.C.C. has imposed a strict timetable to force the network to be built quickly.

As compensation for that demand, the F.C.C. intended this block of spectrum to be somewhat less expensive than the other national blocks of frequencies that do not involve cooperation with public safety agencies. Still, analysts suggest that it may simply be too onerous for a newcomer to the wireless industry to use this range of frequencies.

Blair Levin, a telecommunications analyst with Stifel Nicolaus, said that in contrast to past auctions, in this one investors are wary of backing start-ups that will have to compete with the established giant wireless carriers.
“I see very little interest from people on Wall Street in their backing new wireless entrepreneurs,” he said.

source : www.nytimes.com

Microsoft Bids for Search Software Firm

Microsoft bid $1.2 billion on Tuesday for a Norwegian search software company, in what analysts said was mainly an effort to add more tools to its lucrative Office products, but was also being done with an eye toward fending off Google.

Fast Search and Transfer, based in Oslo, is a specialist in the search technology used inside companies and government agencies to cull information from documents, databases and software applications.
Its software helps teams of workers quickly search the corporate storehouse of information for answers about procurement, marketing, manufacturing and product design.

Fast is not a competitor in consumer Web search and advertising, a market dominated by Google and one where Microsoft is investing heavily and struggling to make progress.
Yet the planned purchase, analysts said, does give Microsoft technology that it could potentially use to enhance its Web search business.

There are some significant differences between Web search and so-called enterprise search technology. In consumer searches, the popularity of a Web page, for example, is an important factor in determining its relevance, while popularity tends to be less important in ranking corporate information sources.

In a conference call, Jeff Raikes, president of Microsoft’s business division, which includes Office, declined to discuss any specific plans for Fast before its shareholders vote on the friendly offer.

But he said the two companies have talked about how elements of Fast’s technology might becaused in Microsoft’s Web search.
“Absolutely, we were excited by the great team and the great work done at Fast,” Mr. Raikes said.

Google does compete in the enterprise search market with specialized software packaged in a slender server computer, called the Google Search Appliance. And Microsoft sees enterprise search as a promising new market where it wants to get a leg up on Google and other rivals.
“With this acquisition, we are the clear leader in enterprise search,” Mr. Raikes said.
The Microsoft move also comes at a time when Google has begun to go after the corporate market with a package of online alternatives to Microsoft’s Office products.
The search giant’s offerings, called Google Apps, include Web-based e-mail, word processing, spreadsheet and presentation software at no charge or, with technical support, for $50 a user each year — a fraction of the cost of Microsoft’s desktop products.
The Microsoft strategy, analysts say, is to add new technology and features to Office, which dominates the market for productivity programs. The company is increasingly moving to make the popular Office products a familiar dashboard used by corporate workers to do all kinds of tasks.

Microsoft has already offered enterprise search with SharePoint, a product in the Office family that lets groups of workers collaborate. And Microsoft has had a partnership with Fast for providing enterprise search.
But by purchasing Fast, Microsoft can more fully integrate the Norwegian company’s technology into its Office technology. Mr. Raikes pointed to the advantage of having “a single vendor with solutions that span the full range of customer needs.”
In a statement, John Lervik, the chief executive of Fast, welcomed the Microsoft bid, which represents a 40 percent premium over the closing price of Fast’s shares on Monday. Fast’s clients include Reuters, the United States Army, Fidelity Investments and America Online.
Mr. Lervik said the Microsoft purchase “validates Fast’s momentum and leadership in enterprise search.”
Industry analysts viewed the planned Fast purchase as a logical step for Microsoft’s big Office business, but one with an uncertain impact on its wider rivalry with Google.
“This is mainly about enterprise search and Microsoft’s strategy for expanding and defending its Office business,” said David M. Smith, an analyst at Gartner. “How the acquisition fits into Microsoft’s larger search strategy is a bigger question.”

The bid sent shares of Fast’s publicly traded competitors soaring. Mike Davis, an analyst at the research firm Ovum in London, said it could herald a wave of takeovers of similar companies like Endeca of Cambridge, Mass., which is privately owned, and Autonomy of Britain.

source : www.nytimes.com