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  Linden Lab CEO: We’re Not For Sale  
 
 
Posted 2006-11-28 by Tony Walsh
 
 
     
 
Linden Lab "is not looking for a public share offering or a buy-out," Reuters reports, after tuning in to CEO Philip Rosedale on the Yi-Tan Weekly Call yesterday [no audio available at the time of writing]. Rosedale's statement contradicts an earlier claim by former CFO David Fleck that "We're open to an IPO or a sale." Rosedale was recently interviewed by In the Grid magazine (my coverage here), and gave a Town Hall meeting earlier this month.
 
     
 
   
 
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  18 Comments  
 
   
 
Comment posted by glynmoody
November 28, 2006 @ 11:32 am
     
 
You may also find of interest Rosedale's comments on the same subjects (and much else) in an interview I did with him recently.
 
     
 
     
   
 
Comment posted by Tony Walsh
November 28, 2006 @ 11:50 am
     
 
Great interview, glynmoody. It seems that Rosedale didn't rule out the possibility of a sale when you asked him about it. I find the inconsistency around this issue annoying. It's probably better to say nothing than to flipflop all the time.
 
     
 
     
   
 
Comment posted by glynmoody
November 28, 2006 @ 12:12 pm
     
 
To be fair to him, he did qualify his reply in terms of the circumstances under which he might consider it. So the answer is more along the lines of "probably no, but maybe yes *if* the following conditions are met."

Also, he probably gets bored giving the same answer to these questions he is asked repeatedly....
 
     
 
     
   
 
Comment posted by csven
November 28, 2006 @ 3:51 pm
     
 
Yep. I don't see any contradiction. Being "open" to a sale and actively "looking" are two different things.
 
     
 
     
   
 
Comment posted by Tony Walsh
November 28, 2006 @ 4:55 pm
     
 
Reuters didn't quote Rosedale, so I'd be interested to hear his exact wording in the audio interview. The audio wasn't available when I published this post. I agree there's a nuance here, but I wish there was clearer language to work with.

All I want to know is whether or not Linden Lab is "for sale." I guess Rosedale's "not looking for" combined with Fleck's "open to" and Rosedale's refusal to rule out a sale means Linden Lab is "for sale." There should really be a straightforward company line on this one. I consider myself reasonably intelligent, and I'm getting confused with the wording.
 
     
 
     
   
 
Comment posted by rikomatic
November 28, 2006 @ 6:00 pm
     
 
Here's the real message: "We're not for sale.... but if we WERE for sale, what would you be offering?"
 
     
 
     
   
 
Comment posted by Tony Walsh
November 28, 2006 @ 10:57 pm
     
 
That's sort of what's driving me nuts, riko :/
 
     
 
     
   
 
Comment posted by Brace
November 29, 2006 @ 2:36 am
     
 
Bahahaha!!!

they just back pedaling. We ALL know how the whiff of a sale can fook stuff up FOR a potential sale

*snuggles T-Dawg*

hang in there :D
 
     
 
     
   
 
Comment posted by Giff-Forseti
November 29, 2006 @ 3:10 pm
     
 
This keeps on coming up and frankly it's pretty silly. Fleck didn't say "we're for sale", he said essentially that they would contemplate all options. This is what every venture-backed business says. Saying you'll listen doesn't mean you want to sell. They're a business and have a fiduciary responsibility to their shareholders to contemplate exits, even if their collective expectations are so high that a near-term IPO is not an option and no buyer would be willing to pay the price tag.

The IPO markets seem pretty soft right now, and frankly running a public company in this era of Sarb-ox is NOT fun at all, so I don't expect that they'll be in a headlong rush until the markets become more receptive to high-risk issues.

As for M&A;, I am not privvy to any inside info but I would bet that Linden Lab is getting approached all the time. Most hot technology companies get sniffed out on a constant basis. It makes sense for them to listen to credible suitors. Each month that Second Life grows, their price tag gets better, as long as buyers have faith in the underlying technology. Linden Lab has shown over and over that they are thinking big, and willing to turn down near-term money for long-term goals. At some point in time what they think they might get in future, adjusted by risk, might be less than a current acquisition offer, and they might sell, but that has *nothing* to do with what Fleck and Rosedale are saying.

Much ado out of nothing.
 
     
 
     
   
 
Comment posted by Tony Walsh
November 29, 2006 @ 3:52 pm
     
 
"Saying you'll listen doesn't mean you want to sell."

I think it's silly that we are forced to resort to speculation and semantics here based on goofy Lindenese. "Want to sell" and "for sale" can be two different things. A company "closed" to sale isn't "open" to one, and is therefore not for sale. A company "open to an IPO or a sale" is a company that is for sale. Right? Wrong? My head hurts.

Maybe this is a big deal over nothing (is it a big deal?). I'm certainly getting tired of Lindenspeak. I think next time I'll just wait for the press release. Which LL's PR firm won't be sending me, of course.
 
     
 
     
   
 
Comment posted by Prokofy Neva
November 29, 2006 @ 7:16 pm
     
 
Linden Lab is a not-for-profit laboratory. It's a research operation devoted to the creation of a Better World. Philip told me personally at SLCC 2005 he would never sell. I believe him.
 
     
 
     
   
 
Comment posted by AndrewLinden
November 30, 2006 @ 3:59 am
     
 
Lemme tell you a story...

Not too long ago the majority of Linden Lab was sitting around eating lunch in a big room and Philip was talking to everybody about the exact same stuff that is in glynmoody and Reuters' articles as well as his "Mission of Linden Lab" blog entry. Basically: "...LL has lots of work to do, but it is nearly to profitability, it has great long-term investors, we're not looking to sell the company..."

At that point someone else in the room shouted "$1.6 Billion!" (the price that youtube.com recently went for after only 19 months of existence)

Philip smiled, shook his head and said more about how we're doing so well now he couldn't put a price on LL...

Someone else shouted "$2.6 Billion!".

Philip laughed and said, "See you guys!" and faked a dash for the door. Everybody laughed and Philip continued.


I think the situation pretty much stands as Philip talked about in the glynmoody interview #2, and the above story illustrates why the hypothetical idea of LL being purchased cannot be ruled out with a definitive statement. Clearly LL is in a good situation now: high growth, decreasingly low burn rate, and plenty of money in the bank. It really doesn't need a buyout; all of the investors are happy with our progress and are interested in the long term possibilities. That said, given the right kind of buyers (i.e. buyers who believe in the Idea) there is a price between $1.0 Billion dollars and $1.0 Trillion dollars where everybody the LL side would say, "Uh... OK!"

Under such a scenario LL would have a huge cash resource which it could use to help it hire, scale, compete, buy laws from congress -- whatever it took to complete the project. Any investors that were in it only for the money could cash out at a huge profit. Any investors in it only for the Idea could sit back with confidence that it would come to fruition.

Meanwhile, Philip is devoted to the Idea of SL and is the best person for the position of LL CEO. Even if LL was purchased for some gawdawful price tag the new owners would want would keep him on the project. And, I can't think of another Idea he'd prefer to work on... except that one about the total VR immersion hardware interface... or maybe the one about an electronic human brain...
 
     
 
     
   
 
Comment posted by Prokofy Neva
November 30, 2006 @ 8:35 am
     
 
>Under such a scenario LL would have a huge cash resource which it could use to help it hire, scale, compete, buy laws from congress

I think the general public will remember flippant comments like this when they ask their congressmen to investigate Second Life regarding allegations of gambling, prostitution, solicitation of minors, and destructive cults.

I realize you're all terribly cynical up at the Lab about the old meat-space law, forged over the millenia by analog human beings -- and you're all really fired-up by your new-found powers as coders in the "code as law" matrix, but not so fast there, dude, as many congressmen as there are to be bought with your virtual world money, there are others who would play the game of exposing you doing that as well.
 
     
 
     
   
 
Comment posted by Tony Walsh
November 30, 2006 @ 9:12 am
     
 
Andrew, thanks for the behind the scenes viewpoint, I think that clears up any remaining questions I might have had. I'm really, really impressed that you folks are creeping into the black, I never thought you'd get there so quickly.
 
     
 
     
   
 
Comment posted by AndrewLinden
November 30, 2006 @ 12:25 pm
     
 
No worries Prokofy, that "flippant remark" was actually a "carefully planned attempt of mild humor". Since it appears that you didn't get it let me explain it to you.

My examples of how LL could spend a wad of cash range from the benign (hire), to the vague (scale), aggressive (compete), and audaciuos (aquire political power). That final example was chosen to top them off and provide some suprise to the reader, but also to bring home the point as to how money could be weilded effectively in the real world, and finally it was an snide acknowledgement that certain unnamed wealthy tech companies have done just that.

There are other examples of my subtle humor in that post. If you don't find them funny please let me know if you'd like me to identify and explain them.

In closing, I feel compelled to mention that this post itself is supposed to be somewhat funny. It is simultaneously silly and useful to belabor and analyze a subtle attempt at humor when someone doesn't understand it.
 
     
 
     
   
 
Comment posted by Prokofy Neva
November 30, 2006 @ 1:32 pm
     
 
Um, I got the subtle humour, Andrew, and realized how you stayed up late planning and executing that humour -- and that's exactly why I characterized it as "flippant". Taken out of context of the game world and game blogs, however, as it will be someday, it will ring rather differently. (Remember your comment about throttling? Re-thinking that now, are you?)

And it points up your cynicism, based on the experience not only of tech companies but your evident overall position of dismissal of the old meat-world's rule of law. And once you subscribe to the radical position of "code as law" as you appear to, why, then it's easy to understand your flippancy and calculated subtle sense of humour, because well, you'll run everything as the coder and make the code be whatever law you like.

Yes, it is silly and simple to point out that someone's condescending and flippant use of humor about law and buying congressmen, at a time when they are in an absolute whirlwind of saturation 24/7 mainstream media coverage, is probably not in their long-term interests if they wish to appear at all serious. Because people aren't going to put up with "code as law" as readily and as quickly as you imagine. And that's not because they're bearing pitchforks and are mouth-breathing SUV drivers. It's because they'll want some oversight over coders like you.

Frankly, Andrew, with all its flaws, including the ability of some of its members to be perverted or bought, I'd take the elected, representative U.S. Congress and the legislative process checked and balanced by other branches of government over a game company, or industry of virtual world companies and consultants, or groups of sequestered and elitist programmers who will rule huge swathes of our time on the Metaverse in the coming years.

Yeah, I got the other yuck-yuck jokes, too, Andrew about the electronic brain. Oh wait, that wasn't the joke part.

Signed, Prokofy
In It For the Idea, Just Not Your Idea
 
     
 
     
   
 
Comment posted by Giff-Forseti
November 30, 2006 @ 3:16 pm
     
 
"A company "open to an IPO or a sale" is a company that is for sale. Right? Wrong? My head hurts."

lol well there is something to that, Tony. Some would argue that every company is up for sale, just like every home. You might not want to sell your home, but would you if someone offered 10x its estimated market price? 100x? 1000x? etc

OK maybe if it had been in your family for generations you would not sell for any price, but for *most* people, at some point there is a price, even if it's at sky-high levels.

Most people say "I'm not looking to sell my home right now" or "We're not looking to sell the company" and they probably mean it, but that doesn't mean the door is completely closed if the offer gets high enough.
 
     
 
     
   
 
Comment posted by Tom
November 30, 2006 @ 7:01 pm
     
 
Each month that Second Life grows, their price tag gets better, as long as buyers have faith in the underlying technology.

I think this is the crux of the matter. As it is, the underlying technology seems exceedingly fragile and the effort it would take to fix potentially less than to develop a similar system from scratch. Any potential acquisitor doing even a modicum of due dilligence would soon discover that.

Perhaps Linden's time to get a decent price was a year ago before the holes in their system became so glaring...
 
     
 
     
   
 
 
     
 
     
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