Loudcloud renamed; sells business unit
The deal, closed Thursday, marks a major change of direction for the closely watched Silicon Valley software shop co-founded by Marc Andreessen, whose role in launching Netscape made him the poster boy of the high-tech heyday's 20-something whiz kids.
"I'm a pragmatist. I think this makes a lot of sense," Andreessen said Friday. "Our baby is the company, and this puts the company in a much better position."
Founded in 1999, Sunnyvale, Calif.-based Loudcloud's fortunes have shifted with the technology sector's boom-and-bust cycle.
Its March 2001 initial public offering--seen by many as having marked the end of the funding wave that turned thousands of young tech workers into overnight millionaires--brought in just a fraction of what the company and its investment bankers had hoped.
Soon after, Loudcloud's dot-com customers disappeared with that sector's meltdown. As a result, the start-up that worked to keep company Web sites from crashing was forced to slash jobs in an effort to cool its own life-threatening cash burn.
While its revenue was eventually righted, Loudcloud continued to rack up losses--more than $240 million at last count.
The sale of Loudcloud's lower-margin services unit to EDS comes amid a merger-and-acquisition drought that has caught some in the industry by surprise. Nevertheless, it leaves Opsware and its 100 employees in a more profitable space: software.
Plano, Texas-based EDS, which hired about 140 people from Loudcloud, has committed to buying a minimum of $52 million in Opsware software over three years, said Ben Horowitz, Opsware's chief executive.
Horowitz--also a Loudcloud co-founder--said the new company needs to book quarterly sales of about $8 million to break even. He expects Opsware's revenue to reach $30 million next year.
"I think, in a different environment, Loudcloud would have worked great," Andreessen said.
The company's ticker symbol has changed from "LDCL" to "OPSW."
Story Copyright © 2002 Reuters Limited. All rights reserved.