Boston Business Journal: Microsoft´s $120M Groove buyout challenged in lawsuit

April 1 2005

Well, I guess we now all know how much Microsoft paid for Groove... IDC's last estimate (2003) of Groove's revenue was US$12 million, so you do the math....

Former Groove employee Michael Matthews claimed Microsoft and Ozzie, who together hold 59 percent of Groove's stock, "seek to eliminate the interest of junior preferred and common stockholders for no consideration" in the $120 million deal, according to a lawsuit filed March 25 in Delaware Chancery Court. ...
The suit claims the buyout is also unfair because insiders will get $50 million in "golden parachute" payments and other benefits, including $27 million in stock grants for Ozzie.
Link: Boston Business Journal: Microsoft's $120M Groove buyout challenged in lawsuit > (thanks Tom and Michael)

Ed Brill | Highland Park, IL USA Category:  In the news  Add/View Comments [7]

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  1. 1  Chris Reckling www.lotus.com | 4/2/2005 11:26:04 AM

    The Boston Globe also covered this suit, with different info on the payouts.

    { Link }

  1. 2  Ed Brill www.edbrill.com | 4/2/2005 11:46:27 AM

    Saw that. Tom Duff picked up seattlepi.com's story on this, with much more financial disclosure.

    { Link }

    and

    { Link }

  1. 3  Duffbert http://www.twduff.com | 4/2/2005 11:50:47 AM

    Thanks for the links back, Ed... This is definitely shaping up to be something far different than what was originally touted in the press...

  1. 4  Danny Lawrence  | 4/2/2005 1:41:17 PM

    I don't see this impeding the sale that much. MSFT will just write checks to Matthews and Chandler and make them sign NDAs to shut them up.

  1. 5  Ed Brill www.edbrill.com | 4/2/2005 2:16:05 PM

    @4 I agree, but I think the point that Tom Duff is making (and others) is that this data casts the nature of the acquisition in somewhat different light.

  1. 6  Duffbert http://www.twduff.com | 4/2/2005 9:06:14 PM

    @4/@5 - Ed's right, Danny... I pointed this out in the second of my three blog entries:

    Microsoft has so much money floating around that I doubt they'll view this as a showstopper. They could easily restructure the deal, throw a few more million on it, and pay everyone to just shut up and go away. What this story *does* highlight is that Groove was basically finished as a company unless a white knight stepped into the picture and rescued them...

    I consider it telling that both sides sought to hide the financials of the transaction now that the facts have come out. It's pretty hard to convince people that the software you bought to fill in your collaboration gaps is from a company that only made $12 million in 2003, took $80 million of your money in venture capital over the years, and *still* went bankrupt because nobody was buying the offering.

    And less than 24 hours to approve a merger? If Groove were a widely held/publically traded company, people would be lining up to file shareholder lawsuits...

  1. 7  Danny Lawrence  | 4/4/2005 8:45:54 AM

    Ed, Tom, you guys are right, I was looking at this from the wrong prespective.

    What is made more obvious by the financial details leaking out is that the real function of this deal was to bring Ray into the MSFT fold. Groove was just the pretext (and ironically it is also a backhand endorsement of Notes/Domino). What is interesting about that is now Ray is one of 3 CTO's at MSFT, I'm just wondering how that is all going to shake out, given WFGIII's tendancy to pit people against one another .