“So,” Mitty said, sliding a piece of paper across the table, “what do you think of this?”
The investment banker frowned slightly as he leaned forward to pick up the paper, expecting it to be the CIPH acquisition press release. Mitty looked a lot more confident than Danforth thought he had a right to be. This was going to be a rough meeting if Mitty thought yesterday’s announcement that WeBCloud had purchased some unknown startup would make investors more interested in participating in the WeBCloud offering.
But the piece of paper wasn’t the press release. Instead, it was a form letter on WeBCloud stationary with the address of the recipient left blank. It began:
Dear ,
I am the licensing officer for WeBCloud, Inc., which has recently acquired Cyber IP Holdings LLC (“CIPH”), an intellectual property development and licensing company focusing on cloud computing security technologies, facilities, and services. According to your website, your company is principally or significantly active in one or more of these areas.
As you may be aware, on January , the President of the United States signed a bill into law popularly known as the Cloud Computing Cybersecurity Act (“CCCA”). Under the CCCA, all vendors of cloud computing equipment and software and all providers of cloud computing services will be required to fully comply with the CCCA within six months of the CCCA’s effective date. Substantial penalties will apply for non-compliance, including being barred from offering products or services if non-compliance is not rectified within the established grace period.
Enclosed with this letter, you will find a list of thirty-seven granted patents that will be necessarily infringed by any cloud computing installation that is in compliance with the CCCA, as well as a table of the fees required to obtain a license to gain access to the technology represented by these patents. For your convenience, we have included an estimate of the fees you would pay to obtain such a license, based upon your publicly reported disclosure information.
After you have had an opportunity to review the table, please contact me promptly at the address below so that we can prepare the necessary paperwork and final fee schedule to permit you to comply with the CCCA.
I look forward to speaking with you or one of your employees at your earliest convenience.
Danforth looked up from the letter. “What kind of money would we be talking about for one of your big competitors to get a license?”
“Well, we don’t want to be too greedy here. Say, about 1.25 billion dollars per calendar quarter.”
The investment banker’s eyes lit up. “And these patents—how solid are they?”
“Rock solid. Even if someone successfully challenges one or two of them, there will still be dozens that will stand up. But in any event, I’m not worried.”
“Why not? If the patents are solid, we could take you public this summer. But if they’re successfully challenged, whatever you paid for CIPH is money down a hole.”
“Of course. But the patents will never be challenged while we own them.”
Danforth frowned again; he knew that Mitty was no fool, but his answer didn’t make sense. “Because?”
“Because supporting the validity of those patents will be worth far more to whoever is the winning bidder when we sell WeBCloud.”
So that was it; Mitty had been planning all along to stick up the marketplace. Between his trade association and this acquisition, he’d have all of WeBCloud’s competitors over a barrel. Mitty was looking very pleased with himself and clearly expected a reaction.
“Aha! I always knew you were a smart guy, Nate, but this is brilliant. My hat’s off to you.”
And indeed, it was brilliant, Danforth thought. There was no way Orinoco and the other big cloud service providers could outlast him if he could become profitable by charging patent royalties from everyone else. WeBCloud had already pushed cloud hosting margins down to almost nothing. Adding big new fees on top of existing operating expenses would drive every other cloud services provider out of the market entirely—except for the one that succeeded in buying WeBCloud. That would be sure to inspire a spirited bidding war and generate one hell of a big sale price—as well as one hell of a big commission for the investment bank that managed the sale.
Danforth found that his mouth was growing a bit dry as a new thought occurred to him. “That’s tremendous news, Nate—we’ll have no problem closing the round at a nice premium over the last one now. What would you think about a dual-track strategy? We could shop the market for a buyer at the same time we’re soliciting funding from investors. That way we’ll get competition between both groups as well as within each one. You could take the best offer you get, whether it’s a lot more money at a much better valuation or a sale right away for the right price.”
“No, Stuart, I don’t think so. I think it’s time for us to reap what we’ve sown. Cloud hosting is still going to be a tough business no matter how things play out. Speaking just for myself, with eight percent of WeBCloud’s stock, I think I’ll be able to get by with my share of a hundred-billion-dollar sale, and I expect that’s how our investors will look at it, too. That’s not a bad return on three years’ work, even if there were a lot of late nights along the way.”
Danforth couldn’t tell whether Mitty was bluffing or not. They both knew the agreement between WeBCloud and Silicon Valley Securities only covered fundraising—not a sale of the company. There was nothing to stop Mitty from terminating their agreement while they were sitting there right now and then signing up one of SVS’s competitors to sell WeBCloud. If that happened, Danforth wouldn’t see a penny of the hundreds of millions of dollars the other investment bank would make on the sale.
His mind was racing now; who knew what calls Mitty might have already made to those competitors? He decided he couldn’t take any chances. “Well, I can understand that. And if you want us to cancel the financing effort, we’d be just as happy to work with you on a sale. It won’t take any time at all to convert the private placement memo we’ve been using for the financing round into a sale book. We’d only need to add a few sentences to our agreement with WeBCloud to cover a sale instead. And I hope you agree we’ve always given you exceptional service.”
“Yes, we’ve always been happy with you and your team. But as you can appreciate, choosing the right investment bank for this transaction is going to be one of the most important decisions I ever ask my board to support. I expect they’ll be leaning on me to pick one of the big, safe, well-known national outfits instead of taking a chance with a West Coast boutique firm like yours. And I’m sure that they’ll grill me on the commission, too, just as they should. I’ll need to have good answers to those questions, so several weeks ago, I asked Lou here to contact all of the top investment banks to collect their best offers. I must say, some of them were astonishingly favorable to WeBCloud. Right, Lou?”
Lou nodded enthusiastically. “Absolutely. I was very pleasantly surprised.”
“And, of course,” Mitty continued, “with the data center security law about to be signed and our acquisition of CIPH, our stature in the marketplace has risen considerably since we signed our current contract with SVS.”
Danforth tried to maintain his best game face. He didn’t want to give up an inch he might later regret, but he didn’t want to risk losing the deal, either. “I’m sure you’ve done your homework, Nate, as always. And of course, you owe that to your shareholders. But keep in mind that we know your company inside out. That can make a big difference in negotiating the deal—if we can’t get you a ten percent higher sale price than any other investment bank, I’ll be amazed. Plus, we’ve always been there when you needed us.”
“Indeed you have. That’s why I’ve had our lawyers draw up an amendment giving you the transaction, at the lowest commission we were offered by any of your competitors. If you’d like to take the deal on those terms, just si
gn here.”
Mitty slid a document and pen across the table. Danforth reached over to take them, and without further pretense, he turned to the page where he knew the commission terms would be found. Mitty was offering him half the usual rate. He flipped back to the first page and leaned back in his chair, thinking.
Mitty smiled. “Take your time. I don’t have another appointment until 3:00; one of your competitors insisted on delivering a new bid personally.”
Danforth glanced at his watch. It was 2:53. It was a struggle not to let his emotions show. This was what really sucked about being a service provider. It didn’t matter if he was a dry cleaner or an investment banker wearing a two-thousand-dollar custom-made suit or that he’d always done great work for WeBCloud in the past. To Mitty, he was just another fungible tool to be used or tossed aside depending on the price.
Mitty looked down at his watch and began lightly tapping the table with his index finger.
Damn! Danforth wished business hadn’t been so slow; he’d love to call Mitty’s bluff. But it was, and he couldn’t. He picked up the pen and examined it, trying to buy even a few more seconds to think before Mitty stood up to leave. On the side of its sleek barrel, it read Goldman Sachs.
The single crumb of satisfaction Danforth salvaged from the miserably demeaning experience came from snapping Mitty’s pen in half before signing the amendment agreement with his own firm’s pen.
* * *
“You’re looking perky. Good meeting with Mr. Danforth?”
“Good enough, Sue. Let’s just say eventually he came around to my way of thinking.”
“I’m glad to hear it. If you don’t mind me saying so, you’ve been looking run-down lately.”
“Really? Well, I’m feeling just fine today.”
“Good! Oh—Mr. Roach called while you were in with Mr. Danforth. He said it was important and hoped you’d be able to return his call today.”
“Thanks.”
So much for his good day. He dialed the lobbyist’s number himself.
“Paul Roach.”
“Nate here. What’s up?”
“Nothing we can’t handle. But Ravitz is at it again. We just saw in her email that she’s persuaded Congressman Titus Steele to hold a hearing on data center physical security before the president can sign our bill, and she’ll be one of the experts on the hearing panel.”
“You have got to be kidding me! I’ve spent two years and ten million dollars in campaign contributions to get that bill adopted!”
“I know—who do you think told you how much to pay, and to who?”
“Listen—it’s worse than that. After buying the rest of Cyber IP Holdings, I’ve only got three months’ cash left. If we don’t get financed or bought within the next two months, we’ll have to declare bankruptcy.”
“Take it easy. I don’t think we need to go crazy here. I’ve already been in touch with Steele’s chief of staff. Benno’s met with him twice in the last six months, and he assured me he’ll put Benno on the panel.”
“Who else?”
“I’m pretty sure I’ll be able to get your chief security officer on, too. Obviously, he’ll say the right things. I can’t imagine they won’t be able to run rings around Ravitz.”
“If it was anybody’s committee other than Steele’s, I wouldn’t care. But he’s so anti-business we didn’t even bother to contribute to his campaign.”
“I know, but he’s no liberal, either. He’s not likely to give much credence to a Chicken Little claiming the sky is falling.”
“So why’s he holding a hearing? Especially now?”
“My guess is just for the publicity. He’s up against a primary challenger from his own party for the first time in ten years, so he’s been trying to keep his name in the news as much as possible. And don’t forget—we’re all set to debunk Ravitz’s fancy research report, so why not think of this as an opportunity to publicly shut her down? Let Tight-ass go ahead and rant for the cameras. If we just keep calm and carry on, everything should settle down then and the president will sign the bill.”
Mitty stared at the phone. He was too close to the end of the road to take chances. And he was definitely not feeling calm.
“That’s not good enough. When we were interviewing lobbying firms, you assured me you could be ‘creative’ when the situation demands. Well, the situation is demanding. What can you do to discredit Ravitz?”
“Nate, I really don’t think we need—”
“Well, I do. Get back to me tomorrow with an airtight plan for making Ravitz look like a fool in front of that committee.”
* * *
President Henry Dodge Yazzie considered the advice he’d just received from Carson Bekin, his oldest advisor and now his press secretary.
“You know, Carson, this isn’t what we came to Washington for six months ago. We were going to be different—that’s what we promised the voters, remember?”
“Sure, Henry. Problem is, we’re here now, and it’s a whole different ball game from what we expected.”
“That’s bull, Carson. If anything, I thought it would be worse. I didn’t expect to be able to believe anything anyone said if they were asking for something. And everybody’s always asking for something.”
“Of course. But that’s not what I meant. What I’m realizing is that if we’re going to deliver on any of the promises we made to the voters, we’re going to have to hold our noses and support more things on other peoples’ agendas than I expected. Sometimes even special interest agendas.”
“If that’s a surprise, Carson, you were kidding yourself. But either way, there’s a difference between supporting something and just not getting in the way, and that ought to be good enough. I’m okay with not vetoing something that has strong support in both houses of Congress, provided it’s not outright counter to the public interest, or contrary to an issue we campaigned hard on. But I’m not going to publicly support a bill I don’t believe in just because one group or another wants us to.”
“This isn’t some special interest group, Henry. This is a bill introduced by Bill Taylor—the speaker of the house—and one that a company called WeBCloud has lobbied hard for! Taylor’s got a tough election coming up, and he could really use WeBCloud’s support. It’s one of the bigger employers in his state. Why should he help us on a bill we care about if we don’t support him on one of his?”
“Because it’s a bad bill! Did you see that report on the vulnerability of data centers to physical attack? There was a reference to it in my daily briefing yesterday, so I asked for a copy. It’s from some public interest group Bill Ravitz’s daughter started, and it turns out that DHS had already done a similar report that came to the same conclusions. Anyway, Ravitz’s father sent advance copies to the White House and a lot of other folks on the Hill, and it scared the hell out of me. You ought to read it.”
“Most of what’s in your daily briefing scares the hell out of me.”
“Yeah, but this is something I can do something about.”
“Such as?”
“Veto that bill.”
“Henry, you can’t.”
“Of course I can. Haven’t you read the Constitution?”
“Don’t be cute, Henry. I’m serious. Don’t forget you ran as an independent—neither party owes you anything. In fact, quite the opposite, given that you beat their own candidates in the election. If Taylor wants to turn his back on you, nobody in his party is going to complain. Then we’ll never get anything accomplished. Look, why don’t you let me at least make a favorable comment on your behalf. Then we can figure out some kind of executive order you could issue after the election that will address your concerns. How about it—can we look into that?”
Yazzie frowned and swiveled around to look out a window of the Oval Office.
He hated this part of the job the most. But maybe Bekin’s idea had some merit. “Okay, Carson,” he said finally. But he felt unclean.
* * *
Sean Lynch was standing by a copy machine, waiting for one stack of paper to become four, and he was no longer enjoying himself. The early glow inspired by his lunch with Roach had faded almost immediately. For starters, he was being supervised by someone only a couple years’ his senior instead of by Roach. And when he did have any contact with the big boss—say, sitting in a chair against the wall while the other team members traded ideas with Roach across the conference room table—he might as well not have been there at all.
The experience of monitoring Sara’s account had also quickly turned sour. It was difficult to maintain his righteous anger while following her familiar way of expressing herself. By turns serious and cheerful, her messages reminded him all too clearly what had drawn him to her, leaving him lonely and regretful. And the contrast of her high-minded efforts, regularly reported in the news media with his own tawdry activities left him feeling soiled and cheap. Lately, her parting words kept springing back to mind: “You’re too good to be doing what you’re doing.” She loved him, she’d said, but she wouldn’t stand aside and watch him promoting causes she knew he didn’t believe in just to make a lot of money. “I’m doing this for your sake more than mine,” she’d said. Maybe it would wake him up. She hoped so, but if not, then they had never been meant for each other to begin with.
The voice of his manager on the DCSA account just outside the alcove he was standing in brought him back to the present.
“Hey, Rob. Just on my way to see you.”
“What’s up?”
“Fire drill on DCSA in conference room three.”
Lynch took the stacks of paper out of the copy machine and hurried back to his cubicle. But there was no blinking light on his phone and no meeting invitation to accept in his email. That was strange; he might be the most junior person on the account, but at least he was always invited to team meetings. He walked down the hall to conference room three, hoping he’d be noticed and invited in. But the door was already closed.
The Doodlebug War: a Tale of Fanatics and Romantics (Frank Adversego Thrillers Book 3) Page 20