Dangerous Reasons To IPO
from the desperation,-not-growth dept
There's been some indication that the IPO market is beginning to open up again, what with profitless firms like NetSuite having successful offerings. At about the same time that was happening, Danger filed to go public as well, but perhaps for all the wrong reasons. Like NetSuite, Danger is losing money. However, the story of Danger is an instructive one, and it's surprising that the firm is trying to go public. Reading between the lines, it feels like Danger is trying to go public more as a desperation play to stay in business, rather than as part of a plan for strategic growth.Danger, of course, launched its HipTop/Sidekick device way back in 2002 to much fanfare. I bought one the first day it was available, and used it for more than three years. It really was one of the first useful mobile devices for being able to do things like web surfing. However, while the company did an amazing job in designing the device, it made a series of strategic mistakes that have since limited the company's business chances. First, it took an early investment from T-Mobile. Initially, this might sound like a good idea for a device maker looking to have its device offered by a mobile operator -- and, indeed, T-Mobile offers the Sidekick. The problem was that almost no one else wanted to go near it, as they didn't want to help out a rival operator's investment. Danger picked up a few smaller operators, but never could get the device out to a large enough audience.
The second big mistake was in closing off the device. Early on, it didn't even have a developer kit for developers. Once it did, many developers had already moved on to other things. On top of that, Danger/T-Mobile still controlled which apps were available. You couldn't go around Danger/T-Mobile to load whatever app you wanted. That also turned off developers who knew they couldn't just write an app and push for viral adoption. They had to go through the gatekeeper. It certainly made the device a lot less useful. Whereas for other popular platforms there were tons of apps available, Danger had a very limited supply.
While the company built up a modest following, in part by getting famous young celebrities to carry the device (which backfired a bit when Paris Hilton's got hacked), many other devices eclipsed Danger's devices and the company has done little to push its way back into the discussion. It basically just bet on having a really cool design and continually making minor updates to that design. That was strong enough to keep the company afloat, but it's still losing money, not growing very fast, and still incredibly reliant on T-Mobile for a huge chunk of its business. It's certainly not a particularly compelling IPO story -- and it feels like an IPO out of desperation for new capital, rather than an IPO of a company that is growing and has strategic plans in place for the use of a capital influx. Perhaps the folks at Danger saw an opening in a market that's warming up to IPOs, but it wouldn't be surprising at all to later hear that the company ends up pulling the IPO.
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Exactly...
Getting back to the Sidekick, now.. I also have to say kudos to the Danger Folks for developing such a brilliant piece of technology based on a reference design, and J2ME UI. At first it was manufactured by Flextronics, and now it's OEM is I believe is Sharp. The secret to it's success was in leveraging existing reference RF design specs. Add a few hooks in the software to connect to the baseband processor, and vola, you can focus on creating your core product- the services and value-added software.
Granted, it may be over simplification of the product, and it took a few years for Apple to essentially go down the same road, but using a OSX core.
The IPO is interesting, but it remains a mixed bag. I can't peg down if it's a offensive or defensive move-- Is the IPO is to generate cash to buy back it's share from T-Mobile and compete in the marketplace with the iPhone and rumored gPhone?
If so, one could be relatively pessimistic about their long term growth strategy on the surface...
But remember, our buddy Steve Wozniak and a bunch of Apple visionaries originally started Danger several years ago, and if they are still there, it could be a very, very interesting few years for service-focused devices.
I'm just too lazy to research where Woz is these days.
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Corrections
Danger's been around since late 1999.
Danger provided J2ME/MIDP support for "legacy apps" in the 2.0 hiptop OS. All the "native" apps are written using the Danger framework, not the far more limited MIDP stuff.
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Kind of...
The original Danger concept was to have a DoCoMo style content platform, but T-Mobile put the nix on that too. T-Mobile USA is 2nd only to Verizon as far as walled garden, operator pig-headedness is concerned. Perhaps Danger has since bought into this limiting approach, which fails to recognize the power of the platform.
That said, they've rested on their laurels since, with little innovation in their handsets - this has been the most disappointing aspect as the platform is solid and would be great with video and 3g/wifi networks. I am sure having T-Mobile as an investor hasn't helped.
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