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Oracle Kills Virtual Iron

Posted by kdawson on from the all-your-VMs-are-belong-to-us dept.

rhathar writes in with news that Oracle is killing off the products of Virtual Iron, a month after purchasing the company. Reports say that all but 10 to 15 staff were let go. The Reg article speculates that Oracle bought VI for its technology and considers its customers and partners expendable. When the Sun purchase finalizes, Oracle will be in possession of three separate virtualization technologies all based on Xen. "In a letter to Virtual Iron's sales partners, Oracle says it 'will suspend development of existing Virtual Iron products and will suspend delivery of orders to new customers.' One partner said, 'So basically, anyone that built their hosting infrastructure on VI... is now totally in the s–.'"

8 of 189 comments (clear)

  1. Yet another IT company gets to live my dream! by tjstork · · Score: 5, Interesting

    I would so love to be Virtual Iron, or anyone who got bought out like that. Geez, they buy me out, then tell me, that, I really am not allowed to work on it any more and can just take off for a few years, here's your millions of dollars.

    Yeah... SWEET!

    --
    This is my sig.
    1. Re:Yet another IT company gets to live my dream! by Anonymous Coward · · Score: 5, Interesting

      Yeah yeah. Great for the 2 or 3 guys on the top. Everyone else gets fucked though.

      Even if you have a small equity stake in a company that gets bought, the guys at the top will always cheat you out your share. Saw it happen many times during the first dot com bubble.

      What usually happens is the original owners have a handful of class A shares, and everyone else has class B shares. When the buyout comes around, the owners create and issue a billion (or so) class B shares, and dilute everyone else's interest. OR they simply vote with their (super voting power) class A shares and force everyone to sell the class B shares back at a reduced rate. Or they just sell the assets of the company, and not the company itself... then give themselves huge "bonuses" for making the sale.

    2. Re:Yet another IT company gets to live my dream! by mzito · · Score: 5, Informative

      Heh. Well, so, that's not exactly how it works. They had raised something around $60-70m in three or four rounds, including one round that involved firing/departures of most of the original founders, a new management team, and a totally new business focus.

      So first of all, every time you do a round of fundraising, you create new shares of stock. Let's say my company has 100 shares of stock, and you're a 10% owner of stock - that means you own 10 shares of stock. When we want to raise money, we go convince an investor that our company is worth $100,000, or $1000 per share, making your shares worth $10k. We then have the investor give us $100,000, we create 100 new shares of stock, making the company worth $200k "post-money" - but now you only own 5%, and your investors own 50%. On top of that, the investors might say, "hey, we want liquidation preference, or participating preferred" - complex subjects that can't be delved into here, but suffice it to say that gives them more power.

      Ok, time goes by - you spend that $100k you've raised, and while business is not terrible, it's not as good as your investors had hoped. You go back to get more money, and they say, "Sure, we'll give you another $100k, but we really don't think the company has progressed like we'd hoped, so the total company is worth $150k pre-money" - whoops, now your shares are worth $7,500. And after another 133 shares are created, you now own around 3% of the company.

      See how fast individual ownership can drop? Now, let's extend this factor to someone like VirtualIron who was raising $10-25m *every time* they raised money, and changed business models once. You can bet that by the time they went through four rounds of funding, the VCs owned almost all of that company. (By the way, I realize that this is only the most simplistic model of how companies fund operations through VCs, so don't yell at me - I don't have the space to talk about every option).

      According to some papers that had been leaked to the nytimes, in 2008 they did $3.4m in revenue and lost something like $17m on that $3.4m. How much can that company be worth? Typical rule of thumb in tech stock transactions is 5x-12x revenue, depending on a variety of factors. Given that it cost them $17m to make $3.4m - one could see how the multiplier is not gonna be so favorable. Let's make it 6x - that's $20m.

      So, you have a company where investors have sunk and lost $60m, fired management at least once, changed business models once, changed products at least once, and in the end, they're getting bought for between $16-32m. Do you think that anyone got more than a "thanks for selling this dog of a company" bonus?

      It's a shame, and I feel bad for the employees, but this is not a tech success story.

      --
      me@mzi.to
    3. Re:Yet another IT company gets to live my dream! by Thing+1 · · Score: 5, Insightful

      This is OT, but needs to be said. My workaround for getting rid of that fucking annoying vertical and horizontal gray bars, and friend/foe circle icons, has now stopped working. It used to be that I could click any post in the story (i.e., "#28404197"), and then click the story link at the top of that page (i.e., "Oracle Kills Virtual Iron") to get back to the story with no disgusting graphics interrupting the flow of the beautiful words.

      Now, that has stopped working as of this morning. So: fuck you, Slashdot. Burn in hell for all I care. I'll read you a lot less now than I used to. No, I'm not saying I'll stay away forever, but as soon as your continued idiotic refusal to fix basic layout bugs annoys me, I will stop reading. And that's about 5 or 6 posts into most stories.

      If this is supposed to be an incentive to get me to try some other layout, FUCKING TELL ME! Don't just break shit and hope that I know how to "upgrade" to fix it.

      --
      I feel fantastic, and I'm still alive.
    4. Re:Yet another IT company gets to live my dream! by dookiesan · · Score: 5, Interesting

      Thank you for saying what so many are afraid to (for fear of offtopic mod)

  2. NOT totally in the s--- by Anonymous Coward · · Score: 5, Funny

    VI customers could just switch to emacs.

  3. Oracle is not IBM. by reporter · · Score: 5, Interesting
    After Oracle agreed to buy Sun Microsystems, many analysts claimed that Oracle intended to become another IBM by selling all components in the typical server room and by supporting those components with the same kind of high-value customer service.

    Well, the analysts were wrong. Without warning, Oracle just abruptly terminated a product line on which its customers may have built their entire information-technology infrastructure. This kind of approach to customer service is not how IBM treats its customers.

    Look at how IBM handled the sunsetting of OS/2. IBM issued a warning long in advance of ceasing sales and distribution of the product. Then, after the termination date, IBM continues to sell service contracts to support the product if a customer continues to need support.

    Hmmm. Maybe the time has come to short my Oracle stock.

  4. Re:They made the product even more virtual by fishbowl · · Score: 5, Insightful

    >The product allowed people to eliminate physical boxes and still run dozens or hundreds of logical servers.

    For us, ESX is the difference between needing a new contract with our electical contractor (hundreds of thousands of dollars) versus working with our current power capabilities. It's not about the host machines, the licenses, or even the sysadmin workload. It's more about the power supplies and cooling the racks than anything else.

    --
    -fb Everything not expressly forbidden is now mandatory.