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May 19, 2005

Adventures at the JPMorgan Tech Conference

Justin Hibbard

Yesterday, I barely made it to day three of the JPMorgan technology conference in San Francisco, and I'm glad I did. Got to catch up with some interesting people and hit a swank after-party in the presidential suite at the Fairmont. Here's the blow by blow.

Finished edits on a story around 2:40 and tore up the 101 from San Mateo to S.F. Parked the Passat in the Ellis O'Farrell garage and dashed up Powell Street to the Westin St. Francis. That hotel has not changed since I was a kid and could use a facelift but will always be special since wifey and I spent our wedding night there.

Sped to the Borgia Room--a dark hall with vaulted, gold ceilings--and had a sit-down with Mark Zanoli, JPMorgan's head of tech banking. He munched popcorn from a paper cup as we talked. I had missed presentations by Force10 Networks and Netscaler, which were standing room only. Both are private and about 18 months from an IPO. Investors craving networking stocks again?

Zanoli specializes in tech M&A. Jim Davidson at Silver Lake Partners was his former boss at Hambrecht & Quist. This guys knows from buyouts. JPMorgan claims 42% market share as lead underwriter in syndicated lending, which finances a lot of leveraged buyouts. As Zanoli says, "Debt used to be a four-letter word in tech." But in the past year, JPMorgan has provided debt financing for buyouts of Telcordia, UGS, and Sungard--all tech.

Here's the rub: the fallout from the GM and Ford downgrades is already raining on the tech buyout parade. "Hedge funds got smacked by getting that trade wrong," Zanoli says. "Their appetite to do deals and take risks has pulled back." With hedgies less hungry for junk bonds, it's harder and more expensive to finance LBOs. So, prices of the target companies may have to come down, and that could make targets less willing to sell.

With that, Zanoli had to bail. Half an hour later, I jumped in a cab with Adam Castellani, PR guy at JPMorgan, drove to the top of Nob Hill, and rolled out at the Fairmont. After some hunting, we found the hidden elevator to the presidential suite. Clinton was the last prez to stay there. The billiard room was a highlight--it featured an Islamic tile motif and an antique table with woven leather pockets. The two-story library had a dome ceiling with various constellations painted on it. The terrace overlooked the Transamerica pyramid and the bay. Highly recommended.

Inside, I bumped into Ameet Patel, a managing executive at JPMorgan. Interesting guy. He used to be a chief technology officer at the bank. After Elliot Spitzer broke up the love affair between bankers and analysts, bankers had no one to analyze tech for them. Patel pitched himself as the non-analyst tech advisor, and that's his job now. (Have other banks have done that?) If the bankers are mulling a tech M&A deal, he'll advise on whether the technologies fit together well. He also spends time with VC-backed startups on strategy and preparing to go public. Patel helps run LabMorgan, a JPMorgan division that develops and invests in tech startups.

I asked Patel how startups that are selling tech to big business are supposed to survive these days. He gave me his 80-20 talk. Most big companies are spending 80% of their tech budget on maintenance--that is, keeping the old systems running. Only 10% goes toward innovative new technologies. (He didn't say where the other 10% goes.) These big companies divide their tech maintenance budgets into categories: networking equipment, servers, middleware, etc. The smart startups find a way to disrupt those categories, consolidate several of them into one, and save companies money, which they can spend on new technologies. Example: an appliance company that combines servers, storage, security, and networking equipment into one box. Get it?

Also chatted with Marten Mickos, CEO at MySQL. Cool guy! Had to run before the company presentations started. Made it back to Union Square as a light mist started falling. I love S.F.!

07:15 PM


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