- Competition. While MarkLogic is not a search engine we did end up competing with Fast at several major media (i.e. publishing) accounts, so they had my attention.
- Seen this before. Fast reminded me of MicroStrategy, against whom we successfully competed at Business Objects, but whose tactics caused me more than a bit of angst over the years. (One might argue this comparison was prescient.)
- Speaking out. I felt that despite the presence of evidence (e.g., financial analyst reports from a Scandinavian bank that did some pretty convincing analysis) that things were awry that everyone (i.e., industry analysts, customers) seemed to turn a willing blind eye first to the indicators of the problems and then to the problems themselves -- either dismissing them entirely or as characterizing them as simple "accounting issues."
- Knew the right way. Also, from my near-decade's worth of experience at Business Objects, I had a strong sense for what I felt was the "right way" to run a European software company. Basically, play by the same rules as everyone else -- dual list on the NASDAQ and report financials under GAAP.
A recent story in Portfolio, entitled Fast Troubles for Microsoft, suggests this was perhaps not the case. Excerpt:
Even as it agreed in January to plunk down $1.23 billion to buy a promising but problematic search company in Norway, Microsoft knew that the company had some accounting matters to address.
Now, it appears, the acquired company, Fast Search & Transfer, may have some criminal matters to work out: Suspicions about the Norwegian search-engine company's revenue reporting are now in the hands of the Oslo police.
Norway's financial supervisory authority, Kredittilsynet, said its review of Fast Search's previously disclosed accounting problems not only appeared to have violated accounting standards, they may have broken the law too.
[...]
In its haste to grab Fast Search, however, Microsoft looked past the company's problems: They include, but aren't limited to, accounting irregularities that began to appear as Microsoft began to look over its books.
In the second quarter of 2007, Fast Search reported an operating loss of $38 million on revenue of only $35 million—a full $20 million below forecasts. The loss widened in the following quarter, leading the Norwegian stock exchange to delist Fast Search on December 12.
That same day, Fast Search said it would review its accounting for all of 2006 and 2007. The latest unaudited results show revenue growth of 7 percent for last year, which is far below Goldman's forecast.
Still, Microsoft pursued the acquisition, completing the deal on April 28.
Kredittilsynet, the supervisory agency, was equally determined. It referred Fast Search to investigators at Økokrim, the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime.
Økokrim last week concurred that the nature of the irregularities and the amount by which Fast Search apparently inflated its accounts were serious matters warranting prosecution. But the agency said it was too busy to open a criminal investigation.
Rather than let the matter rest, the market supervisor turned it over to the Oslo police for investigation. Aftenposten, a Norwegian newspaper, characterized Kredittilsynet's decision to involve the police as an unprecedented step in that country.
