1988 Started with the stock marked still depressed, but off the bottoms it had hit in the year before.
For Excelan, the year started with an internal scandal. Our CEO was going through a rough patch in his marriage and was in the process of divorcing his wife. He got involved with one of the female directors of sales. The company was riven with rumors, but he privately assured me that there was nothing to those rumors. I received some pretty explicit photos in the mail, to this day I don’t know who sent them.
The board felt that firing the CEO would hit the stock hard, which was still below 8. They decided to sell the company to NET, a hot T1 line switching company in Foster City. I was not in favor of it, but the board was adamant. A deal was done which basically sold the company with no premium, essentially a fire sale. NET foolishly did not lock up all the insiders and big share holders before the deal was signed and announced. After they discovered their mistake they wanted insiders and big shareholders, in this case Ed Shea who owned more than 10%, to sign papers supporting the deal. I asked for a big premium because the term of the deals were changing. Taking cue from me Ed Shea let it be known that he will not support the deal. That killed the deal as 90% support was needed for it to be a tax free transaction.
After this fiasco, I emerged as the CEO. I brought Ed on board quickly. It so transpired that NET was caught cooking the books a few months after the merger broke down. Company went under and Excelan shareholders were saved by a whisker.
I went through an emotional wringer because the board was punishing the company and the shareholders to protect the CEO. With Ed Shea on board, power shifted on board and I essentially had a free hand then on.
Incidentally, Ed Shea was one of the brothers who owned Shea Homes, the largest private home builders in California. Ed and I became good friends. Later after I left Novell, Ed co-invested with me almost 50 times!
