{"id":98,"date":"2014-08-16T20:33:04","date_gmt":"2014-08-16T20:33:04","guid":{"rendered":"https:\/\/courses.candelalearning.com\/orgbehavior1xmaster\/?post_type=chapter&p=98"},"modified":"2019-04-15T19:48:28","modified_gmt":"2019-04-15T19:48:28","slug":"10-1-negotiation-failure-the-case-of-the-pointcast","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-orgbehavior\/chapter\/10-1-negotiation-failure-the-case-of-the-pointcast\/","title":{"raw":"10.1 Negotiation Failure: The Case of the PointCast","rendered":"10.1 Negotiation Failure: The Case of the PointCast"},"content":{"raw":"In 1997, a company called PointCast Network Inc. was the hottest start-up in Silicon Valley. Its founder and CEO, Christopher Hassett, was \u201cthe most famous guy on the Internet,\u201d said Hassett\u2019s former attorney, Allen Morgan. Hassett was named CNET\u2019s newsmaker of the year\u2014an honor previously bestowed on giants such as Bill Gates of Microsoft and Larry Ellison of Oracle. The \u201cpush technology\u201d that PointCast pioneered was making headlines as well as being featured on the cover of Wired<\/em> as \u201cThe Radical Future of the Media beyond the Web.\u201d\r\n
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\r\n\r\nAll the attention around PointCast motivated one of the world\u2019s largest communications companies\u2014Rupert Murdoch\u2019s News Corporation\u2014to make them an offer of $450 million. Negotiations were intense and lasted weeks. With media speculation that PointCast\u2014a company with almost no revenue\u2014deserved to be valued at $750 million, some people say Hassett started believing the hype and, with the support of his board, asked for more money. \u201cPeople involved in the company thought they\u2019d be the next Netscape. They hung out for more,\u201d Murdoch said. News Corporation instead lowered its initial offer to $400 million but added incentive clauses that brought the offer close to the original $450 million if PointCast met its financial projections.\r\n\r\nPointCast also rejected that offer, and News Corporation walked away from the bargaining table. The timing couldn\u2019t have been worse for PointCast, as \u201cpush\u201d technology became old news thanks to the maturing of alternatives such as Yahoo! By the time PointCast decided to go public in 1998, the company was valued at half of News Corporation\u2019s last offer. Worse, the process of filing an initial public offering (IPO) requires the company to disclose all potential dangers to investors. PointCast\u2019s disclosures\u2014such as news that customers had left because of poor performance\u2014scared off so many investors that PointCast ultimately withdrew its IPO. By that time Hassett had been forced out by the board, but the company never fully recovered. In the end, PointCast was acquired in 1999 by Idealab for $7 million. In this case, stalled negotiations cost the firm a steep price of $443 million.\r\n\r\nReferring to the missed opportunity, an industry expert said, \u201cIt may go down as one of the biggest mistakes in Internet history.\u201d According to Steve Lippin, writing in the Wall Street Journal<\/em>, \u201cMerger professionals point to these euphemistically called \u2018social issues\u2019\u2014ego and corporate pride, that is\u2014as among the most difficult aspects of negotiating multibillion-dollar mergers these days. Although financial issues can be vexing too, these social issues can be deal-breakers.\u201d\r\n\r\nIn a similar and more recent situation in 2008, Yahoo! CEO Jerry Yang was ousted by the board of directors following failed deals with Microsoft and Google. Yang\u2019s behavior during negotiations indicated that he wasn\u2019t interested in bargaining as much as playing \u201chard to get.\u201d He \u201ckept saying we should get more money, we should get more money, and [he was] not realizing how precarious their position was,\u201d says high-tech analyst Rob Enderle. In other words, even deals that look great financially can fall apart if participants fail to pay attention to organizational behavior issues such as perception, groupthink, and power and influence.\r\n\r\n<\/div>\r\n<\/div>\r\n
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Discussion Questions<\/h3>\r\n
    \r\n \t
  1. Considering the amount of buzz surrounding Hassett\u2019s new technology and the impact previous, similar advancements have made, was Hassett necessarily foolish for not taking a quick offer?<\/li>\r\n \t
  2. Is the PointCast situation a case of pride clouding someone\u2019s judgment or more accurately a representation of the rapidly changing nature of computer-related business? In other words, if Hassett\u2019s advancement had been in an industry that is not known for such rapid changes, would he have been considered foolish if he hadn\u2019t<\/em> held out for more money?<\/li>\r\n \t
  3. This case focuses on how foolish Hassett was for not accepting Rupert Murdoch\u2019s first or second offer. However, think of the buyout offer from the perspective of Rupert Murdoch. If the buyout had gone through, News Corporation would likely have lost hundreds of millions of dollars on the deal, and the company was effectively spared massive losses by the merger falling through. What could Murdoch have done differently to protect against such risky mergers in the future?<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/div>","rendered":"

    In 1997, a company called PointCast Network Inc. was the hottest start-up in Silicon Valley. Its founder and CEO, Christopher Hassett, was \u201cthe most famous guy on the Internet,\u201d said Hassett\u2019s former attorney, Allen Morgan. Hassett was named CNET\u2019s newsmaker of the year\u2014an honor previously bestowed on giants such as Bill Gates of Microsoft and Larry Ellison of Oracle. The \u201cpush technology\u201d that PointCast pioneered was making headlines as well as being featured on the cover of Wired<\/em> as \u201cThe Radical Future of the Media beyond the Web.\u201d<\/p>\n

    \n
    \n

    All the attention around PointCast motivated one of the world\u2019s largest communications companies\u2014Rupert Murdoch\u2019s News Corporation\u2014to make them an offer of $450 million. Negotiations were intense and lasted weeks. With media speculation that PointCast\u2014a company with almost no revenue\u2014deserved to be valued at $750 million, some people say Hassett started believing the hype and, with the support of his board, asked for more money. \u201cPeople involved in the company thought they\u2019d be the next Netscape. They hung out for more,\u201d Murdoch said. News Corporation instead lowered its initial offer to $400 million but added incentive clauses that brought the offer close to the original $450 million if PointCast met its financial projections.<\/p>\n

    PointCast also rejected that offer, and News Corporation walked away from the bargaining table. The timing couldn\u2019t have been worse for PointCast, as \u201cpush\u201d technology became old news thanks to the maturing of alternatives such as Yahoo! By the time PointCast decided to go public in 1998, the company was valued at half of News Corporation\u2019s last offer. Worse, the process of filing an initial public offering (IPO) requires the company to disclose all potential dangers to investors. PointCast\u2019s disclosures\u2014such as news that customers had left because of poor performance\u2014scared off so many investors that PointCast ultimately withdrew its IPO. By that time Hassett had been forced out by the board, but the company never fully recovered. In the end, PointCast was acquired in 1999 by Idealab for $7 million. In this case, stalled negotiations cost the firm a steep price of $443 million.<\/p>\n

    Referring to the missed opportunity, an industry expert said, \u201cIt may go down as one of the biggest mistakes in Internet history.\u201d According to Steve Lippin, writing in the Wall Street Journal<\/em>, \u201cMerger professionals point to these euphemistically called \u2018social issues\u2019\u2014ego and corporate pride, that is\u2014as among the most difficult aspects of negotiating multibillion-dollar mergers these days. Although financial issues can be vexing too, these social issues can be deal-breakers.\u201d<\/p>\n

    In a similar and more recent situation in 2008, Yahoo! CEO Jerry Yang was ousted by the board of directors following failed deals with Microsoft and Google. Yang\u2019s behavior during negotiations indicated that he wasn\u2019t interested in bargaining as much as playing \u201chard to get.\u201d He \u201ckept saying we should get more money, we should get more money, and [he was] not realizing how precarious their position was,\u201d says high-tech analyst Rob Enderle. In other words, even deals that look great financially can fall apart if participants fail to pay attention to organizational behavior issues such as perception, groupthink, and power and influence.<\/p>\n<\/div>\n<\/div>\n

    \n
    \n

    Discussion Questions<\/h3>\n
      \n
    1. Considering the amount of buzz surrounding Hassett\u2019s new technology and the impact previous, similar advancements have made, was Hassett necessarily foolish for not taking a quick offer?<\/li>\n
    2. Is the PointCast situation a case of pride clouding someone\u2019s judgment or more accurately a representation of the rapidly changing nature of computer-related business? In other words, if Hassett\u2019s advancement had been in an industry that is not known for such rapid changes, would he have been considered foolish if he hadn\u2019t<\/em> held out for more money?<\/li>\n
    3. This case focuses on how foolish Hassett was for not accepting Rupert Murdoch\u2019s first or second offer. However, think of the buyout offer from the perspective of Rupert Murdoch. If the buyout had gone through, News Corporation would likely have lost hundreds of millions of dollars on the deal, and the company was effectively spared massive losses by the merger falling through. What could Murdoch have done differently to protect against such risky mergers in the future?<\/li>\n<\/ol>\n<\/div>\n<\/div>\n\n\t\t\t
      \n\t\t\t

      Candela Citations<\/h3>\n\t\t\t\t\t
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      CC licensed content, Original<\/div>