Liberate Technologies: Taking Strange to New Levels

The tortuous tale of Liberate Technologies should be made into a movie. It’s a bizarre, strangely compelling story that could benefit from the Hollywood treatment.

Thanks to the interest in Liberate, I’ve continued to look into the company and its surreal history.

If you go way back, you’ll discover that Liberate began life as an Oracle Corp. operation in the 1990s. It was originally established to build network computers, those thin-client terminals that Larry Ellison and Scott McNealy unsuccessfully foisted on the world when people weren’t spending so much of their time on the web.

Oracle later spun it off as a company that developed software for digital cable-television systems, including set-top boxes. When it had its initial public offering (IPO) back on July 27, 1999, Liberate raised $100 million. The Oracle Corp spin-off sold 6.25 million shares at $16 each. The price had been upped before the sale to $14 to $16 from a previous range of $11 to $13. As of early October of that year, its shares has risen more than 160 percent.

Investment shenanigans ensued, lawsuits followed.

That misadventure aside, Liberate established technology partnerships with Cisco, its strategic investor, as well as with Broadcom and RSA Security, among others. It had illustrious board members from well-known industry behemoths.

In 2000, David Nagel, CTO of AT&T and president of AT&T Labs, was one board member, as was Tom Nagel, an executive with Cox Communications. James Barksdale, formerly CEO at Netscape, also was on the board, along with Larry Ellison. The company’s CEO and president was Mitchell Kertzman, who had been the CEO of Oracle database competitor Sybase and is now with VC firm Hummer Winblad.

Using its stock as currency, Liberate announced early in 2000 that it had acquired MoreCom, a cable-technology firm, for a whopping $561 million. Unfortunately for MoreCom and its investors, Liberate’s share price fell steeply before the deal was consummated.

Cisco Systems pumped $100 million into Liberate Technologies. AOL also had a significant stake in the company, as did Sony Corp. All of the above wanted to ensure that Microsoft didn’t control the market for interactive television.

Late in 2000, the company launched the Liberate Corporate Venture Fund, a $50-million fund dedicated to accelerating the development of interactive television. The fund invested in Two Way TV, a developer of interactive gaming and enhanced-TV applications, and several other startup companies.

Liberate issued a steady stream of press releases about customer engagements, new technology partnerships, and extensions of existing strategic relationships.

As late as March, 2001, Liberate’s prospects remained reasonably bright. Its shares surged 12 percent after the company topped estimates for the seventh consecutive quarter. Market analysts uniformly sang the company’s praises, with many describing Liberate’s core business as “recession-resistant.”

Later that year, Forbes referred prominently to Liberate in an article about an interactive-television market “expected to be quite large .”

A year later, though, Liberate had entered a steep descent. By 2003, it was slashing jobs and restructuring. Its shares had been delisted from NASDAQ, and an SEC investigation had been launched into the company’s revenue-recognition and accounting practices. In addition, the company was dealing with a patent-infringement lawsuit filed by OpenTV, one of its competitors.

It was all downhill from there. In early 2005, Liberate agreed to sell the assets of its North American business for $82 million to Double C Technologies LLC, a joint venture between Comcast and Cox Communications. Later that same year, SeaChange International acquired Liberate’s non-North American assets for $23.5 million.

That was it. Or was it?

Reanimated, Liberate tried to get into an industry a little less abstract than software: trucking. In late September of 2006, Liberate reiterated its intention to acquire USA Truck:

“Liberate has made a serious written offer to acquire all of the outstanding shares of the stock of USA Truck at a price of $21 per share, all cash, subject to the terms and conditions set forth in the letter that we provided to USA Truck.”

Like the rest of the world, USA Truck was mystified as to why it would be subject to an acquisitive approach from a former information-technology company.

USA Truck, Inc. is responding to a press release issued after the close of the market yesterday by Liberate Technologies stating that it had offered $21 per share to acquire USA Truck. Based on publicly available information, Liberate Technologies was formerly a public company that provided software to the cable television industry, which sold all its assets in 2005.

USA Truck officially rejected Liberate’s takeover bid.

Then there was the fire at Liberate’s former office in downtown Palo Alto. From Palo Alto online:

According to a placard beside the door, Liberate Technologies and the San Jose Mercury News occupy the second floor of the building, where the fire broke out. However, the Mercury News no longer has a bureau in Palo Alto, and Liberate Technologies, once based in San Mateo, sold its assets in 2005.

The cause of the fire was arson, and an arrest was made. The suspect, who had a history of mental illness, was convicted.

As for Liberate, Philip Vachon, formerly a vice president of sales for the company, took over as its CEO and chairman. He relinquished those positions in the summer of 2007, at which time he was a board member at Interstate Bakeries Corporation (IBC), purveyor of Wonder Bread and Hostess snacks. Despite his resignation from the company, Vachon still held an equity interest in Liberate. Perhaps he still does.

According to Google Finance, Liberate still trades over-the-counter on the symbol “LBTE.” That’s inexplicable, but so is nearly everything else about this company.