Stock Talk TMF Interview With BroadVision
Chairman & CEO Pehong Chen

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With Mike Trigg (TMF Tonto) and John Del Vecchio (TMF Fuz)
December 21, 2000

Redwood City, Califorina-based BroadVision (Nasdaq: BVSN) helps companies set up Web-based portals for their enterprise software, allowing them to trade information not only online but using wireless devices. The Motley Fool's Mike Trigg and John Del Vecchio interviewed BroadVision Chairman and CEO Pehong Chen over the telephone on Dec. 8. The following is an edited excerpt from that conversation.

TMF: Can you explain to investors learning about BroadVision for the first time what your company does?

Chen: We provide personalized portals and Internet applications to help companies manage their extended enterprise relationships. In other words, a company has lots of participants -- employees, suppliers, customers, and partners -- much more than its own employee base. How do we get them to become self-sustained?

We want to put all the services, interactions, and transactions online so people can help themselves. And to do that, you need a lot of business logic, data modeling, and process automation. That's very different from the traditional enterprise resource planning (ERP) system or customer relationship management (CRM) system -- although we do integrate with those two systems -- but this is a very different set of capabilities, and that's really what BroadVision does.

TMF: Some time ago, I remember reading an analyst report which stated BroadVision had lost ground to Art Technology (Nasdaq: ARTG) because it lacked a J2EE [Java] offering. I was under the impression that you didn't compete with them as much as had been reported, given that you sell a packaged set of applications and Art Technology sells the components. Is that true?

Chen: Yes, those are two different orientations. Art Technology is very focused on hyping this notion of J2EE. So, let's dissect that whole issue and try to understand exactly what that means.

"People who are telling you to build yourself, it's kind of like selling you sheet metal and screwdrivers and saying 'Hey, build your own car.' "
If we poll the market -- I'm talking about investors, not customers -- who can really stand up and explain what J2EE is? I would venture to say that it's probably a very small percentage. In other words, this is an extremely complex issue and people just cling to one buzzword. J2EE itself is something that's very important, however. It's a specification or standard that consists of 13 different things that Sun Microsystems (Nasdaq: SUNW) has defined. The goal is to kind of unseat Microsoft (Nasdaq: MSFT) in creating sort of a New World Order, if you will, certainly on the Unix front, which is fine.

We think that's a very noble goal, but it's very important for software components to be able to talk to each other. On the other hand, it has lots of different pieces in there. There are 13, as I said. So when you say J2EE, it really could mean different things to different people. All I'm saying is that this is about an objective, but the world today is definitely not written this way, so it's a forward-looking thing.

Every time I see an investor, they don't talk about our real value, which is to create this whole suite of applications, personalized portals, and so on. They just kind of basically spend a whole hour talking about this J2EE thing. So it's just a lot of education that we have to do, which is fine. All I'm trying to say is that the important thing about BroadVision, in terms of getting our message out, is that we are trying to provide more value than just J2EE.

The issue, as you said, is are you planning on building this stuff yourself, or would you be better off just to buy from somebody who's already got seven years of experience and over a thousand customers? And hopefully able to extract the essentials out, so that you don't have to do it yourself? In other words, people who are telling you to build yourself, it's kind of like selling you sheet metal and screwdrivers and saying "Hey, build your own car yourself."

We're saying, "No, no, no, you don't want to do that." There are a lot of issues about safety, performance, and comfort. We know how to do that for you. You can tweak it. You can say "I want the car to look like this, look like that, steering wheel on the left, steering wheel on the right," and that's fine. And you can do that today. You can do that in the J2EE way, but tomorrow if its XYZ, well, what we want to say is we will guarantee we will support XYZ.

TMF: I don't want to try and beat a dead horse, but some have voiced concern over your architecture transition saying it takes multiple releases of a new product to gain traction with new and existing customers. However, I know Version 6 will be available to early adopters early next year and with free upgrades. Therefore, what kind of response have you received from customers and integrators?

Chen: This is not like our first release in the whole Java process. As I said, we've been partnering with the Java king, Sun Microsystems, for over a year. For the early adopters, we're going to handpick maybe 12 customers in early January, end of the year. This is not the first time that we've done this, and furthermore, we also guarantee, since it's the same code base, whatever you are doing today on our 5.5 is going to run totally compatible without any change whatsoever when you receive the 6.0. You just flip the switch and we guarantee that it would work immediately, and we put that in writing.

TMF: Is that going to have any effect on the sales cycle?

Chen: There are two reasons why we haven't experienced any hold up. One, anybody who buys BroadVision really wants to get live, get the job done, time to market, get-out-of-the-box functionality rather than kind of splitting things from scratch. They don't really buy this just because they wanted to build something and therefore J2EE, to them, is an insurance policy, but not the thing that they intend to go and do and start from just a drawing board.

"I always say that mind share equals market share. The more you get out of [customers], the less they will have available to your competitors."
The number two reason is the guarantee of upward compatibility, so that whatever you do today, by March you don't have to change anything. Whatever you've done will continue to run in that same path, so there would be no concerns that they'd have to wait until something [else] comes out.

TMF: Recently you announced a partnership with BEA Systems (Nasdaq: BEAS) and you've announced plenty of others. I'm wondering how these partnerships, particularly the BEA relationship, enhance the value proposition for your customer and what's the impact on the end user?

Chen: BEA is very critical because, as I mentioned earlier, J2EE standards consist of 13 different specifications. BroadVision has a lot of experience in building these things we call the interaction manager, which is how objects get rendered into a page or to a cell phone, whatever it is. That requires us to really build it in a way that is highly optimized. So out of the 13, BroadVision is basically only interested in doing one piece of that. The other 12 pieces, we've been looking at whom to partner with

So we've looked at essentially everyone... over the last several months, and finally selected BEA as our technical and strategic partner for several reasons. One, they have the biggest footprint in the industry. Two, they really understand our business very well and can partner with us technically very well. And three, I know the executives there. In doing so, that would make our product entirely J2EE compliant and that would basically erase or remove the issue of any objection or any competitive issue with our competitors.

TMF: And how do these partnerships create value for your shareholders? How do you see that improving stock-price performance?

Chen: It give us sort of an "In the World" partnership. I always say that mind share equals market share. The more you get out of [customers], the less they will have available to your competitors, so as a result, it is really important for us to work really hard with them and that we can really get them to think about us, work with us, and so on.

As a result, our shareholders will benefit from our better growth and bigger market share, or for that matter, penetration into new markets, like manufacturing, in which we as a company have not been very present in the past. As a result of this, we will gain new business. In this case, we will also create new products and, all in all, it will reflect in our top-line growth and bottom-line growth -- and certainly, then, be reflected in our stock price.

TMF: Could you provide an example of a company that uses your e-business platform and discuss the benefits as well as the return on investment that is expected from implementing these types of applications that you sell?

Chen: Sure, there are lots of them, of course. A Silicon Valley technology company came to me just this week, their CEO, and the example there is very common. They now have a couple of thousand applications in their whole company and to maintain all these things has become extremely expensive.

What they are trying to do is boil that down into four primary enterprise applications. The first is ERP, which obviously BroadVision doesn't do. The next is for their CRM cost center and another for their human resources. Finally, as a unifying force, BroadVision has been selected to be this personalized portal, so that everyone touched in the extended enterprise can do a lot of things in the self-service spaces, whether it's about service, transaction, interaction, and so on and so forth.

They actually figure that by doing this obvious simplification... they can reduce their IT budget from $800 million to $400 million.