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Six Who Got Out at the Top

Kevin Kalkhoven, former CEO, JDS Uniphase (May 2000)
By Bill Mann (TMF Otter)

 "JDS Uniphase(Nasdaq: JDSU) is in an outstanding position today from the perspective of our financial performance and strength, our market position, our products, and our strategy." With those words, Kevin Kalkhoven, the chief architect of fiber optics phenomenon, turned the reins of JDS Uniphase over to Jozef Strauss. Kalkhoven left in the midst of an acquisition orgy by JDS, in which it combined with Uniphase, and then acquired, among other less prominent companies, E-Tek, OCLI, and the biggest fish of all, SDL.

Kalkhoven left less than two months before the SDL deal closed, so he was certainly aware of its existence. His rationale for leaving was "burnout." However, Kalkhoven hasn't exactly dropped out for a recharge. Instead, he has stayed quite active in the fiber optic industry, working as a venture capitalist trying to turn his considerable wealth and expertise into another home run.

In the meantime, however, his baby has cratered like no other. JDS Uniphase made its July 2000 offer for SDL in stock -- which was at the time worth about $43 billion -- the largest merger in high technology in history. Now, post-merger, ALL of JDS Uniphase is valued at $13 billion. It is down by 84% from the time of Kalkhoven's departure, more than 94% from its all-time high.

I can't fault Kalkhoven too much here. It's not like he looked out and said, "Well, it's all downhill from here," and got out while the getting was good. At the time he left, JDS Uniphase was the top dog in an industry that was supposed to be changing the world. But all of a sudden the lights came on inside the craniums of telecommunications carriers everywhere: "Gee, we're losing money by the trainload!" And with that, they shut the door on the big capital investments that permeated the 1990s. Maybe Kalkhoven saw the writing on the wall. If so, I can't blame him for not letting us in on the secret. I doubt it, though -- why would Kalkhoven rush to get back into the same business, supporting fiber optic component startups, with his own money?

Besides, Kalkhoven did leave a significant percentage of his net worth in JDS Uniphase. Last year it was worth some $80 million. Now it's just $7 million. Might I suggest that he spend most of his time in Canada? I hear the dollar stretches pretty far there. Still, from a management perspective, Kalkhoven came off smelling as sweet as a rose, leading his company to the heights of success, and leaving just in time for things to get awfully difficult.

Bill Mann wonders why there are no restaurants specializing in Canadian food in his area. He doesn't own any of the stocks discussed in this article. Check out his holdings in his profile.

Eric Greenberg, founder, Viant and Scient (Nov. 2000)
By Todd Lebor (TMF TeeTime)

You don't have to be smart to get out at the top, you just have to look out for number one. The Angel Falls-like drops of the e-consultant stocks like Scient(Nasdaq: SCNT), Viant(NYSE: VIAN), and RazorFish(Nasdaq: RAZF) have been well documented and it's presumed by many that all those dot-com optionaires are left drying their tears with worthless options. Not all. Eric Greenberg, the founder of Scient, Viant, and 12 Entrepreneuring is reportedly sitting on over $200 million thanks to his well-timed sales of founders' shares.

According to eCompany Now, Greenberg is so good at looking out for numero uno that his mother still lives in a "faded condominium outside of Las Vegas" while her son decides whether to sleep in the east or west wing of his $20 million California mansion. It's not surprising to learn that Greenberg cashed in on his business dealings when you consider his Slick-Willy salesman personality.

Once a rising star at research and advisory firm Gartner Group, Greenberg used his workaholic, youthful, and ambitious personality to win over venture capital investors and convinced them to invest in his Web consultant businesses. The amazing thing is that, as eCompany Now's Ralph King reports, even after Greenberg was forced out of his first company, Viant, he got funding for Scient. Scient's goal was to best its predecessor in the e-consultant game and Greenberg was not shy about his vengeful wishes. He installed big name CEOs at his companies, over-promised to clients, took them public, and voila, instant millions.

By November 2000, after stepping down as Scient's chairman in February of the same year, he'd unloaded 4.7 million Scient shares for $225 million. Today, Scient is trading under a $1, making his remaining 8.6 million shares worth more than a few dollars -- while most of Scient's employees who where counting on options to supplement their income are searching for underwater breathing apparatus on eBay(Nasdaq: EBAY).

Clearly not an operator, but a builder of companies, perhaps Eric Greenberg deserves credit for recognizing his shortcomings. But a personal note to my future daughter: Stay away from guys like this.

Todd Lebor had a verbal job offer from Scient that was mysteriously put on hold, but he's gotten over it. He's never owned shares in any of the companies mentioned above. Todd's other holdings can be found online.

Arvind Relan, former Senior Vice President, Webvan (declared Chapter 11 bankruptcy this month)
By Rick Aristotle Munarriz (TMF Edible)

Online supermarket hopeful Webvan(Nasdaq: WBVN) set out to deliver groceries to your doorstep. It just couldn't deliver a sustainable business model to Wall Street beyond its initial public offering fireworks. With a billion-dollar infrastructure buildout plan in place, Webvan ran out of gas earlier this month when it filed for chapter 11 bankruptcy protection. However, former executive Arvind Peter Relan was one of the lucky ones. He found the Express Checkout Lane and was able to cash out of more than $7 million worth of stock before the company buckled under.

Leaving Oracle(Nasdaq: ORCL) to head up Webvan's technology arm in 1998, Relan didn't have to be a supermarket industry veteran to know that you can't have all of your eggs in one basket. He sold off the bulk of his stake piecemeal -- beginning shortly after Webvan's 1999 market debut -- pocketing some, donating some too. He was savvy enough to hop on the Webvan for the ride but get off before it made a beeline for the cliff. In a niche that makes you decide between paper or plastic, he chose paper. Good choice, Arvind.

Rick Aristotle Munarriz (TMF Edible) knows why hot dogs come in packs of ten while hot dog buns come in packs of eight. He's just not at liberty to say. Rick owns no shares of Webvan: View his stock holdings.

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Six Who Got Out at the Top represents the opinion of each Fool only and should in no way be taken as the opinion of either The Motley Fool, Inc. or any companies in question, or as representative of anyone or anything other than that specific Fool's thoughts. And you know how way out those can be, so do your homework, and review The Motley Fool'sdisclosure policy.


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