Surviving the Telecom Bubble, Investor Shifts to the Mundane

WALL STREET WEST

There was a time not long ago when David Glickman figured he was worth many, many millions at least on paper.

That was at the height of the technology bubble, when Glickman was chief executive of TelePacific Communications, a competitive local exchange carrier once worth $500 million, by his estimation.

These days, Glickman, 37, has come down to earth.

He’s still chairman of TelePacific, but is also founder and managing director of Glickman Capital, a downtown leveraged buyout firm.

There, he put together a plan to buy a handful of cash-flow positive, if mundane, companies.

Starting with a list of 200 privately held firms in Los Angeles, Glickman and his small staff pared the list to just five. He ended up buying two, and a third is in negotiations.

“Unlike my investment in telecommunications, I look for companies that have very strong cash flow and are stable,” he said. “I like to quote a saying from Will Rogers: ‘I’m more interested in the return of my capital than the return on my capital.'”

The two private companies appear to have little in common.

Catalina Water Co., based in Long Beach, is the largest provider of sterilized ocean saltwater to municipal aquariums and fish importers. San Bernardino-based Performace Wheel makes wheels under various brand names.

Glickman, who got his start at American Express Corp., became chief executive of Justice Technology Corp., an international long-distance company that grew to $100 million in sales in seven years before being sold in 1999.

He then moved on and raised nearly $300 million from GE Capital and Investcorp, among others, to form TelePacific, which still serves California and Nevada as a competitor to SBC Corp. and Verizon Communications.

Kate Berry

Reaches Out

Sumitomo Corp., the giant Japanese trading company, has retained Fidelys LLC, a newly formed investment bank and consulting arm of Larta, the technology think tank based in downtown Los Angeles.

Terms were not disclosed.

Under the deal signed in May with Sumitomo’s Summit Specialty Group unit, Fidelys will help develop nanotechnology companies and license new technologies aimed at manipulating individual atoms and molecules, said Rocky Springstead, co-founder and managing director.

Fidelys was designed to generate funding for Larta, which has seen a drop-off in state funding over the past several years.

The investment banking unit raised an undisclosed amount of capital in October from six investors including Springstead and Larta. It has three employees and a group of “contractors” what Larta calls its bench from academia, government and business. Larta claims it has arranged or facilitated financing in excess of $1.5 billion for companies it has helped, said Rohit Shukla, Larta’s chief executive.

Springstead said Fidelys’ fees are more flexible than those of traditional investment banks because the firm will bring together a team of experts, from accountants to lawyers to technology professionals, with specific expertise in whatever area a company needs help.

“What we’ve done is leverage the platform that Larta has put together and added it with a capital markets, turnaround and operational discipline,” he said.

Kate Berry

Hungry Chipmaker

Broadcom Corp. still is hungry for acquisitions and could be in for its biggest meal yet. The Irvine-based chipmaker is considering buying a company “equal in size or slightly smaller” than itself, interim Chief Executive Alan E. “Lanny” Ross said.

Ross declined to cite potential candidates but said Broadcom has an initial list of possible buys.

“We are at the very preliminary stage of formulating our goals and a process for exploration of opportunities,” Ross said.

Broadcom’s board is set to meet in late August or early September to discuss a buy, along with other strategy matters, Ross said.

Broadcom grew to its present size through acquisitions, but the pace has slowed. In 1999 and 2000, the company made 20 acquisitions. In 2001, it made four.

Broadcom’s most recent buy, of Santa Clara-based Gadzoox Networks Inc. in March, was the first for the chipmaker in a year.

In the past, the company has made acquisitions to expand into new markets. This time around, Broadcom is looking to make a larger buy as part of a defensive strategy.

With about $1 billion in yearly sales, Broadcom has drawn attention and fire from heavyweights such as Intel Corp. and Texas Instruments Inc. The company’s growth has led to lawsuits from rivals who are looking to fend off competitive challenges, Ross said.

The biggest legal salvo has come from Intel, which sued Broadcom for patent infringement. The lawsuit still is working its way through court.

Broadcom is now looking at companies that hold patents in a market where it wants to grow, Ross said. He said those include its switching, cable, DSL and mobile communications business units.

Legal fees from Broadcom’s court battles have been costly.

“That’s money that could have been spent on R & D;,” Ross said. The company laid off 500 workers in November.

A chip designer for wireless phones could be at the top of Broadcom’s shopping list, according to Kalpesh Kapadia, an analyst with C.E. Unterberg Towbin.

Orange County Business Journal