A week of unexpected deals in the technology sector has been capped by "a remarkable comeback", says the FT. Frank Quattrone, the financier responsible for some of the best launches (and worst turkeys) of the dotcom boom, is striding the stage once more. His boutique advisory firm, Qatalyst Partners, not only advised Motorola Mobility on its $12.5bn sale to Google, but also masterminded Hewlett-Packard's proposed $10.2bn takeover of the British software firm Autonomy. He's now being talked up again as the sector's "go to" adviser.
In his Wall Street prime in the 1980s and 1990s, Quattrone earned the moniker "the Prince of Silicon Valley". As head of technology banking, first at Morgan Stanley and then at Deutsche Bank and Credit Suisse, he floated more than 175 firms, including Amazon, Cisco and Netscape. He was "the highest-paid banker, in the hottest sector, and he knew it", says Stephen Wolfe in The Exeter Bulletin: stories of the all-night parties enjoyed by his teams abounded.
But he became best known for his "Friends of Frank" accounts, says The Economist. Set up for his best investment clients, these were stashed with "fresh initial public offering [IPO] shares". Once these had risen nicely (a 300% rise on the first day's trading wasn't uncommon), Quattrone's brokers would "flip" them to less fortunate buyers "booking the profits for Frank's friends".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Born in Philadelphia, Quattrone was a scholarship boy. At Stanford he "became obsessed with the Valley's nascent tech industry", says Businessweek. In 1981 he persuaded Morgan Stanley to get involved. Wall Street thought he was mad, recalls one investor. "It was like Bob Dylan going electric beyond weird." But Quattrone was a consummate risk-taker who timed the rising cycle perfectly. The ensuing tech boom "pumped his image to near-mythic proportions".
When the bubble burst in 2000, Quattrone fell as rapidly as his high-flying stocks. He was the obvious target for regulators seeking a human face for the crash. Still, they found it difficult to nail him. Eventually, Quattrone underwent two trials: not for his flipping activities, but on charges of obstructing justice. Federal prosecutors had latched onto an email instructing his team at Credit Suisse First Boston that it was "time to clean up those files". Found guilty in 2004, he had the conviction overturned in 2006; only narrowly escaping a third trial.
A decade on and Quattrone still remains a controversial figure, says Businessinsider. com. Yet, after the carnage of 2008, his activities seem "quaint". "He didn't rotate out of IPOs into collateralised debt obligations... and there's no federally funded liquidity stream propping up his business". Quattrone is just back in the game he knows best: advising technology entrepreneurs and making lots of money.
The powerbroker behind a generation of tech giants
As both a powerbroker and rainmaker, Frank Quattrone shaped the technology industry we know today, says Businessweek. Think of any pre-millennial household name "and Quattrone's fingerprints are on it". He led more initial public offerings between 1998 and 2000 than his leading rivals combined. After his brush with the law, Quattrone took the charity route to restoring his reputation, before forming Qatalyst in 2008. Google was his first client in a new generation of tech giants.
Some say Quattrone's return is another ominous sign of a second bubble. Just as his fall was said "to symbolise the eradication of the excesses of the past", as Henry Blodgett put it in New York magazine in 2004, so his return coincides with a new phase of excess, epitomised by the near-60% premium that Google paid for Motorola in the current arms-race to secure patents. Paying $12bn for 17,000 patents is "bonkers", even when dressed up as a defensive measure against lawsuits from aggressive rivals, says Margareta Pagano in The Independent on Sunday. "This patent war is getting so ridiculous that some analysts reckon it's turning into a subprime-type crisis, with patents being traded like mortgages." Another battle is brewing over Kodak's 1,100 patents. If those go on the block, "expect an expensive and vicious fight".
Is the sub-prime comparison justified? Some of the billion-dollar patent packages are almost as opaque, says Rolfe Winkler in The Wall Street Journal. The challenge for investors is gauging which companies "are buying bazookas and which are settling for pea-shooters". "There's a lot of noise going on right now, with pumpers screaming buy' and shorts yelling sell', so be careful with your capital, agrees the Balanced Bull on Seekingalpha.com. "There have already been many casualties in the great patent wars of 2011. Don't let your portfolio become one of them."
-
Going part-time could leave a £58,000 hole in your pension: how to plug the gapThere are many reasons for switching to part-time work, but some savers don’t consider the impact on their pension until it is too late
-
Three bargain investment trusts to add to your portfolioThese three investment trusts are bargains compared to their net asset value (NAV), but one fund analyst thinks the deep discounts are unwarranted.
