Thursday, March 08, 2001

Timing is everything:

And if you haven't learned that from the past couple of years, you haven't learned anything.

Here's a terrific example: Palm Computing and Handspring

Palm had great timing, and terrible timing. The key to Jeff Hawkins and Donna Dubinsky's success at Palm wasn't just "the big idea." People sometimes forget that Palm's first product, the Zeos, was a serious flop, along with Go, Eo, the Newton, and every other PDA of that vintage. What set them apart was that they learned from the failure, and had husbanded their resources enough to bring out the Palm Pilot. They had great timing.

Unfortunately for Jeff and Donna, a lack of cash forced them to sell their company to U.S. Robotics for a paltry amount of stock. Bad timing. U.S. Robotics, in turn, managed to sell itself to 3Com when its shares were near an all-time high. Good timing for USR, bad timing for 3Com. 3Com's shares never really recovered, as accounting irregularities sank 3Com's stock, making Jeff and Donna's stock worth even less. However, the USR acquisition turned out to be good timing for 3Com, since the Palm Pilot became a huge hit, driving almost all of 3Com's growth and profits.

By then, however, Jeff and Donna had left 3Com to start Handspring. Great timing. Jeff and Donna raised money from Kleiner Perkins and Sequoia, and launched Handspring in time for the 1999 Christmas season. Unfortunately, production and customer service problems dogged their launch, a result of the compressed time frame. Bad timing.

Handspring recovered however, since this time Jeff and Donna had left plenty of safety margin. By June, Handspring was ready to IPO. Good timing. Handspring went public before the general tech stock slide, and shot up to $100 a share. Even though the stock slid from that height, Donna was able to sell 100,000 shares (a mere .22% of her stake!) for $4 million. Good timing. Jeff hasn't sold yet (bad timing), but don't feel too bad for him and his 40 million shares, which are still worth close to $1 billion.

The moral of the story is that even an entrepreneurial home run, like Palm/Handspring, is apt to have been affected by timing, both good and bad. You need to put yourself in a position to benefit from good timing, and leave yourself sufficient safety marging so that bad timing doesn't wreck your plans.

No comments: