EightBlack.

I had a client call me the other day and asked if I had shares in BlueFreeway. After reading one of the recent posts about the carnage over at BlueFreeway, he was concerned that I was some sort of disgruntled investor. Which I’m not. And I really don’t have it in for them.

But this whole saga simply perplexes me.

To put this into some sort of basic perspective, if you had purchased $1000 worth of BlueFreeway stock exactly 1 year ago, that would be worth the princely sum of $42 as of close of play today.

Now I didn’t do that well at economics at school, but even I know that’s bad.

Last Friday, the stock resumed trading after a months hiatus. When it had stopped trading 4 weeks ago, the share price was at 24 cents. Finished close of business on Friday the 13th at 9.3 cents. Natalie broke the story here.

On Monday the 16th June, over 16 million shares traded hands. Finshed the day at 5 cents. The market cap of the entire company is worth no more than $7 million dollars.

The guys over at BlueFreeway must be chewing their fingernails to the quick. Or maybe their bankers are, given that the facility that they have with the NAB has hit its limit of $34.6 million.

What I don’t get is the motive behind the IPMG Group’s decision to effectively bail the company out. First they rode in on their white horse and scooped up 19.9% of the company. I dare say they paid more than 5 cents a share.

They then agree to inject an immediate $6.5 million cash injection by way of a convertible note. According to the press release last Friday, the note will be convertible into BLU shares at 12 cents a share and will attract an interest rate of 400 bps (basis points) above the BBSY whilst being serviced otherwise 600 basis points while being capitalised.

In plain english, the BBSY refers to the Bank Bill Swap Bid Rate and 400 basis points refers to 4% above that (or 6%  when it refers to 600 basis points).

Obviously the IPMG guys are no fools. They would have poured over their numbers. And they can well afford to bail the entire thing out, pay out all the bank debt and appease unhappy creditors if the thing goes completely pear shaped.

Michael Hannan and the rest of the Hannan Clan benefited a couple of years back when their entire magazine and newspaper portfolio was sold to in 2 separate deals for the $350 million mark. Assuming he still has some of it left after his divorce around the same time, he still should be fine with whatever he chooses to do with BlueFreeways bankers and finance folks.

Why IPMG has such a hard on for BlueFreeway I’m not sure. I’d sure love to ask them.

When you crawl all over Google in search of information around IPMG, you are quickly impressed with the rich history of the company, the domination of one industry vertical (ie printing), the continued investment into the latest technology and equipment and the sheer focus in sticking to what it knows best. Printing.

Not the web. Not as a corporate rescue merchant. And not as a company who has a reputation for taking on projects that need a very strong stomach and a boatload of cash to revive.

By his own admission, his foray into publishing and the magazine business ended up with the family company selling all those assets. For a tidy sum as stated above. Hannan cited “a lack of growth opportunities and none on the horizon” as the key drivers behind the sale.

If IPMG are about making money and about passing the torch from one generation to the next, then I fail to see what sort of inheritance the major stakeholding in BLU will yield. It could take years for this thing to recover - if it ever does.

And what sort of growth opportunities can the group exploit if they are have a boat anchor around their necks?

My humble knowledge of the digital landscape is that morale is key, the right environment, cool projects, plenty of smart bastards in the same office and hopefully, light at the end of the tunnel. And great clients.

Hard to attract if you’ve been lumbered with something akin to a STD. The stigma of BlueFreeway will tarnish each and every member company and their staff. Not their fault. But a fact they have to live with.

IPMG are in for a lot more than the $6.5 million they have initially promised. Their findings, during the trading suspension, revealed that the company needs around $9 million immediately, will post a $6.8 million dollar loss (lets call it $7M) this financial year (instead of $200K), and Hannan has personally guaranteed to underwrite the 3 for 2 rights issue (to raise another $12M), if the market doesn’t come through with the money.

He’ll be reaching for his cheque-book sooner rather than later.

Now which existing investor in BLU, who has all their faculties together, would agree to a 3 for 2 rights issue at 10 cents, when yesterdays stock price ended up at 5 cents.

They also have this small detail of the $35 million they owe the NAB. At present, most senior Aussie bank executives have no sense of humour and because of the train wrecks with Opes Prime, the nervousness around the viability of even industry titans such as Babcock & Brown, plus a litany of others, the banks credit departments are calling the shots.

Apparently, you now meet with the banks and they come armed with a toilet brush and 3 people (who look like they just killed their parents). Its not pleasant.

Or something like that.

I had a meeting with Stuart Mitchell a little while back. While he didn’t give much away about their perspective on whatever deal they had in mind (probably because his old man wasn’t in the room), it’s public knowledge that Mitchells were sniffing around BLU.

But even Harolds appetite for large meals wasn’t enough. Mitchells probably bailed as soon as they lifted the hood on what was promised to be a Ferrari and soon discovered a Kia Picanto (or Salsa, or Avocado) or whatever the hell they call those silly little Korean cars.

Last week I was supposed to have lunch with Lori Silver from Clear Light Digital. She never showed. And I never heard from her - despite my emails and voicemail. Odd I thought, given that she called me in the first place. Now, being stood up by women is not a new thing for me. But I thought this was weird.

All I know is that if I had sold 27% of my company (which Lori et al did) for $924,000, it would piss me off no end to keep remitting one third of my earnings back to a mother ship which was about as sea worthy as the Titanic.

If the original sales pitch to all these independents which BLU went and acquired, was that the corporate entity (ie Head Office) would be there to provide leverage, capital and expertise, then it’s clearly failed. Many of the individual companies now within the portfolio would (or could) be worth more than the market cap of the whole shooting match.

Time will tell whether or not Hannan and his team can ressurrect the ailing digital group. And his absolute passion for remaining well out of the public eye and his notion that you can employ people to keep you out of the media is about to be blown to smithereens.

Because he’s taken the reigns, he’s also taken onboard the very public role of company punching bag. Shareholders, bankers, clients, staff and the media all want a piece of him.

And no matter who he employs to control the environment, the web has already proven that no matter what length you go to, the conversation exists. With you. Or without. It doesn’t care.

Tomorrow I’m in Sydney. And I’m having an off the record chat with someone who knows the other side of the story to BlueFreeway. It’s a pity the person won’t go on the record. The story deserves to be told.

Interesting times ahead.

*Stock Quote courtesy Business Spectator, Image Stuart Mitchell courtesy Mitchell website

We’ve just taken on our second round of private equity finance. Interesting space this whole VC market. And not without its challenges.

The words that keep ringing in my ears about the whole “building a software company” crusade caper are the words of Eric Schmidt last year at one of the Web 2.0 gigs in San Francisco when he said “If you want to win on the web, you need to have the ability to scale”.

Given that TaguchiMail is now around 12-months old - I wouldn’t say that funding was the hardest part. Not easy. But not insurmountable.

Recruitment of talent. Now that’s the toughest part in this climate. Especially for start-ups.

So if you hear of any good programmers or business analysts, I’d be grateful. There are currently 2 openings in our Melbourne office.

Details here.

It still staggers me that people don’t get this.

Take this example. I received this today from my insurance brokers. If I offend them with this, then too bad. They need to be told. They’re cheap arse bastards.

I’ve been a client of theirs for 8+ years. I think they know who I am - that is, they know my name and obviously have my email address.

So this is what they sent. This is a pure extract.

“We  hope you enjoy reading our second newsletter for 2008, where we have covered the following interesting topics –
* The importance of insurance for women - only 20% of women are insured!
* Cash Offsetting – how it can work for you.
* Self Managed Super Funds – new rules.
* Wills and Superannuation – who inherits your nest egg?
Please click  http://www.lakesideconsultants.com.au/news/no16.pdf <blocked::http://www.lakesideconsultants.com.au/news/no16.pdf>   to download this quarter’s newsletter from our website.
For any queries or financial assistance please don’t hesitate to call our office on 0510 0788.
Kind regards,
GARY KENNEDY”

First mistake. It was all text.

Second, it was sent from someone called Ros Walsh. Never heard of the woman. But it was signed Gary Kennedy. Again, don’t know the man.

More importantly, the fools at Lakeside then wanted me to visit their website and download their freakin’ newsletter. As if. Why the hell should I?

To add insult to injury, they then admit that email marketing is way too hard because this is only the 2nd newsletter sent out this year. The first one I never received. It probably asked you to drive to their office and pick up a copy of it from reception. Or something like that.

They even made a mistake with their own phone number. Idiots.

My advice is simple. If you haven’t got the skills to do this - pay someone to do it for you. If you only email every 3 months or so and have a customer facing business with hundreds of clients (like Lakeside does) - then don’t do it all. Sending email once every 3 months is SPAM. What possible relationship could you have with such little frequency?

Get the basics right. Like spelling, grammar, accuracy of information presented. Make the content relevant to the recipient. And above all, make it easy for your clients to consume your content. Making someone go to your website to download the newsletter is rubbish. People won’t do it. Lakeside probably dont run analytics on their site so its no use probably asking them what their bounce rate is from this email. (they don’t - I just checked).

And to make matters worse, if I was a real narky prick, I could ping them hard for not adhering to the SPAM Act. In their actual newsletter (on the last page), the MD rambles on how Lakeside is in total compliance with the SPAM Act of 2004. Except for the fact that they aren’t.

You see, the email they sent (the text based one), needed to have the functional unsubscribe link in it (not the actual PDF).

There’s no excuse for lousy marketing. Companies like Lakeside are going to get blown into oblivion if they don’t embrace change. Companies like this are already turning the industry upside-down.

Hooray is all I say.

Oh crap.

I received this email from Perry Marshall tonite. Now the damn content of it is going to keep me awake for days. See what you think.

Simon,

Have you heard the rage, the shrieking and the cries of terror?
Have you signed the petition yet?
Be afraid.  Be very afraid.

Yup, Yahoo and AOL plan to start charging ? cent to 1 cent per email, to guarantee your messages get through the SPAM filters. The political activists are having a panic attack.

Gotta tell you, I had fun reading about this.  Hundreds of columnists emoting about the Very End Of Free Speech Itself. Apparently, today “free speech” not only means speaking your mind without going to jail, it also means having big corporations distribute your thoughts to millions of people for you, for free.

Friends and neighbors, if your “free speech” is riding on some big company’s generosity, you don’t have free speech.

You have sponsored content.

If you’re not willing to make any sacrifices to get your message out, why should anyone else do it for you?  This is a case study in mushy thinking from people who have no idea how expensive Free Speech really is.

I’m actually surprised Pay Per Email didn’t already kick in a year or two ago.  Basic economic fact: Email, being something that’s inordinately valuable - instantaneous access to someone’s inner sanctum - is something that shouldn’t be free.  The very fact that it is violates nature.

It is fundamentally impossible for email to remain totally free forever.  Something has to give.

Now if MoveOn.org wants to send 3 million emails a week, can they afford to pay $7,500 to $30,000 for the privilege?

That depends.  Certainly non-profits with huge email lists will be hit the hardest by this.  But before the Internet they would have had to pay half a buck to send a letter.   In my humble opinion, a quarter of a cent is quite a bit more attractive than half a buck.

Plus there’s a big upside to this that few people seem to have thought of.

If sending an email suddenly cost a fraction of a cent, most of the garbage in your customers’ email boxes would disappear overnight. Your ability to cut through the clutter would multiply dramatically.

Not only would your emails get through in the first place, they would have less competition.  Your customers would have more time to read them. It would double, triple or quadruple the response to your emails.

Would you be willing to pay for that?

You should.

Coming up: What’s really going to happen with pay per email and how it will effect your business…until then…

Perry Marshall

It’s time for the management at the embattled digital group to come clean.

Just 2 days ago, after just 3 months, Danny Herceg - the man who was recruited to primarily re-build the company’s finances due to his high profile legal and banking network, quit.

Along with him went co-founder, Tony Charara. Although Charara is apparently still heavily involved with the finances of the group (more later).

According to the March 12, 2008 press release by BlueFreeway,

“Danny is a senior corporate and commercial lawyer with particular specialisation in capital raisings, mergers and acquisitions, privatisations, restructurings and venture capital. In addition to Danny’s capital raising experience, he also advises on various corporate law issues including prospectus issues, corporate governance, and employee share and option plans, as well as joint ventures and non-equity funding”.

The BlueFreeway shares are still in a protracted trading halt. It’s been a month now. This is not really their fault. If their taking advantage of a legal loophole within the charter of the ASX, then so be it.

But its clearly a fault that rests with the ASX. I just dont think its appropriate corporate regulation by the ASX to allow a company an unreasonable time frame (like a month in this case) to ascertain their financial viability. How hard can it be?

I’d be keen to interview both guys - but clearly they may have better things to do nor will they probably be allowed to talk to anyone. Or want to.

Interestingly, Tony Charara cites his time at BlueFreeway as something of an achievement with his new venture here. Not sure if I agree with the logic.

The problem with not communicating to the shareholder base is that in the absence of any concrete direction and advice, people will make and form their own opinions. And because there is a lot of pissed off investors and staff, people want to vent their anger. And rightly so.

I’m noticing this anger within the comments I’ve received over the past few weeks. And by the slew of email that has hit my gmail account.

Consider this “re-counting” of events that were relayed to me.

BlueFreeway, in its quest for world domination, went out and acquired 3 separate companies in Thailand. This was late last year, October, to be exact. Quite what for, I’m not totally sure. The companies were Media Synergies, Planetutech and Reflexible. The press release is here. The 3 acquisitions, according to the BlueFreeway announcement, cost the company A$1.5million (for all 3) and would add $1 million in revenue to the group.

Bill Emden, the Group Managing Director for BlueFreeway Asia stated that the acquisitions would allow BlueFreeway to service the rapidly growing Thailand digital media industry with world class talent.

However, if you are to believe the comments by numerous staff in Thailand, nothing could be further from the truth. For one, according to insiders, the much hyped “Blu” portal was nothing but smoke and mirrors.

Second, the access to technology and financial resources to grow and expand the “rapidly growing Thailand digital market” never eventuated.

When I tried to find out more about senior execs like Bill Emden, Google came back with this. I decided to look no further. Apparently, Emden is no longer with BlueFreeway, and nor are any of the other “head office” staff in Asia. I am told that the number one listing under Google for Bill Emden and the Bill Emden who ran BlueFreeway in Asia are one and the same person. See here for proof.

Whenever businesses are put under extreme pressure, like BlueFreeway is now, rash decisions are made.

Take for example, the alleged recent requests by head office to owners of several BlueFreeway companies to buy back their businesses. The only trouble is though is that many of the businesses that BF acquired, they acquired 100%, lock, stock and barrel. If you take the 3 entities in Bangkok for example, as stated above, they paid $1.5 million for all 3. This amount wouldn’t have made life changing differences to anyone.

All it did most probably was shore up some debt and return some “sweat” capital back to the respective owners.

According to some, Sydney is now pressuring these offshore entities to buy back their companies for the original amount paid. All I can ask is “why”. And what makes the head office at BlueFreeway think that they can do this? It gets even worse. Apparently threats and intimidation are occuring, resulting in even more bad blood between employees, shareholders and owners.

I actually feel sorry for those people who only sold a percentage of their company to the fast talking sales guys who pedalled the original BlueFreeway dream.

At least the people who sold 100% made the call at the time they did their deal. They made their bed. Now they’re lying in it. They can either quit and start again - or ride the storm out and wait for events to unfold. Either way, they’ll be better from the experience. They might not think that now, but they will be.

But the people who agreed to sell 51% or 27% or whatever the number, are stuck with this noose around their neck. More like a boat anchor.

Whatever happens, BlueFreeway need to make the call. And that call should be to quit now. Let the respective businesses (which have some world class talent within them) get on with their lives.

I think their stock will survive all of 5 minutes on the ASX, should they resume trading. There’s probably an unlimited number of “sell” orders queued and waiting to go, no matter what the price.

I do not for one minute, believe this is a salvageable ship. The damage has been done.

Too many people have left, including the majority of the founders, staff morale is in the toilet, the stock is suspended, past owners who are now employees are disgruntled and distracted and the vapourware behind their original proposition is now exposed.

The conclusion I have (and its obviously a personal one) is this. People get appointed to the board - and the smart ones promptly quit (after they see what’s really there). There appears to be no one in charge. Demanding that the 100% owned companies buy back their businesses is sheer desparation and the deafening silence to the market (which is now in its 4th week) can’t be good.

And I have no idea what Michael Hannan and his company, IPMG intend to salvage from all of this - but it can’t be much.

The saga will no doubt continue. Which is a shame. It needs to end. And quickly.

I was sitting in a Sydney hotel yesterday, quietly minding my own business when I couldn’t help but over hear the conversations of the 2 Americans sitting beside me.

Turns out that the 2 guys were here fitting out the new Apple store - which is due to open any minute.

My colleague and I were fascinated with the story that unfolded.

Apple handles the fit out personally of each and every store. This means that they use their own firm to supply the architectural woodwork. This is a proud, 100 year-old company called Fetzer, based out of Salt Lake City. They make all the interior fitout, pack it into containers and ship it to where-ever they are building a new store.

More importantly, a contractor from Fetzer goes with the container and supervises the whole installation. This guy, from Ohio, has been in Sydney for 5 weeks. Shacked up at the Hilton no less.

His buddy, who handles all the electrical contracting, including cabling, telephony etc does the same thing. This poor bastard spent 48 weeks out of 52 last year on the road - simply fitting out Apple stores worldwide.

Its this attention to detail that makes Apple Apple. No one else would go to this trouble. Well, precious few.

I asked the guy from Fetzer whether or not the Aussies were good tradies. He actually said they were. He might have been polite. (apart from the fact that because he’s in Sydney, some half wit contractor tried to convince him that Rugby League or Union or whatever the hell they call that bum sniffing crap they play was actually a sport).

He then got warmed up and starting talking about how crazy the Italians were to work with, how precise and exact the Japanese were and how average the Brits were (which surprised me, given that you can walk into a pub in outer London that’s been standing in the same spot for 800 years). Or something like that.

When you get the chance, if you haven’t done so already, walk into an Apple store. Notice the quality of the fixtures and fittings (ie Fetzer). See if you can see exposed wires at all. Anywhere. Look at the quality of the flooring. The image above by the way is of Apples New York store, which recently opened.

If Apple have done their job right (and they have), you actually wont notice much at all. Because the whole show has been built around showing off the Apple product. Nothing else.

Ok, ok, I’m biased. But you’ve got to give credit where credit is due. And there’s a reason why Apple absolutely blitz their competition when it comes to revenue per square foot.

The Sydney store, when it opens, will be a cracker. Mark my words.

I know this is an over used saying - but if there’s one event you attend this year, this should be it. If you have anything to do with the web, if you want to try and put your finger on “the pulse”, if you want the chance to interract with some of the brightest people driving the web, then there is no better event.

I attended this last year. Coverage was picked up by John Battelle and The Times Online. That’s irrelevant. What is though is that I was the only Aussie there. I think there was a Kiwi - but they don’t count.

I know it’s a tough gig to get into. Last year (and according to the event organisers) - anywhere between 7,000 to 10,000 applied for a ticket to attend. Less than 1,000 actually were granted access. And the entry fee isn’t cheap.

But these aren’t barriers that any online agency, or company making its living online can’t jump over.

Now I know that there is plenty of digital talent in Australia, that we can mix it with the best but the last time I looked, guys like Steve Ballmer, Bill Gates, Jerry, Larry, Sergey, Eric, and Mark Zuckerberg all lived on the West Coast of the USA.

And after having spent the last 12-months trekking back and forth to the states, I will tell you that this is where the the web is being driven from. While the event organisers would no doubt love to come down under and run an event, it’s not going to happen anytime soon.

Do yourself a favour. Seriously consider going. You won’t regret it.

Don’t let me be the only one standing there marvelling at how the world’s biggest economy can seriously think that Budweiser is a beer. I beg you.

I know that Bill Gates reckons he’s going to give away 90% plus of his wealth before he dies, but he may end up running out of moolah sooner rather than later if this takes off.

My initial gut response to this is that I just don’t get it. I don’t think that the relatively small “cash back rewards” will make the difference.

John Battelle is going to provide a lot more detail this weekend - given that he’s just visited with the MicroHoo folks.

Lets wait and see what he reckons. Good coverage of the proposal here. And a different opinion here.

Just as a side note, I saw Fake Steve at Web 2.0 recently. He’s mad. But funny as all shit.

Something really smells now.

News today via the ASX website is that the beleagured digital conglomerate has sought additional time (on top of the original extension) to try and work out just what is under the hood, so to speak.

You can bet your bottom dollar that there’s consultants in there from one of the accounting firms, who specialise in insolvency.

Via their ASX statement:

“Further to Bluefreeways request for voluntary suspension on May 7th, the company is seeking an extension to the voluntary suspension of its securities”

(Translation - the insolvency experts and forensic accountants are only halfway through their audit and all is not looking well. The words “trainwreck” and “carnage” have often been used these past 2 weeks and the remaining finance team are swearing louder than Gordon Ramsay)

Their ASX statement continues to mention how the current investigations are reviewing their accounts to June 30 as well as looking for further capitalisation options and that once all is said and done, we should be able to give you something definitive in the next 2-3 weeks.

Or something like that.

If you were a cynic (or a shareholder), you wouldn’t be impressed. In fact, each and every shareholder is completely hamstrung and unable to do anything until quite possibly its too late.

I really feel sorry for all those local companies who did a 50/50 deal for cash and stock when the fast talking Bluefreeway guys came along. There’s not one who wouldn’t be regretting their decision to sell.

Because if the core group goes pear shaped when they do finally make an announcement to the market, each and every company won’t be able to do anything. Potential buyers of the carcass (or carcasses) will be negotiating with someone from Ferrier Hodgson rather than the founders of the individual brands.

I’ve never heard of a company requesting an extension to a trading halt who then re-emerges completely unscathed.

Something is definitely up.

And I think the management of Bluefreeway owe it to their shareholders to be straight-up and tell them whats going on. In back and white. Not shades of Blu.

After all, you don’t need to be a rocket scientist to work it out. The audit and subsequent investigation can’t possibly take 3 full weeks to complete.

I hope I am wrong. I hope that whatever the announcement in yet another 2 weeks will be positive.

But I doubt it. I’m going to do some digging. I’ll keep you posted with what I find out (that’s if anyone is prepared to talk with me).

Let’s wait and see.

This story hit the wires Monday US time.

I actually don’t think anyone deserves this. While I am not the biggest fan of Ballmer, my opinion changed significantly of the man after I saw him speak at last year’s Web 2.0 Summit.

People who see this might argue that this sort of treatment comes with the territory of running the largest software company on the planet.

And anyone who has followed Ballmer long enough knows that he has a short fuse and throws the odd chair now and then. But no one would ever question his loyalty and commitment to USS Microsoft.

You can be sure that if this happened in the US, the assailant would have been charged with assault.

But in Europe (Budapest to be exact), the officials didn’t know what the hell to do with the guy. He sort of just leaves on his own accord (the fact that he ran out of eggs probably had something to do with it).

Ballmer recovered somewhat. To his credit.

But you can be sure that when he next speaks, there might be 2 guys with no necks and large bulges in their jackets, wearing designer sunglasses. As there should be.

I would have beaten the crap out of the guy. But that’s just me. The fact that I’ve won every fight I’ve ever been in by 500 yards helps no end.