Be-all: The story of the OS
In announcing Thursday that it will sell itself to Palm for $11 million, operating system developer Be wrote the final chapter in its saga of being almost in the right place at the right time.
Founded in 1990, Menlo Park, Calif.-based Be often received rave reviews for its technology. The BeOS could multitask, or run multiple programs at once, well before mainstream operating systems could. Demonstrations of the BeOS running multimedia programs drew applause at investor conferences.
Unfortunately for the company, technological elegance never translated into sales. Although it developed a small legion of devoted fans, Be never gained widespread, or even visible, acceptance with consumers or hardware makers. Right now, a Be OS is offered on Sony's eVilla Web-surfing appliance, but that's about it.
The lack of acceptance, though, wasn't for lack of trying. At various times, the company tried to sell its own computers containing the BeOS, sold the BeOS as an operating system for Macintosh computers, offered the OS for Intel-based PCs, and tried to sell the technology for set-top boxes and Internet appliances. At various times, Be offered its OS free for download to consumers and free to PC makers.
"Toward the end, they even tried to get into the home (MP3) jukebox market," noted Bryan Ma, an analyst at IDC. "They went into the information appliance market thinking it was going to be huge. It wasn't."
One thing that Be never did was become profitable. Before its initial public offering in 1999, Be had accumulated debt totaling $54.6 million. In 1998, revenue came to $1.2 million, but net losses reached $16.9 million. In 1999, revenue more than doubled to $2.7 million, but losses grew to $24.5 million. In 2000, Be reported $480,000 in revenue and $22.3 million in losses. In the first quarter of 2001, revenue came to $100,000.
In April, the company cut 27 jobs, mostly in sales and marketing, stating that the size of its work force had to reflect the downturn in the Internet appliance market and the need to conserve cash. Later that month, the company hired ING Barings as a strategic adviser and said it was exploring the possibility of selling the company.
The company currently has 57 workers. Palm plans to hire up to 50 of them, Palm spokeswoman Marlene Somsak said.
Be's failed potential can be attributed, in part, to one notorious management decision. The company was founded by flamboyant Frenchman Jean-Louis Gassee, a former Apple Computer executive known for a hard-charging negotiating style and a fondness for dressing like a motorcycle rider.
In 1996, Apple attempted to negotiate a purchase of Be, but discussions foundered over price, according to "Apple Confidential," a book by Owen Linzmayer. Gassee, who is Be's chairman and CEO, wanted $200 million. Apple CEO Gil Amelio called the figure "outrageous" and offered $125 million.
Apple eventually chose to purchase for $400 million a company, run and partly owned by Apple co-founder Steve Jobs, called Next.
Be then tried to go it alone. In 1998, Intel, August Capital and others invested millions of dollars in the company, which had begun to position its product as an alternative to Microsoft's Windows. A new version of Be's OS was capable of reading data contained in Windows applications. Hitachi announced it would include the OS in certain PCs.
Unfortunately, the company began to tout itself at a time when the Linux OS was gaining momentum as the non-Windows.
Be went public in July 1999. The stock opened at $6, rose to just above $8, and largely experienced doldrums thereafter.
"The technology is fine, but it's a little late," said Lou Mazzuchelli, an analyst with Gerard Klauer Mattison, at the time of the IPO. "If you are going to go with one of the off-the-beaten-path OSes, you will go with Linux."
Later in 1999, Be began to tout its OS for the emerging market of Internet appliances. It even landed a deal with Compaq Computer that ideally could have led to a Compaq-Be appliance. Later that year, Compaq did announce an Internet appliance, but it contained a Microsoft OS.
Since then, the Internet appliance category has collapsed. Ironically in light of the Palm deal, handheld computers remain one of the few markets that Be had not attempted to enter.
The acquisition of Be, though, may prove to be a good fit because Palm is trying to add multimedia support to its OS, Ma said. The BeOS already supports multimedia applications.
Be's shares have been trading below $1 since spring. On Thursday, the stock closed down 20 cents, or 44 percent, to 25 cents.