IP: More re Microsoft, Hughes out of California university

[Dave Farber <farber () cis upenn edu>]

Date: Sat, 18 Apr 1998 09:37:56 -0400
From: "Jonathan S. Shapiro" <jsshapiro () earthlink net>
To: farber () cis upenn edu


[for IP]


The Mercury News yesterday carried a somewhat more informative article
on the CSU situation, which included comments from both sides on why
Microsoft backed out of the deal.


CSU has been looking for a way to fund massive campus infrastructure
upgrades that the Cal State system simply cannot afford at this time.
They were hoping to do it without having CSU go into debt to do it.
The necessary infrastructure upgrades will require $300 million --
undoubtedly more by the time the work is actually done.


CSU was trying to build an investment partnership with several
companies to fund this effort.  It is unclear (to me) how they
expected the partnership to pay off for the investors.  Actually, it
is unclear to me how such a partnership *could* be made to pay off in
the absence of giving the investors favorable status or somehow
privileged access to CSU resources.


A key issue, raised in the article by both CSU and Microsoft, is that
Microsoft was approaching the sale solely as a customer/supplier
relationship rather than as an investment. Microsoft spokespeople said
that MS concluded they were not willing to invest the required money
in any single customer.  CSU, for its part, commented that the
unwillingness of MS to approach this as a partnership had been an
ongoing problem, and that it clearly wasn't going to work if CSU was
just another customer.


An ongoing concern in the effort has been figuring out how to get the
investors paid out without giving favorable status to their products.
The University staff and faculty are strongly resisting any outcome
that would bias product purchases on favor of the investors.


Fujitsu, by the way, is still in the deal.


The key to this, I think, is figuring out how the investors might see
some return on their investment.




Jonathan Shapiro