Jennifer was the second person to learn about Simon's plan to acquire Bell Atlantic. The first, of course, was Janet.
After wrapping up his San Francisco trip, Simon planned to head to New York and formally discuss the feasibility of running two acquisition tracks at once, the MCA bid and the Bell Atlantic bid, with the senior leadership of both Westeros Company and Cersei Capital.
This San Francisco trip, though, was mainly for Ygritte and America Online.
Ygritte's issue was simple. The company was out of money again.
After Carol Bartz and Jeff Bezos began jointly running Ygritte, their recent results had left Simon quite satisfied.
Ygritte kept strengthening its patent moat in World Wide Web technologies through sustained R and D investment. Its software sales business quickly gained traction thanks to Carol Bartz's years of industry experience. Its portal site user count continued to climb, and it had smoothly launched its internet advertising business, and so on and so forth.
All of that meant heavy cash burn.
Simon understood exactly what Ygritte's hundreds of core web technology patents represented. And the full suite of applications Ygritte had already developed around web technology, a graphical browser, server software, web design tools, and other products, all had solid commercial prospects.
So this time, Simon planned to inject another fifty million dollars to keep web technology development and promotion moving.
When Ygritte was founded, its total share capital was ten million shares. Westeros Company invested ten million dollars for nine million shares, while Tim Berners Lee held the remaining one million. After the last twenty million dollar capital injection, Ygritte's total shares doubled. Tim Berners Lee's share count stayed the same at one million, but his ownership percentage fell to five percent.
This time, Simon didn't bring in a professional valuation team. He personally set Ygritte's valuation at fifty million. For a startup tech company that hadn't yet formed stable revenue, that figure was a bit high, but Simon believed Ygritte was worth it.
On the other hand, Simon still had no desire to deliberately squeeze Tim Berners Lee's stake. He valued the Web's creator highly, so just like last time, he offered Lee a plan to maintain his percentage through a loan.
But Tim Berners Lee once again declined. He was very satisfied with his stake and with the work he was doing now.
Simon did plan to carve out some Ygritte equity at the right time as incentives for executives and employees, but he wasn't going to hand shares to anyone for free.
So Ygritte's total shares doubled again, reaching forty million. Westeros Company's ownership increased to ninety seven point five percent, while Tim Berners Lee's fell to two point five percent, his share count still unchanged at one million.
As for America Online, the main issue was still Steve Case's negotiation over that exclusive agreement.
Even though Simon planned to move early and acquire a regional telecom company, America Online's near term growth tempo wouldn't be adjusted. As long as they could sign an exclusive agreement with Bell Atlantic, NYNEX, and Bell Pacific, America Online's development over the next few years would become dramatically easier.
Of course, the biggest problem remained money.
America Online's shareholders weren't like Tim Berners Lee. After the deal was finalized, they planned to use loans and other methods to raise the first year buyout payment on their own.
The three telecom companies still insisted the exclusive fee be paid based on total subscribers, but the final amount still had a lot of room to negotiate. In the end it would probably match what Jennifer predicted over breakfast, dropping to about one dollar per household. At that point, a little over twenty million dollars would be well within America Online's credit capacity.
This time, Simon also took a closer look at the operating performance of America Online's one hundred internet cafes.
In their first month, thanks to strong early promotion and public curiosity toward this brand new kind of leisure venue, those one hundred cafes generated total revenue of 2.06 million dollars, averaging more than twenty thousand per cafe.
Ignoring upfront investment, and after rent, wages, and power costs, America Online's cafe chain produced 530,000 dollars in gross profit in just that one month.
If that performance held, America Online would likely recover its initial investment in about two years.
Because those one hundred cafes served as proof of concept, people had already begun contacting America Online about opening franchised locations.
And over the previous month, the number of users who used the internet access discount coupons from the cafes to get online reached more than 2,600, about five percent of America Online's new subscribers in the same period. That was the part Simon valued most.
Simon's original purpose in suggesting internet cafes was to get people familiar with, and connected to, the internet.
Just in the first month, they brought in more than 2,600 new users. That conversion rate far exceeded the America Online team's initial expectations. It was easy to imagine that as the IE browser continued improving and as Ygritte's portal offered richer content services, more and more people would choose to get connected from home.
Since that purpose had already been achieved, and would continue, America Online no longer planned to keep this "Internet Bar" subsidiary in house.
Two years to break even was still a bit long.
America Online headquarters in Palo Alto.
After a meeting to review negotiation progress on the exclusive agreements with the three telecom operators, Simon and Steve Case stayed behind in the conference room. Steve Case brought up Internet Bar.
"We've already contacted several private equity funds on Wall Street. Three of them are interested in Internet Bar. For America Online's fifty percent stake, the highest offer is ten million. I think we can push it to fifteen million. If we cash out early, we'll cover most of the first year fee for the exclusive deal with Bell Atlantic and the other two."
Since they never intended to make money from the one hundred cafes in the first place, Simon didn't object to cashing out.
But selling in a hurry after only one month was obviously leaving value on the table.
Whether it was ten million or fifteen million, those numbers were only for the fifty percent stake in the existing one hundred cafes. If they patiently ran it for a year or two and grew Internet Bar into a larger chain, the company's value would rise sharply.
After Steve Case finished, Simon asked, "What about IBM?"
"IBM plans to keep its stake," Steve Case said. "But they don't object to us selling ours. After we exit, IBM's team can take over running Internet Bar."
A giant like IBM, with a recent market cap over fifty billion, wouldn't care much about a startup like Internet Bar. More precisely, the investor last time was IBM's venture capital arm. Every corporate behemoth had a department like that.
Compared to America Online, which urgently needed cash, IBM's investment team understood Internet Bar still had upside, so they didn't need to rush to cash out.
Simon understood why Steve Case was impatient. America Online's team worried Simon would keep injecting money and diluting other shareholders. After thinking for a moment, he didn't insist. "If you think it's appropriate, then sell. But make sure Internet Bar keeps cooperating with America Online on user promotion."
Seeing Simon agree, Steve Case nodded. "I understand. That was part of my conditions with those private equity funds from the start. By the way, Simon, if Cersei Capital is interested in Internet Bar, thirteen million is enough."
America Online had only invested 3.5 million in the cafe project. Even selling at thirteen million would mean nearly a 300% return.
But Simon shook his head. He'd already discussed this with Janet.
Cersei Capital was an important Wall Street layout for Simon. Unless necessary, he didn't want Cersei Capital tangled with too many businesses under Westeros Company. That made conflicts of interest and public suspicion far more likely, and there was no need to chase a petty two million in extra profit.
"Cersei Capital won't be involved," Simon said. Then he continued, "Let's talk about something else. You know I've made a very large sum overseas these past two years."
Hearing Simon refuse, Steve Case quietly let out a breath. Two million wasn't much to Simon, but America Online had to count every dollar right now.
Now that Simon changed topics, Steve Case nodded and waited.
Simon went on. "The Kuwait War has pushed U.S. stocks down recently. This is a good window to expand. My current thinking is that I want to acquire a regional telecom company, and the initial target is one of the three America Online is negotiating with."
Steve Case's face showed surprise. A moment later he steadied himself and smiled. "Simon, I thought you'd use that money to buy a major Hollywood studio. Daenerys Entertainment doesn't have the same deep roots as the Big Seven."
Simon knew that was probably what many people thought, and he smiled too. "A lot of things are still uncertain. For now I'm just giving you a heads up. Tomorrow I'm going to New York, and I'll formally discuss it with James and the others. Also, even if we acquire a regional telecom company, the process will probably take a year. So everything on America Online's side stays the same. What you need to do is get that exclusive agreement finalized as much as possible before the end of September. And keep it confidential."
Steve Case agreed solemnly, but inside he was already guessing which company Simon had in mind.
Even though Simon lived mostly on the West Coast, Case felt it probably wouldn't be Bell Pacific.
Bell Pacific sounded bigger than Bell Atlantic and NYNEX, but in reality it was the smallest of the three, arguably the smallest among the seven Baby Bells. Its territory was limited to California and Nevada.
NYNEX was an acronym for New York and New England. Several northeastern states like Connecticut, Rhode Island, and Massachusetts were small, and for historical reasons were collectively called New England.
NYNEX's territory covered those two areas, and it split the Boston to Washington metro corridor with Bell Atlantic.
Because Bell Atlantic's states like Pennsylvania and Virginia were large in both land and population, Bell Atlantic was slightly bigger than NYNEX.
In Steve Case's view, given Simon's appetite, the target could only be NYNEX or Bell Atlantic, and more likely the latter.
Still, since Simon didn't reveal more, Steve Case didn't pry. Any one of those three potential targets was a behemoth to America Online. A multi billion dollar acquisition wasn't something he could influence.
Of course, if Simon's target actually succeeded, Steve Case could already imagine how much it would help America Online. He'd been exhausting himself trying to sign an exclusive agreement with the three companies precisely to secure entry into their telecom networks.
The massive buyout payment wasn't just for some vague exclusivity on paper.
If the plan went through and the three companies opened their network access to America Online, America Online wouldn't need to spend enormous money and time laying its own lines. It would only need to build trunk cabling and servers, connect into the three carriers' networks, then install modems in the homes of telephone users covered by those networks, making it far easier to get households online.
After finishing up at America Online, Simon also made a trip to Cisco headquarters.
Westeros Company had already completed its additional share purchases in Cisco, bringing its stake to an absolute controlling 57.5%.
Because U.S. stocks had continued sliding under the Kuwait War, Cisco's IPO preparations slowed. Simon didn't have Cisco stop entirely. No one understood better than he did how long this downturn would likely last.
In a blink, it was Thursday.
At dawn, Simon got up and, as usual, went for a morning run in the Woodside hills, planning to fly to New York after breakfast. Because of Simon's schedule, Janet was still staying there, planning to spend the weekend together on the East Coast.
He moved through the cool mountain road. Near a three way intersection, a middle aged man in athletic wear came up alongside him from another path.
Simon glanced at him and greeted him with a smile. "Morning, Larry."
From the amusement in Simon's eyes, Larry Ellison knew the young man had already seen through him showing up here on purpose. Fortunately, Larry's skin was thick. His scruffy, bearded face showed no embarrassment at all. Instead, he grinned widely and replied warmly, "Morning, Simon."
The bodyguards behind Simon saw the two men knew each other, so they slowed and fell back a bit.
They jogged side by side for a few dozen meters before Larry Ellison spoke first. "Simon, Westeros Company has increased its stake in Oracle to fifteen percent. Are you going to keep buying?"
Simon said, "Oracle's stock is so cheap right now. If I can buy more, of course I'm going to. I'm very bullish on the company."
Larry Ellison couldn't tell whether Simon was mocking him.
Oracle's stock really had been extremely low these past few months. Compared to its peak price of $28 within the last twelve months, it had slid to around $8, a seventy percent drop. Its market cap had fallen from a high of $3.6 billion to about $1 billion now, a miserable sight.
With the price sinking, many shareholders had been dumping Oracle shares recently.
Yet in a filing Westeros Company had submitted to the SEC, its stake in Oracle had risen against the trend to fifteen percent, adding four percent in just one month.
Larry Ellison's own stake in Oracle was only thirty three percent, and Oracle didn't have a dual class structure that would let him maintain ironclad control. If Simon kept buying like this, Larry's control over Oracle would become dangerously shaky.