QUEST’S DOYLE AND SMITH FOLLOW IPO WITH ACQUISITIONS
If a perfectly matched leadership team were a prerequisite to launching a flawless public offering, there might not have ever been a Quest Software Inc.
How would David Doyle, a shy computer programmer who took his first job because his mother told him to get out of the house, ever be considered a good pairing with the athletic Vince Smith, an outgoing ski fanatic known for challenging orthodoxy and taking risks?
The partnership appears to be a good one, though, as Quest sets forth from its spectacular IPO last year on an aggressive acquisition spree, continuing its rise in Orange County’s technology sector. The company took a big step in that plan last week by completing the previously announced purchase of Pleasanton-based Foglight Software for more than $99 million in stock.
The company went public in August in one of the area’s biggest IPOs, giving it a market value of more than $3.6 billion and making instant multimillionaires of Doyle and Smith. This year, one of the company’s top objectives is buying companies and technologies to beef up its database-management software.
Quest makes software designed to increase the reliability and accessibility of databases, a function that has grown increasingly important in the world of e-commerce. Though Doyle didn’t have the segment in mind when he founded the company in 1987, he’s ready to cash in on its popularity. Customers include Internet service provider EarthLink Network, computer services firm NCR and jelly giant Smuckers.
Quest’s product line bolsters popular database and enterprise resource management packages such as SAP, Oracle and PeopleSoft by helping system administrators optimize and manage such things as storage space and traffic load. The 415-employee firm also designs tools that give users remote access to those databases from any computer connected to the Internet. As businesses become more information-centered, they’ll likely demand that extra edge from their information systems.
While many companies offer database-support software, Quest executives boast that their products are faster, more thorough and easier to use.
Doyle, the 38-year-old founder and president, who’s now in charge of acquisitions, admits he’s had to adjust to the faster, more aggressive pace of the newly public company. He can credit most of that to Smith, a hotshot entrepreneur and investor who a few years ago found himself bored with life on the Colorado slopes and ready to get back into the corporate arena. Smith had made $4 million from his own startup, Patrol Software, which he sold to another company before taking on the role of investor.
After investing in Quest in 1995, Smith immediately shook up the company’s timid business plan, a change so unsettling that Quest’s other founder, Doran Machin, cashed out for $35 million,and Doyle considered doing the same. But Doyle stayed, and two years later, the younger Smith took the reins as chief executive.
Doyle admits he and Smith are an unlikely duo. But so far, he says, the partnership works.
“I’m the technical guy, and I am conservative; he’s the sales guy and not so conservative,” Doyle says.
Doyle, who’s lived in Orange County all his life, owns 19% of the company, making him worth more than $596 million. But with his wide glasses, open-collar shirt and khaki slacks, there’s little to distinguish him from the army of programmers he employs.
Well, maybe a little. Doyle has used his money to amass the 10,000-or-so wine bottles in his personal collection, which he made room for by converting a bedroom, bathroom and closet into a wine cellar. And then there’s the BMW 750, painted a custom “canyon red.”
Differing Styles
Smith, meanwhile, downplays the contrasts between them, attributing most of their differences to style rather than substance.
“We don’t see the world that differently,” he says.
Smith, who goes by “Vinnie” among his friends and fellow executives, is a bit thinner and taller than Doyle, with a sales background that shows up in his aggressive business approach, evident even in the midst of a flu.
He has plenty of reasons not to call in sick. With 48% of the company,valued at about $1.18 billion,Smith has a big stake in its performance.
Still, he says, the newfound wealth barely fazes him. According to fellow executives, he jokes that the only thing he has to show for it is a few pairs of new socks. And instead of splurging on a fancy celebration dinner on the eve of the company’s IPO, he and Doyle split a pizza at Doyle’s Newport Coast home.
“(Wealth) introduces a lot of new issues, and not all of them are positive,” Smith says. “Once you get to a certain point, your net worth is not all that important.”
He’s reluctant to talk about his wife and two children, and those who know Smith call him a devoted father who’s extremely protective of their privacy. In addition to taking care of the children at work on occasion, he’s canceled business meetings to watch them perform at school.
Juli Ackerman, the company’s director of business development, is one of the few people he trusts babysitting them. She joined the company in 1997 after being heavily recruited by Smith from a small technology company in Texas.
“They’re guys I would trust my life to,” she says. “Trust is a big part of this company.”
She works closely with Doyle on corporate acquisitions, and says she’s surprised how quickly the company’s successful IPO has raised its profile among potential sellers. Several companies have since approached the company, asking to be purchased.
Aggressive Moves Planned
And while she won’t tip her hand about how many purchases the company has planned this year, she did say Quest is prepared to move aggressively, regardless of how well its stock does this year. (Quest shares, caught in an industry-wide stock slump, have fallen from their high of 120 in December to the low 80s last week.)
“If it goes up, we buy more; if it goes down, we give out more options,” she says, paraphrasing a recent statement from Smith. “We have a plan for both.”
Doyle was similarly reticent, saying only that he’s looking for appropriately valued companies that can strengthen Quest’s product line.
“You won’t be seeing us go buy some Internet hot shot,” he says, admitting that many of his technology peers have become inflated with speculative stock purchases. “For each guy who’s a market leader, there’s some other guy who’s in the shadows with as good or better technology. We’re looking for anything that compliments our technology.”
Eventually, “when the timing’s right,” Quest will branch out into new directions, he says.
With other software companies flocking to the e-commerce segment, particularly hungry giants hurt by a sagging enterprise resource planning segment, that could come sooner than he even he expects.
He says he’ll be ready.
“We don’t have a B.S. company; I’m not in marketing,” he says. “We have a great opportunity, and I want to make it happen. Everybody says they can be the best software company in the industry, but we have reasons to believe we can.” n
