My conversation with S. Sprague at IDC.
Quite a few folks are requesting that I post something about my conversation with S. Sprague a few days ago at IDC. I would have posted something earlier, but I spent most of yesterday trying to catch a glimpse of Tiger Woods at the Nissan Open being held this week at the Riviera Country Club in LA.
I was fortunate enough to have the opportunity to speak at length with S. Sprague at IDC. Kevin and I met up with him at IDC in the late morning between about 10:30 AM to 12 PM. We both bombarded him with questions; he answered all of them without missing a beat. We then invited him to join us for lunch with a few other investors at a nearby restaurant; and he graciously accepted. The lunch lasted from about 12 PM to 2:30 PM.
In total I had about 4 hours with S. Sprague. Most of my questions took place before lunch. And I asked him about Versecure, Trusted Web Services, Defacto platforms and so on.....I had a good time! lol!
Yea, I know everyone wants to read about some possible insider stuff that may have slipped accidentally from his lips. But first you're going to have grin and bear my discussion of Steven Sprague the Man. Simply put, I have never met anyone quite like Steven Sprague. His inexhaustible, combustible energy and enthusiasm combined with his all encompassing grasp of the entire Trusted Computing Space, is something to see and experience. I can understand why George Gilder called him a genius. When he gets going, his combustible energy level gets so high, I half expected to see him begin to levitate (Actually, I think he did start levitating twice; Kevin had to pull him back down both times. )
His discursive mind though is hard to sometimes follow. Actually, to be truthful sometimes I felt I I was in the presence of Bugs Bunny/The Road Runner. He dashes forward in one direction, then makes a sudden turn-on-the dime U Turn, and without missing a beat sprints maniacally in the opposite direction towards some unknown, unseen destination. And then suddenly he'll come to a sccccreeeeeecccccching abrupt stop, no doubt to allow his fellow companions enough time to catch up with him. And when you finally do catch up to him you'll probably find yourself dropping down on one knee trying to catch your breath. But before your knee touches the ground, you can bet your bottom dollar that he'll once again activate those high octane turbo chargers of his in order to charge up some damn nearby vertical mountain that may have just caught his eye. In a cloud of dust he zooms up the mountain. And in a dazed state you begin to slowly trudge up the mountain in a vain effort to catch up with him. After struggling up a small portion of that mountain you suddenly see this figure rapidly descending toward you doing........ Cartwheels! Yep, there he is, S. Sprague whipping right pass you hollering and yelping in pure delight cartwheeling down to the base of the mountain.
And at about this point, he's only getting Warmed Up!!! I kid you not! OK, maybe I'm kidding a little bit. But you get my drift. The man is a veritable force of nature. He no doubt has a great team behind him, but the bottom line is this: HE IS WAVE. Period. End of story.
Unfortunately as great as he is, one needs a real talent for reading between the lines when S. Sprague talks. He will offer a torrent of information on whatever question you ask. But 10 minutes later you're likely to discover that what had appeared to be perfectly direct and informative reply, was actually pretty peripheral to the question asked. Therefore what you will read below is my own interpretive understanding of what he appeared to be revealing.
1. I had the strong sense that NSM Safekeeper Super I/O will be deployed in heavy numbers this year inside IBM ThinkPad laptops. I asked him about a recent article which had mentioned that IBM intended to make changes to their current security chip(ATMEL). I asked whether the NSM Safekeeper Super I/Os might be the replacement chip. He replied he could not and would not comment on that specific question. He then added that NSM has been a major distributor of Super I/O's to IBM for many years. He further stated that the advantage of embedding the TPM inside the Super I/O was that it would reduce the OEM cost of the TPM to under a dollar. I then asked him something stupid to the effect, "Well, how surprised would you be if IBM began using the NSM Super Safekeeper I/O in all future IBM ThinkPads? " Of course, he didn't fall for that loaded clumsy question, but he did repeat a couple of times that the greater the number of Safekeeper chips sold, the happier WAVE would be, as WAVE received revenue for each Safekeeper sold. I'd be darn surprise not to see Safekeeper on IBM ThinkPads fairly soon.
2. I asked him exactly how did WAVE manage to place itself in the very enviable position of providing TCG with the ONLY certified TCG Server? How did it happen that WAVE presently finds itself to be the ONLY player offering TCG Attestation and a TCG Interoperable Trust platform? In other words, how did WAVE manage to wiggle itself into the Cats Bird Seat right at the very moment when Trusted Computing is on the very brink of achieving significant traction? Well, he broke into his Bugs Bunny/The Road Runner routine, zigzagging all over the place. By which I mean, he really didn't want to answer that question. But at one point I believe he inadvertently revealed too much. And what he revealed I will keep to myself. But it led me to conclude that a conscious decision had been made by the leaders of TCG to allow WAVE to be essentially the only TCG utility services player for at least the first significant phase of TPM deployment. I also gained the impression that at a later stage a few of the first tier OEMs like HP, IBM would develop their own utility/management services. It appeared that WAVE's role later down the line would be that of providing Utility Services for the 2nd tier PC OEMs like E-Machine and Toshiba. In other words, all PC companies who didn't want to spend the time/money developing their own lifecycle Management tools would be using WAVE's.
3. He was very firm about TCG gaining significant traction towards the 2nd half of this YEAR. The number he bandied about most frequently was 15 million TPM units. He indicated that WAVE would do very nicely revenue wise even if they captured only half (7.5 million) if the TPM market. But he refused to speculate on how many of the 7 1/2 million he believed would activate the Embassy Services. My strong sense was that the projection of 15 million TPM units was actually quite conservative. (And I think Vactionhouse's recent terrific find which suggested something in the neighborhood of 100 million TPMs in the next year, might be closer to the mark).
4. Many application developers were very excited about the opportunity to create services for the TCG platform. But he confused me when he said in almost the same breath that the PC OEMs focus appeared to be almost exclusively fixated on file/folder encryption and recovery services. In other words, the PC OEMs were so ecstatic about the basic service being provided by WAVE that they almost appeared to be blind to the other mega potential applications being developed by Wave and others. That didn't make too much sense to me. Thinking about his later on I felt he was throwing out a bit of misinformation to avoid being asked what other potentially blockbuster Trusted Services were going to made available by WAVE and others.
5. I tried to pin him on the issue of Interoperability. I said it appeared that the present TCG focus was on limited Interoperability. I used his example of a few years back about the difference between a Typewriter and a PC. A typewriter is a closed system which provides limited Interoperability by only making available a limited number of trusted applications. In contrast, a TCG PC, with an open platform (and therefore having true Interoperability) enabled an unlimited universe of trusted applications for possible usage. Was it fair then to describe WAVE's present role in Trusted Computing as providing the Utility Services for the equivalent of a Trusted Typewriter? His answer was "Yes". But he added that with the emergence of Longhorn and NGSCB, the Platform would evolve toward openness. I tried to pin him down on exactly what WAVE's role be with the introduction of Longhorn and NGSCB, but I found him to be very vague. Essentially all he said that was that he had great confidence that WAVE would have some really great opportunities when Trusted Computing reached that stage of development. I asked if one of the opportunities would be recurring revenues. And he replied with a firm Yes.
6. I expressed my frustration about last week's IDF PR. I wanted to know why there was not ONE WORD about Attestation in that PR. I told him I was dumbfounded that such a Holy Grail breakthrough (and REAL Attestation IS a Holy Grail Breakthrough!) was nowhere to be found in any of WAVE's PRs. He replied that there good reasons why WAVE had chosen not to underscore many of their strengths at this point in time.
7. I believe he said at one point that none of the OEMs wanted anything to do with the Endorsement Key primarily due to liability concerns. He suggested that WAVE might end up exclusively responsible for that Key. "If we're in a 100 million TPMs, we'll be happy to assume the liability risks." Or something like that.
8. He repeatedly mentioned how so few OEMs "Really Got It". And so I asked him who among the OEMs Got it the Most? He replied Microsoft. But his chronic repeating of this "No One Really Get's It" appeared to me to be another example of probable misdirection on his part. I think what he was really trying to say is that "No One Really Get's it as Well as ME!" (And what I mean by misdirection is this: If Steven Sprague points North, one should probably immediately look NW or NE, anywhere but North! lol!)
9. The "Owning the Space"" or "Defacto" word was used more than once. But boy oh boy, trying to corner him on what EXACTLY what he meant by those words got me nowhere. At one point, I called a halt, and reminded him about his repeated pitch of Embassy becoming the Defacto neutral platform for all Trust Domains. He replied, "We expect to play a significant role. But you're talking about things that are many years away." Simply put, HE DIDN'T WANT TO TALK ABOUT THE UBIQUITY STUFF. PERIOD.
10. And yea, I did bring up Versecure. I said to him, "I have one question for you that I bet no one has asked you in the past few years....what's happening with Versecure? Is it still a valuable asset to WAVE?" He answered in the affirmative and raved about Versecure and its technology. But when I pressed at what point did he expect that Versecure would rear its sublime head, he offered a time frame which I hope he meant in a factious way (I think he said 10 years).
11. I have little doubt that he reads this Board on a daily basis. He dropped some phrases in the conversation that I believe he could have only picked up by reading the board. And I will even confess that when I met with him for dinner a number of months earlier he said something that almost caused me fall off my chair. Somehow is a brief discussion about HP he found the opportunity to look me straight in the eye to inform me in no uncertain terms that "AND CARLY DOESN'T GET IT!" Trust me, he reads the Boards. Not that he will learn anything of value, but just out of pure almost child like fascination. In fact, I have little doubt that he reads up on anything and everything possibly related to WAVE and Trusted Computing. He sponges it ALL up and keeps it locked up a TPM embedded in his brain.
And speaking of brain's, I have no doubt that S. Sprague has this very complex road map etched in his capacious brain as to how this how the Trusted Space is going to be play out. He's going to share bits and pieces of that map to shareholders. But no one on this board is going to figure out exactly what this map looks like. We are seeing only the Tip of the Trusted Computing Iceberg. Simply put, I walked away feeling very humbled about what I thought I understood.
He spoke of Fantastic Company going under in large part because management finally cracked up, after one too many missed revenue opportunities. He indicated it was possible for anyone, including himself, to end up certifiably insane when locked into an investment where time after time the fruits of victory always seem just out of reach. Which is why he always focused on the VISION part; he was not going to wallow in self-pity about what might have been. I replied, that many long term WAVE investors also faced and continue to face the prospects of become certifiably Insane. He smiled a weak smile while I stealthily slipped into my mouth my latest prescribed psychotropic.
Sometime this year the VISION part is going to be temporarily eclipsed by the REVENUE part of the business equation. Of that I have no doubt!
AI
