Taking Stock / Petruschka's Talking

Orni Petruschka is talking.

Three and a half years after he and his partner, Rafi Gidron, sold the Israeli startup Chromatis Networks to telecoms equipment giant Lucent for $4.8 billion, the inscrutable entrepreneur is talking.

To recap, it was the biggest and most widely covered takeover in Israeli history, yet Petruschka and Gidron kept mum even after the deal had been done. Not a peep, no interviews, no quotes, no pictures, nothing on the record or off it either.

Petruschka and Gidron are very gifted men. The fact that they managed to create and sell two companies one after the other, Scorpio in 1997 and then Chromatis in 2000, says the coup wasn't coincidence.

Their decision not to grant interviews was a legitimate one that attests to prescience. Unlike so many others in the arena, they evidently understood back in the summer of 2000, when the deal was inked, that the boom was fated to end and that they'd do well to keep their piece to themselves.

Disappointment did not delay

Yet lately Petruschka has been talking. First, he made the interviews contingent on being asked only about the public initiatives with which he is involved (the People's Campaign for Peace and Democracy, a kind of private-initiative peace proposal). Then he also began talking about other things.

Last week, he took another step into the limelight, allowing discussion on a subject of vast interest to him: the sale of high-tech companies, against sustaining their independence.

Which is where the sense of disappointment comes in. While the affair of Chromatis' sale and fate begs penetrating debate on the whys and wherefores of selling companies, he barely mentions it. One wouldn't think from his words that he had anything to do with it at all.

Petruschka repeats and reiterates that one shouldn't establish a company with the deliberate purpose of selling it.

Strange. If you'd tracked Chromatis from day one, you might well think that every move and step taken there was designed to promote its eventual takeover.

Does the fact that Chromatis' investors included George Boutros, a leading investment banker and the right-hand man of Frank Quattrone of Credit Suisse, a man who specialized in selling startups to big corporations, sound like coincidence?

You don't need to be an expert on corporate takeovers to see that from its list of investors to its market positioning to its management structure on the eve of its sale, Chromatis had been designed and built to be sold.

Petruschka warns entrepreneurs about strategic investors who will stamp their mark on the company. Is that why one of Chromatis' biggest investors had been the venture capital fund run by Lucent, the company that eventually bought Chromatis?

Niggling questions

And there are a few highly disturbing thoughts that Petruschka has not addressed.

1. How many owners and managers of major U.S. communications firms, which had been Chromatis' customers, received equity in the startup before its sale? People such as Phil Anschutz and Joe Nacchio, the owner and chief executive of Qwest? Was that normal business practice in Silicon Valley back then? Do the norms of the time, involving conflict of interest, still prevail in today's high-tech world?

2. How is it that a company is bought for $4.8 billion one day, indicating that its technology is terrifically valuable, and is closed a year later? Was its technology bad? Or did the inflated price demand a subsequent chain of decisions that led to its demise?

3. If its technology was sound, why didn't Petruschka and Gidron buy it back from Lucent after the giant decided to terminate it? Was it because given its high price, Lucent preferred to simply liquidate it, rather than accept peanuts?

4. Petruschka talks about the great importance of looking after the good of the company's staff and their future. Did anybody take care of the Chromatis people? Could they, like the founders, cash out options? Could they take their money and run? Or did many of them develop fond expectations that were dashed as Lucent's share price collapsed, and Chromatis was terminated?

5. And the most intriguing question of all: Does his experience with Chromatis and Scorpio, both of which were sold to huge fanfare and which closed after their takeover, tell us something about a model of establishing companies just in order to sell them?

Like it or not, Petruschka and Gidron, like Chromatis, have come to symbolize an era, an entire industry. So maybe the next time they decide to talk, they'll finally deliver the real story of their ill-fated company and the real lessons it teaches.