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SneakerLabs to be bought, price may top $100 million

Friday, March 17, 2000

By Dan Fitzpatrick, Post-Gazette Staff Writer

SneakerLabs, a small Oakland software company that allows people to conduct multimedia conferences online, has agreed to be acquired by a Silicon Valley software company, becoming the latest Pittsburgh technology startup to win big.

The deal, once completed, may bring SneakerLabs more than $100 million.

Manu Kumar, who founded SneakerLabs in 1996 while studying at Carnegie Mellon University and owns more than half of the company, would become Pittsburgh's newest multimillionaire. If the deal tops $100 million, Kumar's net worth would jump by more than $50 million.

Neither SneakerLabs nor Octane Software Inc., the San Mateo, Calif.-based firm that agreed to purchase SneakerLabs, would comment yesterday on the terms of the deal.

Octane has no plans to move SneakerLabs out of Pittsburgh, said Octane CFO Jim Doehrman. In fact, it wants to add employees, build a new development center and attract new engineers from CMU and the University of Pittsburgh. SneakerLabs currently employs 18 at a building in North Oakland.

SneakerLabs' windfall, though, rises and falls with a separate Silicon Valley deal also struck this week. While Octane was swallowing SneakerLabs, a bigger company was swallowing Octane. E.piphany Inc., another San Mateo software company that helps companies interact with customers over the Web, agreed Wednesday to purchase Octane and give its shareholders 27 percent of E.piphany's outstanding stock.

As of yesterday, that slice of E.piphany stock was valued at $2.3 billion, down from $3.18 billion at Wednesday's close. The final price will be set once E.piphany's shareholders and regulators approve the deal.

SneakerLabs would receive about 5 percent of the outstanding stock. As of yesterday, that stake was $94 million.

"It is a typical software deal with a Silicon Valley edge," Doehrman said. "Certainly," he added, the deal "is more than few dollars."

Octane has more than 225 employees, $3 million in revenue and about $60 million from venture capitalists. It is less than three years old.

The company makes software that manages customer relations for companies that sell products through the Web, phone or e-mail.

Octane and SneakerLabs complement each other, Doehrman and Kumar said. SneakerLabs makes software that allows a company and its customers to interact on a Web site -- communicating via text, web presentations and collaborative browsing.

"We add value to Octane, and they add a heck of a lot of value to us," Kumar said.

The deal came together quickly. About three weeks ago, Kumar was on a West Coast business trip, looking for partners and venture capital. One person referred him to Octane CEO Tim Guleri. Kumar sent Guleri an e-mail, asking him to meet for coffee on a Sunday morning. At first, they talked about a partnership. Later, Guleri asked Kumar if he would be interested in being acquired.

"We reached the conclusion that we wanted to do something together very quickly," Kumar said.

SneakerLabs' rise has been a quick one, too.

The name SneakerLabs is a relic from Kumar's user ID at CMU, where he earned bachelor's and master's degrees in computer science. He raised $1 million from investors in 1998. Its revenue, which Kumar would not identify, arrived last year. The goal was to go public in about a year and a half.

"This speeds up the whole process," said Raymond Fragale, who was Kumar's first investor and sat on SneakerLabs' board.

"This is a very positive Pittsburgh story," said Fragale, founder of data processing company Commercial Data Services Inc. "I would like to see it happen over and over again."

SneakerLabs, like many young technology companies, prides itself on its culture. The average age is shy of 30. Work stops every Friday afternoon for a game of "Quake." Kumar is known to arrive at work some days in jeans, a T-shirt and boots. Some of his employees begin work at 11 a.m. and work late into the evening. On sunny days, they are encouraged to skip work.

Kumar is not open about one thing: his age. He will say only that he is in his mid 20s.

"Certainly, Manu has done a lot in a short period of time," Doehrman said.

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