Last year, SunGard (booth 2411), one of the world's largest providers of software and processing solutions, went private. The deal, the second-largest leveraged buyout in history, left CEO Cristobal Conde free to make moves without the Street driving the firm's stock up and down with every quarterly report. Recently, WS&T Contributing Editor Anthony Guerra chatted with Conde to find out what life is like without a ticker symbol.
WS&T: On Aug. 11, SunGard officially became a private company, yet you reported first quarter numbers for 2006. Why?
Conde: [As a private company] you have more flexibility, but we're reporting things and going about our public disclosures as if we were public. So we are keeping Sarbanes-Oxley running for two reasons. First, if we went public down the road, it would cost us more to restart it than it costs to keep it going. Also, we have some public debts and some requirements anyway. [In the future], we wouldn't want to answer the question of what we were doing for those years ... that we had to shut down Sarbanes-Oxley. So I'd rather keep it going.
WS&T: One of the things we talked about last year was the benefit of not having to report every quarter. Since you still intend to report, has that benefit been reduced?
Conde: No. It's just that we no longer get punished for that disclosure. The markets are very intolerant of small deviations, and, in fact, when you run a public company, so much of your credibility with the Street is tied to the volatility of results that you wind up spending a lot of time on volatility. We now focus on the growth of results, not the volatility. So it's really refreshing.
WS&T: What have been some of the company's main accomplishments in the past 12 months?
Conde: We've taken a more long-term view and changed the way we think of our business. In our budget process, we used to spend a lot of time, as an example, looking at numbers. This time, I spent maybe a third of the time I usually spend and used all the balance to look at the long-term direction for key products and what we should do to improve things.
WS&T: In what strategic direction are you taking the business?
Conde: In terms of what people want to do, I think that's been pretty constant for a number of years. People want solutions that do a broader set of things as opposed to niche products. They want more-integrated solutions. They want the vendors to take on more risk and be accountable for larger bundled solutions, and they look for technologies that allow them to interconnect and reuse key components. So that has been pretty consistent for us. The single biggest thing that's going on is CSA (Common Services Architecture), which is the biggest thing in which SunGard has ever invested.
WS&T: Describe Common Services Architecture (CSA).
Conde: It allows our various products to share and reuse components, and this means two things. First, it helps us reduce our costs because we only have to do things once. Second, it improves our time to market. If we use proven components, the components will always have higher quality because more users will have gone through them and more programmers.
WS&T: What would you want clients to know about the CSA project?
Conde: We've talked to clients about CSAand now we're looking to open up CSA to give them access to the components so they can incorporate it into their own products and then potentially contribute components to CSA as well. It allows us to reuse components, to share our proven products and modules. It really changes our solutions from a series of best-of-breed systems to more-integrated solutions that share components.
WS&T: Are there any negatives about going private?
Conde: Overall, I can't say that I miss anything about being a public company. After going private, we've been able to invest internally and in acquisitions in things that perhaps we couldn't have done before because running a public company, we were so focused on the volatility of our results. R&D is inherently lumpy and M&A is inherently lumpy, so that restricted us from the types of projects we could take on.
Now, our investors are far more tolerant of volatility than the public markets ever were, and they understand our business far better than the public markets ever did. So we can take a long-term view. Many of the things we have done we, perhaps, couldn't have done or would have been forced to do more slowly than what we have done, and that applies to internal R&D and acquisitions.
WS&T: There has to be something you miss about being public?
Conde: When you're a big public company CEO, you get invited to more A-list-type events, but that would be about it. I really don't miss anything.
It's ironic. We are able to invest in things we couldn't before, meaning we can use capital better. If you define access to capital in terms of whether or not you can actually gather it and use it, then we have more access to capital. That is totally weird because private companies go public in order to be able to have more capital, to raise capital and have access to more capital. But here I'm saying as a private company, we have far more effective access to capital because we can use it in many more ways in terms of just the sheer access to capital. We now have in place a $1 billion revolving line of credit that we didn't have before.
WS&T: And that line of credit is totally open to you?
Conde: Yes. It's an open line with the banks, so we can draw on it whenever we feel like it. So technically we can borrow $1 billion without having to give a reason why. It was part of the deal with the banks [when we went private]. I told them that I wanted to move faster, not slower, to have a lot of dry powder. We negotiated $1 billion worth of dry powder.
WS&T: What would be one message to your clients or potential clients about what you're up to?
Conde: As a private company, we're investing far more for the long view and to the long term than ever before. The rollout of technology such as CSA makes us a much more substantial business partner.
WS&T: How long have you been CEO?
Conde: Since 2002.
WS&T: What lessons have you learned so far during your tenure?
Conde: No matter how high you get in an organization or how big the job is or how powerful the company is, there is simply no substitute for doing things the long way. It's the shortcuts that can get you into a lot of trouble. There's only one way, and you have to take pride in doing things right and doing things the long way. I think that as you go higher in an organization, the tendency is to be less and less detail oriented, and I think that's a grave mistake.