Marimba Makes Its Move

There’s nothing like some high-visibility coverage by prestigious
Fortune magazine to help build a buzz around your company’s pending IPO. That is unless the headline alerting readers to your company in the March 1 issue is “Silicon Valley’s Biggest Hype Job.”

While competition for this distinction is incredibly fierce, the winner
in this case is Marimba, the Internet-based application distribution and
management software start-up that on Feb. 12 filed to go public.

Marimba hopes to raise $56.4 million. It could prove to be a good short-term
bet. Its debut has not been scheduled and PointCast showed anything can happen when it comes to Internet IPOs.

A host of difficult challenges, however, make Marimba’s long-term
investment prospects questionable, despite impressive revenue growth in
1998. Among the most critical are:

  • Three years since its inception, Marimba still has only one product
    line, its family of Castanet software, which distributes, upgrades and
    manages applications over the Internet as well as corporate intranets
    and extranets.

  • The emerging Internet services management software market will quickly
    move toward commoditization, as large vendors bundle such features into
    existing products. In other words, it will get hard to make much money
    in this niche.

  • Due to a number of factors, Marimba faces an uphill battle to be taken
    seriously in the enterprise.

Marimba was founded in early 1996 by CEO Kim Polese and several other
members of Sun Microsystems early Java development team. For the entire
year the company had no product in the market, but received an
incredible amount of attention from the high-tech trade and business
press.

In part this was due to the founders’ Java pedigree. Marimba was one of the
first companies in the $100 million Java Fund started in ’96 by venture
capital firm Kleiner Perkins Caufield & Byers.

But the biggest reason for Marimba’s free publicity ride was the
industry and media’s adolescent infatuation with the attractive Polese,
who was immediately annointed the Glamour Queen of Silicon Valley.
Suddenly Polese was everywhere, gracing the covers of industry
publications and appearing as a keynote speaker at virtually every major
high-tech trade show alongside heavyweights such as Bill Gates, Lou
Gerstner and John Chambers.

Kim-mania hit its silly peak in March ’97, when Time put her on
its list of 25 most influential Americans. At the time Marimba had its
first version of Castanet on the market and almost no sales.

If its association with push and Polese’s relentless self-promotion
weren’t enough, Marimba suffered from other marketing problems. The
company’s name and the name of its Castanet product line certainly
were imbued with an unmistakable feminine elan. Unfortunately, the vast
majority of its target customers were enterprise managers in need of
industrial-strength solutions for their mega-networks. There was a
disconnect.

Marimba’s revenues in 1997 were a modest $5.5 million. Things improved
dramatically last year, as sales of Marimba software and related
services zoomed to $17 million. Even more promising, sales increased
quarter to quarter in ’98. Especially since the market for Internet services management software is
likely to evaporate once a company like Microsoft integrates these
features into its Windows and NT operating systems. Remember what
happened when Microsoft and Netscape bundled push into their browsers.

Marimba at last seems past its hype phase and headed in the right
direction.But the market it’s playing in probably isn’t. Unless it
adjusts quickly, Marimba’s prospects for long-term growth — and thus it’s attractiveness as a long-term investment — are dubious.

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