When your predecessor, Jeffrey Rodek, passed the CEO reins to you and assumed the position of executive chairman of the board, he said having separate individuals serve as chairman and CEO is a preferable governance model. How's it working? More and more companies are starting to separate the chairman and CEO roles. It doesn't mean that's the only way to go; there are plenty of companies that do it the other way, and they do fine, too. But from a governance standpoint, it's a pretty good separation. It lessens the chance for the CEO to have the board in his pocket.
It's interesting, in a governance context, that former CA Chairman and CEO Sanjay Kumar today pleaded guilty to the financial fraud charges he had been facing. What's your assessment of that development? I haven't followed that case so closely that I could give you legal merits, but I'll tell you that the interchange I have with our auditors is quite simple in why they feel good about their relationship with Hyperion. I believe that if you set conservative guidance and you follow that, you'll keep people in bounds. When you set growth targets that are too aggressive for your business -- when you live in denial and say, "I wish we were going faster, therefore, I'll just set the bar high and then we'll chase that bar" -- you really force people out onto the ethical edge. They'll do whatever it takes to close a deal; they'll treat a customer the wrong way. Somebody in the day-to-day business will make the wrong decision because they've been pushed to the edge or pushed over the edge.
The No. 1 thing a CEO can do to maintain ethical guardrails and make sure you're doing the right thing for the customer -- which, by default, is the right thing for the shareholders -- is to set conservative guidance and then exceed it.
But what happens when the CEO is the problem? Obviously, you have an ethical dilemma there. The tone comes from the top. If you can't set the expectations for your corporate behavior, you will ultimately fail.
It's also interesting that Sun's Scott McNealy relinquished his CEO role today, but is staying on as chairman. What do you make of that? Scott built a terrific company at Sun -- it's a big shock to see Scott stepping down.
After having been at Sun for a number of years, it appears Mike [Lehman] is back [as chief financial officer] with the specific role to help restore Sun's profitability. I'm sure he'll have a major impact. The word on the street is that Scott has resisted layoffs. He takes that stuff personally, and he has a tremendous amount of pride in the Sun culture. I can see where a cost restructuring would be very difficult. When you've started a company, you feel an awful lot of personal responsibility for those people.
Now that former President and COO Jonathan Schwartz has taken over as Sun's CEO, would you say that parallels the shift Hyperion made in 2004? I suspect that's sort of how Scott and Jonathan work today in terms of a partnering role. So with Scott as chairman, that gives Jonathan the chance to really run the company day to day, but he'll have Scott there to help him out on strategy matters and the like. It's worked well for us; I suspect it will work well for them.
You noted in your opening keynote this morning that Symantec is a major Hyperion customer. Did the recent news about the IRS hitting Symantec with a US$1 billion tax bill, saying it underpriced intellectual property licensed to its Irish subsidiaries, affect Hyperion in any way? The No. 1 thing that a vendor like us can do to help a company in terms of their financial practices is really identifying variances. If you have a variance, and it looks too good to be true, it probably is. A lot of companies that have moved IP offshore and established shared services centers in Europe and all that have done so on a well-defined path over the last 10 years. So we'll be watching this tax bill with Symantec very carefully from the standpoint that many technology companies have taken similar actions to move IP offshore and therefore benefit from lower tax rates.
Have you done that? No, we haven't. We've kind of got the old-fashioned IP treatment -- it's all domestic, and we pay 37 percent taxes on our revenue. But we watch cases like this because we're a global company, and global tax law is something that affects all of us.
Is this something you would consider doing in the future? Sure we would. As you reach some size, having shared service centers around the world is a very common concept. That is, instead of doing an administrative practice country by country, you tend to centralize those things. Those two go hand-in-hand. To move IP without real operations is not an accepted tax practice.
What is Hyperion doing in terms of global software development? We typically have three submissions per day to the code stream. We have about 100 people in Minsk, [Belarus], that came to us through the Brio acquisition; we have big development centers in Stamford, [Conn.], and California; and we have another in Bangalore, [India]. So for about two years now we've done follow-the-sun programming, and it has absolutely changed the way we build.
I know that in China you've partnered with Beijing University on curriculum development. What else are you doing in China? We do a lot of business in China. We have about 40 employees in Beijing and Shanghai. Of course we do business with all the multinationals that do business there, but we're also starting to see a lot of Chinese companies that are going from being government-owned to privatization, on their way to public offerings. They're going through a massive transformation over a very short period of time, and they're using our tools to help plan and manage the business.
What's your position on the H-1B visa issue? It's hard to separate H-1B from the geopolitical issues. From a geopolitical standpoint, we're cutting off our nose to spite our face in terms of having security constraints around students who want to come study here be so tight. We have massive brand power here in higher education. For us to be overly restrictive around H-1B, especially in the student world, is just asking for new brands to be created some other place where people can go to get what they used to get here.
From an H-1B standpoint, we can always use more technical talent from other parts of the world. When we try to hire a chief architect in Stamford, you'd be amazed at how long that search goes and how hard it is to find someone. It goes back to the education question, and it's a huge, complex issue. In the meantime, we ought to be letting more and more H-1Bs through.
What's your response to unemployed U.S. IT professionals who feel H-1B workers are stealing U.S. jobs? There's no simple answer. It's hard to connect the dots between the high demand for great technical people and the unemployed IT professionals. It's a complete mystery to me.
We've heard from some analysts that Hyperion had some cash-flow issues stemming from problems with a new Oracle billing system. Can you comment on that? That's true. We implemented a new billing system [during the quarter that ended last December], and sometimes you do it great, and sometimes you don't do it great. We did not do the best job in implementing that system and getting ready to go live with it. As a result, we didn't get a lot of our bills out on time. Our implementation was flawed -- we should have stayed on the system we were on to give our implementation another three to six months to mature. We cut over too soon -- we should have run those systems concurrently for at least a quarter.
We were back up to normal levels of cash flow [during the quarter that ended in March]. We're still working through a DSO [days sales outstanding] issue; that is, if you billed late, your customers may not pay you in that quarter. It'll take another quarter to get that resolved.