Thursday, April 19, 2012

KIT Digital & Kaleil's Departure -- My Thoughts As An Industry Insider

Perhaps THE single most buzz-worthy story in my industry -- online video enabling solutions -- at this week's NAB convention surrounded the stepping down of KIT Digital's Chairman Kaleil Isaza Tuzman on Monday.  This was strange timing in two respects -- (1) it was announced the first day of NAB, which isn't exactly the best publicity for a company that probably counts NAB as one of its most important shows and attendees as some of its most important customers, and (2) Kaleil had resigned as CEO just a few weeks earlier (and why not resign both at the same time?).

I don't know Kaleil personally, although by all accounts (including his own) he certainly is a colorful player in our industry.  I certainly do know a fair amount about KIT.  First, the "KIT" in the company's name follows Kaleil's initials, demonstrating how much the company was his "baby" from day 1.  His fingerprints -- for better or for worse -- are all over it.  Second, Kaleil built the company from a small consumer player that lost millions of dollars annually, to a formidable force in our online video industry that generates tens of millions of dollars and had a market cap of over $500 million not so long ago.  Even amidst all of this tumult, KIT today has a market cap of over $360 million.  He was able to do this by some highly skillful deal making -- 14 acquisitions in just the past couple years.  Is that too much?  I would say "absolutely."  Nonetheless, it is impressive deal-making -- and the terms of those deals also were impressive from a pure KIT-interested financial perspective.

So, as a deal-maker myself, I respect this -- and what Kaleil was able to do.  As a CEO leading an online video software and technology company in a highly competitive space, I respect the role KIT now plays and the customers it has amassed.  Does this mean that I vouch for Kaleil one way or another?  No.  I simply have no personal experience in that regard. 

So, why did Kaleil step down?  I have been asked this question time and time again by reporters covering our space.  The answer is that I have no real clue -- no special insights.  KIT's COO, Alex Blum, is quoted as saying that, following the company's acquisition binge, "we're in a different mode, one that's not [Kaleil's] forte.  We're moving forward and executing the next phase for KIT."  And, Kaleil previously himself has said he is a "lightning rod" to analysts and the Street -- and boards and investors aren't necessarily enamored with lightning rods.  I accept these insights at face value, despite the rampant speculation in the industry (including whether Kaleil's departure is connected in any way to potential swallowing up of KIT itself by a bigger fish ... or to matters that are more ominous, given the fact that it has been widely reported that there is an ongoing SEC investigation).  I have been asked to comment on those speculations, and I have nothing to add.  I have no unique knowledge here.  

At the end of the day, once again, KIT is still today an online video force (particularly internationally).  Who are they precisely?  It is difficult to define -- which is not surprising given the company's voracious M&A appetite over the past few years and clear -- and not surprising -- integration challenges which certainly are widely known in the industry.  But, the company has indicated M&A is over now -- now it's time to execute.  And, if they execute and integrate effectively, and if we take what Blum says at face value, KIT has the potential to become an even greater force than it already is today.  That all changes, of course, if certain speculation becomes ... well ... real.