Liberate Technologies Inc., the troubled San Carlos, Calif., developer of interactive television software, has tapped a venture capitalist to lead it out of the morass of dwindling sales, accounting irregularities, delisted stock and federal scrutiny.
The company announced that David Lockwood would take over as chairman and chief executive as soon as it files a long-delayed amended annual report for the fiscal year that ended May 31. Lockwood, who acquired 12% of Liberate's stock in the months leading up to his appointment, is the former chief executive of InterTrust Technologies Corp. of Santa Clara, Calif., which makes software to protect copyrights.
Lockwood plans to take his chief financial officer at InterTrust, Greg Wood, to be CFO at Liberate.
Shortly after becoming chief executive at InterTrust in March 2002, Lockwood laid off much of the staff, focused the company on licensing and enforcing its patents and then sold it to a consortium led by Sony Corp. and Royal Philips Electronics.
Lockwood will replace Mitchell Kertzman, the company's current chairman and chief executive. Kertzman, who plans to stay on the Liberate board, said he already has lined up his next job, as a general partner at Hummer Winblad Venture Partners, a venture capital firm.
Kertzman had announced in August that he planned to step down as chief executive at the end of the year, with company President Coleman Sisson taking his place.
Two months later, shortly after it reported widening losses and large-scale layoffs, Liberate announced that it had to restate fourth-quarter and year-end results because it may have improperly accounted for revenue from a license fee.
Liberate's internal investigation broadened, and auditors questioned more than 10% of its revenue since mid-2001, prompting the company to suspend and later fire its chief operating officer.
In January, Liberate's stock was dropped from the Nasdaq Stock Market, and this month the company announced that the Securities and Exchange Commission had opened an investigation.
Kertzman said the turmoil persuaded Sisson not to take over as chief executive but to stay on as president instead. The company's board then started talking to Lockwood, a former investment banker and venture capitalist, Kertzman said.
Lockwood held nearly 5% of Liberate's stock at the time and raised his stake to 12% before agreeing to take the company's reins.
He declined to be interviewed.
"What Liberate needs is to have confidence restored in all of its communities," including shareholders, employees and partners, Kertzman said. But the company also needs something beyond its control: a revived interest in interactivity among cable television operators, which are Liberate's major customers.
One of Liberate's main products is software that enables cable systems to add multiple interactive services, such as video and music on demand, to their lineups. But the economic slowdown around the globe has led many cable operators to scale back plans for deploying more powerful set-top boxes and expanding into new digital businesses, drying up demand for Liberate's software.
Liberate's shares rose 12 cents Monday to $1.87 in over-the-counter trading.