Qatalyst Partners

Brainstorm Tech video: Frank Quattrone on Bubble 2.0 -- or is it?

July 21, 2011: 1:35 AM ET

Fortune's Adam Lashinsky interviewed longtime Silicon Valley banker Frank Quattrone about bubbles, what he learned when Apple went public, and why this time really isn't any different.



MR. LASHINSKY:  Thank you, Jeff, and please welcome with me Frank Quattrone.

(Applause.)

MR. LASHINSKY:  Frank, thank you so much for being here.

MR. QUATTRONE:  It's a pleasure, Adam.  Thanks for inviting me.

MR. LASHINSKY:  You bet.  I just wanted to kick things off by showing an illustration or a chart, rather, that's in the current issue of Fortune magazine, if we could get that up on the screen.

This is in our cover story about "Bubbles," and if you direct your sight to the bottom of this chart, the hot investment banker during the last banker, Frank Quattrone.  The hot investment banker during the current bubble, if that's what it is, Frank Quattrone.

That's quite an accomplishment.  So congratulations, first of all.

MR. QUATTRONE:  Thanks, I think.

MR. LASHINSKY:  Well, yes.  Okay.  There was some applause confirming that.

MR. QUATTRONE:  Yes, appreciate it.

MR. LASHINSKY:  So you know, I have this fond memory of my first week in Silicon Valley in 1997.  I had a meeting with you, and I left the meeting and found an apartment about half a block from where your office was in Menlo Park.  When I met with Frank, he was reading this book by Jim Carlton about Apple (AAPL), that was either just out or hadn't come out yet.

It made a big impression on me, because I thought I didn't even know this book existed, and yet this guy, who leads, you know, the top investment banking practice in the Valley, already is pouring through it, looking for morsels about what's going on in Silicon Valley.  So the point is you've been a student of the Valley for a long time now.

MR. QUATTRONE:  I was fortunate that I came out to the Valley in 1979, when I came out to go to Stanford Business School, and my very first assignment as a teaching assistant for an Investments professor was to -- he told me go down to this computer company in Cupertino called Apple.

It was the year before they went public.  Go get an Apple 2e and bring it back here, and import an investment program from the HP mini-computer onto this Apple 2e.  I said "Okay, I can do that."  So when I opened it up, there really wasn't much inside other than, you know, the single board computer with a keyboard, and this green screen that didn't have any word processing or database or applications of any kind.  It just had the basic programming language.

So I thought yes, small mini-computer.  What's the big deal?  Then a year later, that same Investment professor had a class that I attended in the fall of 1980, as Apple was going public.  He brought the then 25 year-old Steve Jobs into our classroom, to tell us all about how PCs were going to change the world, and how they were going to be used to communicate, as well as to do commerce and all this other stuff, and how he had traded in his Volkswagen van for a few hundred bucks to get the company started.

I was also 25 at the time.  I thought I was kind of a hotshot, because I had had two years of work experience at Morgan Stanley, and I was about to get my Stanford MBA.  Here's a guy my age, who had just created a company that Wall Street was about to value at a billion dollars.

So that's what got me really focused on, you know, people who like to change the world in Silicon Valley.

MR. LASHINSKY:  So let's talk about what you're focused on right now.  Frank has a several year old firm, what now three, four years old?

MR. QUATTRONE:  Three and a half, yeah.

MR. LASHINSKY:  Three and a half year-old firm called Qatalyst Partners.  It is primarily engaged in M&A advisory.  They do a little bit of other things, but significantly you do not do what you did for the entire first part of your career, which was securities, securities underwriting.

Just a small handful of the deals that your firm has done recently, you sold Pop Cap to EA, Zong to PayPal, Go Daddy to a consortium of private equity firms, National Semiconductor to TI, Atheros to Qualcomm, Cosmics to Wal-Mart, Palm to HP, Data Domain to EMC.

Not only have you been busy, but my question is are you letting the competition have any deals?

MR. QUATTRONE:  There's plenty of deals to go around the competition.  We're a very small firm and we're very focused, and we're trying not to be a deal factory, but to try to pick some themes that we think are going to generate a lot of change in the industry, and advise both the very top companies in the industry, the kind of, you know, medium-sized companies that could either be bought or sold, and some of the venture-backed start-ups that are really trying to change the world.

We don't have sales trading, brokerage, capital lending, any of those kinds of things that got some of the Wall Street firms a little bit in trouble.  What we have is experienced advisors who have been around the technology industry 15 to 25 or 30 years, and we focus on the strategic stuff that's going on in the industry, and try to be a proactive catalyst, if you will, for change among the people who want to improve their position or defend their position in the industry.

MR. LASHINSKY:  It seems obvious to me, but why not do all that other stuff?  I mean there's money to be made here, isn't there?  The competition is still doing it.

MR. QUATTRONE:  Sure.  But you know, if you consider what's going on in the venture world, for most of my career, the venture community got liquidity sort of half from IPOs and half from M&A.  In the last ten plus years, it's been more like 90 percent M&A and ten percent IPOs.

So there's just fewer of them.  Not that it's not an exciting or important product.  But I think there's a lot more interesting stuff going on within industry structure and across the industry structure, whether it's in enterprise, cloud, the data center, mobility, the web.  Everyone's attacking one another, which is great for us.

MR. LASHINSKY:  Good business opportunities.

MR. QUATTRONE:  Yes.

MR. LASHINSKY:  So last night at dinner, we heard Larry Summers espouse what I will call the Andreeson-Horowitz perspective on whether or not we're in a bubble right now.  Andreeson-Horowitz are willing to say no.  Larry Summers sort of gave a qualified no, and I'd like your perspective on this, especially given the length of time that you've just explained to us you've been in this industry.

You know, are we in a bubble?  I know it's not a yes-no answer, so go ahead and have at it.

MR. QUATTRONE:  Terrific.  So I really respect Mark's point of view on this.  We first met when he was a very young guy on that chart you showed.  He had a lot of hair then.  I actually sent him a message the other day and said did you really have all that hair back then?  I should remember, but I'm too old.  He said you couldn't see through that mustache.  That's why.

MR. LASHINSKY:  Which you still have.

MR. QUATTRONE:  But Mark, as one of the founders of Netscape, which we took public when I was at Morgan Stanley in 1995, it really feels to me more like 1995, which is the beginning of a new era of IPOs.  The new era is called social, mobile, local, real time, all these new trends that public investors really want to invest in.

But there's really not very many stocks to do it.  So like when we took Netscape public, if people wanted to invest in the web, that was the only stock that they could do it by investing in.  So Netscape's market value was higher than it probably otherwise would have been, if there were lots of other ways to play that theme.

I'd say, you know, some people might say the same about Linked-In today.  But it wasn't until four years had passed, that enough Internet companies came public after Netscape, that you started to see the really more speculative kind of things happen.  It wasn't until another year after that, 2000, that the market really peaked.

So it feels to me like Linked-In is sort of the Netscape of its era, and there's going to be a lot more interesting companies come out.  Obviously, everybody's waiting for Facebook and many, many other really high quality companies.  What's different is that these companies are by and large larger, with significant revenues, significant revenue growth, business models that really make sense, and I don't think we're anything close to a bubble, if you define bubble as a company with, you know, no accomplishments whatsoever being able to go public.  We're nowhere close to that.

What I worry a little bit about is the late stage venture capital private financing market, where it seems like, you know, a lot of people are trying to raise money at a billion dollar plus valuation at very early stages.  To me, and you usually don't see that in a cycle until the IPO market becomes much more robust.  To me, this time, the private market led the IPO market in driving up those valuations.

MR. LASHINSKY:  And but why is that concerning?  Isn't the -- I remember John Doerr telling me that the Kleiner rule, I think, is that if someone's passing hors d'ouevres around the party, you take them and that's why private companies should raise as much money as they can when they get the opportunity.

MR. QUATTRONE:  Yes.  I think Eugene Kleiner said the best time to eat is when they're passing around hors d'ouevres at the cocktail party.

MR. LASHINSKY:  Thank you for clarifying that.

MR. QUATTRONE:  That's right.  But I'm not criticizing the companies.  What I'm saying is that a lot of investors and a lot of new funds are being formed, with a specific purpose of investing in these hot things.  Unless the IPO market does follow through, and unless these companies really perform quite well over a number of years, some of those valuations might not hold up.

What's what we saw a lot of.  For the companies that got late stage venture funding in the `98-`99 time frame, when the IPO window shut, a lot of people who had invested in illiquid late stage private investments got caught holding the bag.

MR. LASHINSKY:  You know, you raise an interesting issue that I haven't seen anyone explore, which is what was obvious -- in retrospect, what was scary about the `99-2000 time frame is that every technology company's valuation was high, from venture-backed start-ups to new IPOs, to Sun and Oracle (ORCL) and so on.  They had stratospheric valuations.

So now today that's not the case.  The big cap tech stocks do not have high valuations.  They're very low valuations.  Was that the case in `95 as well?

MR. QUATTRONE:  In `95, I'd say the valuations in general were more moderate across the board.  But there were some high growth darlings that had, back then they were PE multiples, in sort of the 30's or 40's, and the more mature growth companies had PE multiples in the 20's.

Today, the leading technology companies that are the largest ones, by and large, have PE multiples more like 10 or 12.  Somebody told me the other day Cisco (CSCO) has an EBITDA multiple of four and a half.

So the companies that had been the standard-bearers of the last generation of enterprise computing on premise in the Wintel instruction set-compatible world, are viewed as companies that most of them have had trouble making the transition.

A couple have made a stronger transition.  I think IBM (IBM) and Oracle, you know, have added to market cap since 2007.  A lot of the others have lost market cap.

MR. LASHINSKY:  Do you think you could sell Cisco at a four and a half to EBITDA multiple?

MR. QUATTRONE:  Send me on coach.

MR. LASHINSKY:  We'll call it (inaudible) right now and say you're ready to talk.

MR. QUATTRONE:  All right.

MR. LASHINSKY:  So you know, you helped take public some of the most iconic companies in the history of the Valley, Netscape, Amazon --

MR. QUATTRONE:  Cisco.

MR. LASHINSKY:  Cisco before Netscape.

MR. QUATTRONE:  Yes, Intuit.

MR. LASHINSKY:  And Intuit before that, right?  So what are some of the themes that you're seeing right now?  Where are we going?  Give me your thoughts on, you know, who's going to win in this battle among Twitter, Google (GOOG), Facebook?  The competition's really heating up.  You've got views on all of this.

MR. QUATTRONE:  Well, I'm not sure I have any crystal ball.  I'd say, you know, Facebook has just done a marvelous job of creating a platform that people don't just come to and leave, but live on.  I think that they're at the very early stages of figuring out how to take full monetization advantage of what is an undeniable trend.

I'd say don't forget that a lot of people attacked Microsoft early on, and Microsoft (MSFT) might not have gotten it right with Windows 1.0 or Window 2.0, but they got it right with Windows 3.0.  I think today, that company might be Google, and Google, as someone said earlier today, had had some forays into social before.

The Plus looks like it's got some really early great traction.  I really like Twitter a lot.  I didn't quite get it at first, but when my daughter went to New Zealand to study there, as soon as she got off the airplane, New Zealand had a 7.8 earthquake and I freaked out.  I couldn't get ahold of her, and I tried to go to Google and Google News.  Not a whole lot of information.  A 7.8 earthquake at the epicenter.

The New Zealand government website didn't have anything.  But on a lark, I entered into Twitter Search New Zealand on Eden, which was the city earthquake, and 12 real time posts on people who have just lived through that earthquake, and they were saying things like, you know, I'm fine in Dunedin and glad I'm not in Christ Church.

Now that solved my little problem.  But what it got me to focus on was that Twitter has a several hour advantage in getting information.  So it's not any individual Tweet; it's the ability to search all those Tweets, to get the real time data.

If you're an advertiser or a commerce person, what's it worth to have, you know, real time sentiment of not only what someone wants to buy or where they want to go, but where they happen to be located, because a lot of people Tweet from their phones.

I think while Twitter may be a little farther behind in terms of achieving the business model potential that it has, it's got tremendous potential, I'd say.

MR. LASHINSKY:  It's funny.  Here at this conference, we've had two executives use the, you know, the trust us explanation on the business model.  One was Dick Costelo last night on Twitter, and the other today was Patrick Pichette at Google on Android.

You know, I think there's a very compelling case there, but it is still a trust us.  Do you agree?

MR. QUATTRONE:  I do.

MR. LASHINSKY:  How do you analyze it?

MR. QUATTRONE:  It's hard to analyze, but I think that companies that get 50 to 100 million of audience, and have a service or a product that people have to rely on, like I mean no disrespect, but I don't follow any particular periodical any more.  I use Twitter as my customized news feed, and I think more and more people are relying on it, and sort of can't live without it.

If you get enough people to the point where that's the situation they're in, people are going to be able to figure out how to monetize.  Few people remember, because I was one of the first people that went to visit Google, right after Kleiner made their early investment.

There was a time when Google didn't have a business model for Search, and they swore up and down a stack of bibles that they'd never do paid Search.  Then a company called GoTo.com came along, and people laughed at it because it was all paid search.  That's not technology, you know.  Anybody can make a result appear at the top of the page if they'd pay more for it.

But it was literally the only business model on the web that made money.  When Yahoo acquired it, it then became known as Overture.

MR. LASHINSKY:  Yes.

MR. QUATTRONE:  Google said, well maybe if we have paid Search here and sponsored links there, but have most of the page be relevant, and you know, that was huge, because prior to that time, I think the board members were kind of pulling out their hair, saying when is this company really going to be able to figure this out?

MR. LASHINSKY:  Can you remember what you thought in that meeting?  Did you get it?

MR. QUATTRONE:  Well to me, I mean I'd been an early user of different search engines, and I found them incredibly complex to use and the results were terrible and 18,000 pages long.  You never find what you actually really wanted.  The first time I used Google, it must have been 1999, I thought it was clean, it was fast, it was relevant, it was fun to use, and it was very, very useful.  I thought it was very, very different.

No one at the time could have thought that, you know, it could have created a company as large as it is today.  I'd say no company has been more innovative in coming up with so many different products and services.  Obviously, not all of them have worked, but I think they've done a great job with You Tube, a great job with Double Click.  I think that Gmail is a great product, and I think Android is a terrific success.

MR. LASHINSKY:  Now I know you had one or two slides you wanted to show, to give your vision of where things are going.  Should we put those up right now?

MR. QUATTRONE:  That would be great.  Maybe the slide, the first slide that has all those circles on it.

(Slide.)

MR. QUATTRONE:  So this is chart that shows the market caps of lots of different technology leaders at various points in time, in billions of dollars.  That very top row in sort of light gray is at late 1996, on the date that Apple acquired Next, which led to Steve Jobs coming back into the company.

MR. LASHINSKY:  That tiny dot?

MR. QUATTRONE:  Apple's that tiny dot in the upper left, which was a $3 billion market cap company.  One of the toughest fairness opinions that I had to write was advising Apple's board on why they should pay 400 plus million dollars for the money-losing Next.  Apple had forgotten how to make operating system software.  It's kind of like Coke forgetting how to make syrup, and they had to go outside the company to get an operating system, which is what Next was.

But the next row down is the date of the Google IPO in 2004, which also is not too far away from the time that Facebook got some of its early funding.  Facebook is that $100 million valuation on that row.  The next row down is the fall of 2007, when NASDAQ peaked, and it was also very close to the time when Apple introduced the iPhone.

MR. LASHINSKY:  This is the yellow?

MR. QUATTRONE:  Yellow, uh-huh, the middle one.  Then the fourth one down in light blue is the market trough when the world looked like it was going out of business, and that was the low point in NASDAQ in March of `09, and then the bottom row is today.

Just a few things to point out.  So Apple in 1996 was a $3 billion market cap company.  At the time, Microsoft and Intel were the 900 pound gorillas of the industry.  If you added up their market caps, it would total 210 billion.  So 70 times Apple's market cap.

Today, Apple is about 340 billion, and Apple equals Microsoft plus Intel.  So also, if you look at Qualcomm, which is another very small bubble in that top row, two over from Intel, it was a $3 billion company versus Intel at 110.  Today, Qualcomm is 94 billion versus Intel's 122.  So Qualcomm, with all of its strength in the chips that go into communications in mobile devices, has really gained a lot of ground.

In `96, Google didn't exist, but by the time of their IPO in 2004, that second row, they were a $25 billion company, versus Microsoft about 300 billion.  By `07, that next row down, Google had added 200 billion in market cap in a really short period of time, and gotten to 225 billion, versus Microsoft's 350.  So they had closed the gap to about two-thirds.

Today, both companies have shrunk, Google to 180 billion and Microsoft to 230.  So it's about three-quarters the size.  But you know, look at Google versus Facebook.  At Google's IPO, it was 25 billion in market cap.  Facebook was about 100 million.  They're about to get that valuation from my friend, Jim Breyer, who was so embarrassed to have paid 100 million, that he wanted a non-disclosure agreement.

By 2007, Google's market cap had increased to 225, Facebook's to 15.  That was the Microsoft investment in 2007.  So they had narrowed the gap 15X.  Today Google 180.  So they've lost 45, and Facebook, if you believe people are buying it at 70 billion, has added 55 billion.

So there's been a shift in market value of roughly equivalent proportion, from Google to Facebook during that time.  I think if you take one of the points that we're making is we've lived through 25 years of a business model in enterprise computing that was very unusual.

It was a series of narrowly-focused specialists.  Microsoft in software, Oracle in operating systems.  Oracle in database.  Cisco in networking, EMC in storage.  Everybody cooperated with one another in partnerships.  They were the key beneficiaries of the Wintel era.

A lot of them have lost significant market value since 2007.  If you look at the moves from 2007 to today, Microsoft is down 120 billion in market cap, Intel down 30, Cisco down 120, Dell down 60, HP down 35.  Google, which had had a massive run on the initial online search advertising, is down 45.

If you add all that up, those group of companies, which were the standard-bearers of the last generation, are down over 400 billion in market cap.  The companies on the rise, Apple, Amazon, Qualcomm, Facebook, ARM and Sales Force, are up about 435.

So there's been a massive market cap shift from the last generation, which was on premise, which was horizontal, which was desktop, which was Wintel, which was basic web search and was future phone, to the companies that have done vertical, done online, down mobile, down smart devices, done social, mobile, local and real time.

So it's a very, very interesting time in the industry's evolution.

MR. LASHINSKY:  You know, I think there's three great stories there.  You've alluded to two of them, in terms of Microsoft's decline, Apple's rebirth.  It was a big company before it was on there, and then it lost it and now it's gained it back.  Oracle's been shockingly steady.  IBM also has been reborn.  So before we go to questions from the audience, I think the one thing I'd like to know from you is can Microsoft be reborn?

MR. QUATTRONE:  It can.  It can absolutely.  But I think --

MR. LASHINSKY:  What will it take?

MR. QUATTRONE:  I think that Microsoft was a beneficiary of a few accidents and brilliant business execution.  The few accidents were IBM going to digital research for CPM and Gary Kildall going flying instead of licensing CPM to IBM.  So that's how DOS happened.

Then Windows was Microsoft licensing it from Apple, when Apple thought it needed to do that, to get Microsoft to do applications.  But it was a brilliant run, where they made the industry agenda Wintel compatibility, whether on a desktop or the server.  They had NT.  They were just on the upswing.  Brilliant, brilliant business executives.

But now that Wintel compatibility is not the agenda, and the industry is going back vertical, there's no surprise why Oracle and IBM are the only two of the legacy companies on this list that have added market cap since 2007.  They've each added 55 billion of market cap.

It's because they both have embraced and put forth this vertical strategy, of not just being a horizontal specialist, but in Oracle's case, not only going all the way up through applications, but now with Sun, going all the way down through servers.

So that's -- the old mini-computer mainframe model is coming back, and IBM's got that too, with you know, going all the way up to global services.  So those two companies have embraced the vertical model, and I think Microsoft has to both move that way in the enterprise, as well as continue to do bold things and acquire companies that people lust after their products and services like Skype.

MR. LASHINSKY:  Do you think that's a good deal?

MR. QUATTRONE:  I'm not saying it's a good deal or not, but I think that in the consumer world, that Microsoft has to get products and services that people lust after and must have, in order to win there.

MR. LASHINSKY:  Would it be an alternative just not to be in the consumer?  I know they already made the decision to be there.

MR. QUATTRONE:  They could split the two companies into consumer and enterprise.

MR. LASHINSKY:  One last question from me, and I want to ask you a personal question, which is how do you approach psychologically, if you will, being on top of your game in an industry that you were on top of your game at 15 years ago?  Because correct me if I'm wrong, but investment banking, for the most part, is a younger man's game.  Is that true?

MR. QUATTRONE:  Yeah.  It's a war of attrition, so most of my peers have decided to leave the business.

MR. LASHINSKY:  They're playing golf.

MR. QUATTRONE:  They're, you know, mostly in private equity firms right now and on the beach.  But for me, when I had my time on the beach, I really went through a period of self-reflection, and thought about private equity and thought about, you know, doing pure charity stuff or getting into clean tech.

But what I discovered in a meeting with a client that I had known quite some time earlier, that what I really enjoyed doing is advising great companies who want to change the world.  That's what I'm good at.  I'd probably be, you know, not bad in investing.  There's a lot of people who are great at investing.

But I think I'm pretty good and experienced at advising companies, and I love that perch that it gives me.  It gives me a little bit of a window into the future, and an ability to help companies, in some small way, to help make the world a better place through changing the world.

So that's what I like, and I had to change my business model and our business model from all things to all people and big firm, to a small, focused firm where we focus on one service really, which is giving advice to companies based on their best interests, and focusing on the industry strategy and not worrying about the financial engineering so much.

MR. LASHINSKY:  Questions, please.  All the way in the back there.  Please identify yourself.

AUDIENCE:  It's Michael Shragg (ph).  What, you've done this tremendous comparison with market caps.  Is there any other metric since Bubble 1 or Bubble 2, given the changes in technology, that you pay more attention now, when you're giving advice or focusing on what the potential of a company is, that you didn't quite realize or didn't quite grasp 15 years ago?

MR. QUATTRONE:  That's a really good question.  I'm not sure there's any new metric.  I knew we were in trouble last time around when, you know, some pretty smart people were starting to question valuations, and the only answer was you just don't get it.  It's really, you know, multiple of engineers or multiple of losses or, you know.  When you start seeing stuff like that happening, you know, it's time to put a big short on the market.

But you know, now I think it's, you know, some of the companies that are coming public with very rapid growth are doing it local market by local market.  So they're asking you to take on faith well, you know, in the Midwest or in Chicago or in San Francisco, I'm doing really well.  If we can migrate that strategy into other local markets, yeah, we're investing in those, but they'll become profitable.

I think a lot of cohort analysis has crept into some of the mix.  But I think basically, it's really coming down to free cash flow, good old free cash flow, you know.  In the companies that are valued the most highly today, people are saying oh, it's not so much the earnings; it's not even EBITDA.  It's the company's ability to return cash flow after paying not just the operating expenses but the capital expenditures.  I think that's actually pretty healthy.

MR. LASHINSKY:  Up there, please.

AUDIENCE:  Peter Schwartz.  You talked about wanting to work with companies that change the world.  I'm a member of the Cult of Steve, and as I look out here in front of me, every single -- every laptop I can see in front of me is a Mac.  Is there any chance that our cult will actually take over the world, at least in terms of market share?

MR. QUATTRONE:  I think it already has.  You know, I think people love using that technology.  I was actually -- when I was at Morgan Stanley running the Technology Investment Banking Group, I drove the IT guys crazy, because I insisted on having a Macintosh and having to integrate into the Windows environment.

I think it made them a better IT organization, but I think, like I said, today the agenda in the industry isn't compatibility with what's on your desktop or what's in your server.  It's what applications can I use on a device where I didn't even know what's inside the guts of it?  So I think the tide has turned.  I mean I think that the fact that Apple is the number one market cap company in the industry, I think, says it all.

I think that they've got the momentum, and I think now that there's been a consumerization of technology in the enterprise, where people are bringing their own, and now the IT organizations are much better capable of providing the security and the integration and the networking to make those things happen, I think that the best technology has a better chance of winning, rather than what's safe.

MR. LASHINSKY:  An old friend and former employee of yours has a question.  Frankie.

AUDIENCE:  I do, I do.

MR. LASHINSKY:  Please identify yourself, though.

AUDIENCE:  I'm Liz Beyer (ph).

MR. QUATTRONE:  Beyer aware.

AUDIENCE:  I did used to have the privilege of working for Frank.  I don't know if you guys heard the last panel, because you were in the back, but hopefully you did, which was an incredibly interesting panel on secondary markets notably lacking any public equity investors.

I'm wondering what your thoughts are about letting management teams take out big hunks of money prior to an IPO, and also pushing back the amount of time the companies can stay private, and what the advantages or disadvantages may be?

MR. QUATTRONE:  You know, it's interesting.  A lot of, you know, old conventions have been shattered, in terms of what makes sense.  I think you have to ask yourself why do the management teams want to get liquidity.  The reason why people didn't want that to happen in the past was they thought that they would get so wealthy that they wouldn't come back to work the next day, or that they'd leave to go do something else.

I think these management teams are saying let me take a little bit of the risk out, so I can really swing for the fences, stay private longer, build a lot more value, and either go public or sell the company or do something different at a much larger scale.

So I think with those things it's always a question of what's the motivation.  If the motivation is to cash out, none of this is going to be a good idea.  If the motivation is hey, you know, let me just buy a house, so that my family's little more comfortable, but I really want to swing for the fences and build something long-term that really rocks the world, I'm all for it.

MR. LASHINSKY:  And can you generalize?  Is that your opinion of what's going on today?

MR. QUATTRONE:  I can't generalize, and you know, you have to look at each situation based on, you know, the specific facts.

MR. LASHINSKY:  Please.

AUDIENCE:  Frank Straydon (ph) from Intel.  I was struck by your comment.  In your first generation, obviously you spent most of your time in the U.S.  But I'm not sure if you're doing it differently this time, internationally.  But I would love to hear what you think of companies like Kwa Wei (ph) and Ziti and Infosys.

These companies have gone through tremendous transition over the last 10, 15 years.  But it's not clear if they've gone through the same ups and downs like the traditional, you know, big caps here have gone through.

MR. QUATTRONE:  Yes.  So you know we at Morgan Stanley and Credit Suisse and Deutsche Bank, we had global businesses.  So we had operations in Asia and in Europe, as well as the United States.  At Qatalyst, we have a lot more going on in Europe, but we sold Riot to Ten Cent, which gave us a pretty good visibility into what's going on in the online gaming market there.

International companies have always played a key role in technology.  I think if you look at Europe, the communications, the semiconductor industries have had very, very active participation and software has as well.  I think in Asia and in India, the services market, the Internet market, some of the biggest leaders, as someone else was saying earlier today.  Mary Meeker (ph), I think, was saying that there's three companies with a $50 billion market cap over there.

In the advisory part, which we serve, Asia's not all that well developed.  Europe is.  But companies like Kwa Wei, boy, they've put a big dent in the com equipment marketplace, and they are the feared competitor.

They've taken a lot of market share away from the traditional U.S. and European-based companies, and Infosys in IT services, the same thing.  So we do live in a global village, I'd say, with the Internet and broadband and social and Facebook and Twitter and Google, we are all part of the same global village.

So I don't think there's really any barriers to international companies really playing a leadership role.  I think the best example is three of the last five golf major championship winners are from Northern Ireland, which has 1.8 million people.

MR. LASHINSKY:  Frank, it's been a privilege for me to speak with you today.  Thanks for being here with us.

MR. QUATTRONE:  Adam, thank you very much.

MR. LASHINSKY:  I appreciate it.

(Applause.)

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