UBNT, Robert Pera and Basketball

Investment Analysis Clubs Saul’s Investing Discussions
#1

I don’t know any more about the Grizzlies than you do, but I think you’re just making assumptions without any real evidence. I’m not saying you’re wrong, but most of Pera’s net worth is tied up in company stock, so he certainly has a vested interest in seeing the company be successful. At the very least, you’d think that if he were genuinely bored with the company he’d shop it around and try to cash out rather than destroy his net worth along with his life’s work to this point.

I thought about this Neil, and I don’t think he’s bored. I think he has the hubris to think he can run UBNT with just half (or 40%) of his attention, while he runs the Grizzlies with the other half (or 60%). His first love is basketball. Here’s what I googled on him challenging Michael Jordan to a 1-on-1.

Michael Jordan Fires Back at Robert Pera, Calls 1-on-1 …
bleacherreport.com/…/1814600-michael-jordan-fires-bac…
Bleacher Report

Oct 17, 2013 - Asked about Pera challenging him to a game of one-on-one for charity, Jordan called the wager comical, according to the Charlotte Observer’s …

Grizzlies Owner Robert Pera Calls out Michael Jordan to …
bleacherreport.com/…/1811722-grizzlies-owner-robert-p…
Bleacher Report

Oct 15, 2013 - Robert Pera sure likes to put his money where his tweets are. … How many points would Robert Pera score on Michael Jordan in a one-on-one …

Grizzlies owner Robert Pera challenges Michael Jordan to …
sports.yahoo.com/…/grizzlies-owner-robert-pera-challenge…
Yahoo! Sports

Oct 15, 2013 - From Yahoo Sports: Memphis Grizzlies owner (and tech executive) Robert Pera has challenged Charlotte Bobcats owner (and greatest …

Michael Jordan: Robert Pera 1-on-1 challenge is 'comical …
www.sportingnews.com/…/michael-jordan-robert-pera-1-…

Sporting News
Oct 17, 2013 - Memphis Grizzlies owner Robert Pera is no slouch. He cycles through workouts on the court with a personal trainer and stands at 6-foot-3 …

Michael Jordan laughs off challenge - ESPN.com - Go.com
espn.go.com/…/michael-jordan-charlotte-bobcats-responds-on……
ESPN

Oct 16, 2013 - Michael Jordan laughed off the one-one-one challenge from fellow NBA owner Robert Pera on Wednesday.
Owner challenges Michael Jordan - ESPN.com - Go.com
espn.go.com/…/robert-pera-memphis-grizzlies-owner-wants-pl……
ESPN

Oct 16, 2013 - Memphis Grizzlies controlling owner Robert Pera is starting his second … in charge of an NBA team, and he’s already calling out Michael Jordan.

Here’s just a small sprinkling of what you’ll find by googling “Robert Pera basketball”. Look through them and decide if you really want this basketball obsessed kid managing your company with half or less of his attention.

Saul

Report: Robert Pera orchestrated one-on-one game with …
probasketballtalk.nbcsports.com/…/report-robert-pera-orche… Sports

Report details Robert Pera’s crazy Grizzlies ideas, including …
www.sbnation.com/…/robert-pera-mike-miller-grizzlies-dave-……
SB Nation
May 26, 2014 - If Robert Pera couldn’t fire Dave Joerger and make Mike Miller the player-coach of the Memphis Grizzlies, that’s OK. Pera had some other ideas …

May 26, 2014 - UPDATE: Grizzlies owner Robert Pera took to twitter to defend himself. … A basketball coach is feet from all his assistants, and there are only a …

Memphis Practice Court 9/28/13 - YouTube
Video for robert pera basketball
www.youtube.com/watch?v=OG_sCLvT8ds

Oct 13, 2013 - Uploaded by Flicker Flacker
Honestly, he’s not a pro basketball player, he’s an ENGINEER and a good …

Robert Pera (Grizzlies owner …
Grizzlies Owner Robert Pera Shows off Basketball Skills by …
bleacherreport.com/…/2112634-grizzlies-owner-robert-p…
Bleacher Report

Jun 27, 2014 - Pera posted this video on his Instagram account, which shows him actually dunking a basketball. Considering the average age of most owners, …

VIDEO: Grizzlies owner Robert Pera can ball - CBSSports.com
www.cbssports.com/…basketball/…/video-grizzlies-owner…
CBSSports.com

Oct 14, 2013 - Grizzlies owner Robert Pera can play some ball. … had this video meticulously edited and made to look as if he was a good basketball player.

Grizzlies’ Robert Pera refutes report team is in chaos …
www.cbssports.com/…basketball/…/robert-pera-refutes-re…
CBSSports.com

May 26, 2014 - college basketball story thumbnail … Robert Pera is at the source of controversy in Memphis. … Robert J Pera (@RobertPera) May 26, 2014 …

Robert J Pera (@RobertPera) | Twitter
https://twitter.com/robertpera
148 tweets • 29 photos/videos • 16.3K followers. Check out the latest Tweets from Robert J Pera (@RobertPera)

Story: Robert Pera: The Kid That Bought the Grizzlies
www.businessweek.com/…/robert-pera-the-kid-…
Bloomberg Businessweek

Apr 24, 2013 - Robert Pera has just lost a game of Horse, and he wants to play again. He’s palming the basketball as he paces the court across the parking lot …

Grizzlies owner Robert Pera shows his basketball skills by …
www.sportando.com/…/grizzlies-owner-robert-pera-shows-his-……

Jun 28, 2014 - Memphis Grizzlies owner Robert Pera showed on Instagram his basketball skills by making a two-handed dunk.

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#2

Well, but number of news articles about something isn’t much of a measure of the man. As from your own example, a single statement generated a whole raft of articles because writers found it interesting and provocative. If one were intentionally provocative … and a reasonably conspicuous person … it would be easy to keep a steady stream of news articles and opinion pieces going with 1% of his attention.

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#3

If one were intentionally provocative … and a reasonably conspicuous person … it would be easy to keep a steady stream of news articles and opinion pieces going with 1% of his attention.

Hi Tamhas, we each make our own evaluation about this kind of thing, and mine certainly isn’t inherently better than yours. I gave it a pass when things were going well, but with flat earnings for a year, I thought it was time to move on.

Maybe you missed this from my initial post on the subject:

Robert Pera is the owner of the Memphis Grizzlies; that is to say, he’s the man at the epicenter of the NBA’s strangest spectacle over the past week. CEO Jason Levien and assistant general manager Stu Lash were abruptly fired last week, and coach Dave Joerger seemed all but sure to hit the road and accept the Minnesota Timberwolves’ vacant job. Instead, news broke Sunday night that Joerger would stay in Memphis despite the organizational turmoil. As it turns out, Pera wanted to replace Joerger five games into his first season as a head coach, and Pera had some truly strange ideas as to how the team would move forward after hypothetically firing a coach with a 2-3 career record.

After the first five games of the season, Pera flew to Memphis and held individual meetings with players. In those meetings, he began offering a handful of suggestions, according to Sports Illustrated’s Chris Mannix, one of which was that Joerger should be fired as coach and replaced by player-coach Mike Miller…

This sounds like a heck of a lot more than 1% of his attention. A heck of a lot more!

Saul

#4

Hi all,

Pera seems to retweet a lot about basketball. Its most of his Twitter activity. He seems to tweet about Ubiquiti and technology … His Twitter activity is indeed a bit strange although we should probably assign different value to tweets and re-tweets. Also, I would say that celebrities use Twitter differently than common folks, and I know of many hardworking celebrities who are very active on Twitter talking about their cause, whatever that may be (for Pera it is basketball).

I think Saul’s main contention that earnings have been flat or down can’t be disputed. That’s plain fact. Given the earnings are flat, and the guidance is also flat, we have very little to go by to suggest that there will be near term growth. That leaves us with ascertaining potential for long-term growth and honestly I think there’s a lot of merit in questioning whether or not the leadership is up to it. Given the information Saul has shared, it becomes harder to believe that Pera is fully immersed into Ubiquiti. But then, we have someone like Musk who runs three companies and does it well, so may be it is okay for Pera to run Ubiquiti and a basketball team.

Honestly, I don’t see any fault in Saul’s assessment. The near-term numbers just don’t stack up … and Saul decided to move the funds to other faster growing businesses. FB and CRTO are fantastic choices, nothing wrong there.

I have been mulling on this. I have been thinking about what I like here: Solid insider ownership, differentiated business model, a lot of opportunity for growth, and very cheap valuation relative to other holdings (both on a trailing and forward estimate basis). If I wasn’t adding new funds to my account and wanted to invest in FB/CRTO, I could justify selling UBNT.

However, since I add new funds about once a month, I don’t think I need to make this decision, at least not right now, plus I have other dead wood to cull before I need to cull UBNT. I culled RAX … which was selling for 70x trailing earnings, with revenue and earnings being squeezed by the fierce competition in the cloud war between Amazon, Google, and Microsoft. I bough it sometime back when it was a “starter” stock in Rule Breakers. IMO, it is now a company that one would hold hoping one of the larger players buying it out for some premium! I have a few others that I could cull (GTLS anyone?). So, UBNT isn’t at risk I think, not right now.

I think the cheap valuation is one reason for me to continue to hold, but I will continue to closely watch the earnings …

Anirban

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#5

Understand, Saul, that I was in no way objecting to your underlying thesis … and yes, a period of flat growth in a company which one is investing in with the expectation of high growth is an obvious reason to be cautious. I was reacting only to the characterization that the number of googled articles on the sports side was indicative of anything. Sports stuff generates more news, even when it isn’t titillating. Add some controversy or spice and it is going to generate a lot more press than mere company business. It is just non-evidence for the amount of attention he is paying to each area.

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#6

Saul,

At the outset you have better track record than me in the last few years of my investing. And I see your impatience as a key to your success. I have often ended up holding wrong ideas partly in hope and partly because it is hard to let go.

On Robert Pera and Basketball, Elon Musk manages 3 technologically intensive companies, Google is many companies unto itself and so is Amazon. So though I do not like his distraction, I am okay as long as he delivers with UBNT.

What I like about Robert Pera is his philosophy to UBNT resonates very closely to what I have come to strongly believe. Product centric approach, invest in the best R&D, eliminate sales and marketing overhead through a community approach, high insider ownership. I am in this only for this philosophy. I believe it has and will disrupt several companies. There is too much inefficiency baked in even successful technology giants. It helps that Pera really believes in this philosophy.

This approach has seen them build UBNT from scratch with unbelievably cheap high quality products. An analogy to their product can be iphone. When it came out, it was so differentiated it had incredible growth rates till adoption reached some critical mass. The next iterations of iphone while an improvement, did not lead to the same growth rates. I think they may be in a similar situation with WISP and we may have to wait till their new enterprise products gain sufficient traction.

I do not understand enough of basketball, to make an assessment of how Grizzlies are doing this year…maybe more knowledgeable folks can fill me on it… from a cursory glance…it seems they are doing very good this year… http://espn.go.com/nba/standings compared to 2013 and 2012. They are at number 1 or 2 in Western conference.

Did Pera help it turn around ? maybe more knowledgeable folks can fill me on it

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#7

I really don’t think that Pera owning a Basketball team could make or break UBNT. There are plenty of people that are very successful that do more than two things in their life. I don’t think that anyone would say that Mark Cuban is only vested in his basketball team although you see a lot of stories written about him and the Mavericks. So whether someone spends a little time away from their business doesn’t seem like something I am going to worry about. Pera said on the last conference call the next few years will be the most impressive. I am willing to wait and see if he is right because if he is my portfolio could be very impressive too :).

Andy

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#8

I guess I’m the only one who is concerned about Robert Pera’s shenanigans, so maybe I should reevaluate my decision. UBNT is down about $1.50 from when I got out so I guess I could reestablish a small position without regret if I decide that’s the thing to do.

One thing though: Several people have commented that Elon Musk seems able to participate in three companies, so why not Robert Pera. Well Elon Musk is a genius, who seems to be able to get backing from everyone from Goldman Sachs to BMW and Panasonic. Robert Pera seems to run around making a fool of himself. There’s no comparison between him and Elon Musk. That’s not saying Pera’s basic concept for UBNT is wrong. It’s excellent. It just makes me wonder about future execution when he seems so preoccupied with challenging pro basketball players and then dashing across the country in October to try to fire his coach (for which he was roundly ridiculed), and then doesn’t seem to know the details of his revenue sources in the conference call (no wonder). JMO

Saul

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#9

Saul, et al,

I posted a similar concern on the RB board back in July:

http://discussion.fool.com/1069/alex-pera-is-definitely-an-inter…

Here’s the text for those without a subscription:

"Pera is definitely an interesting guy and clearly impressive at such a young age. I really agree with his sentiment in this blog:

What does this mean moving forward? As an Engineer first who enjoys building great products, and a Businessman second who has no patience for politics and inefficiencies, I feel very fortunate to be at the early stages of my career in this point of time. Moving forward, I can say with certainty that the most successful tech companies of the future will be the ones who deliver the best products and technology value first and foremost which empower customers. This is very different than the traditional business model which leverages relationships to control information asymmetries and extract profit from customers.

Three companies that I believe are positioned well in an increasingly information transparent world are: Tesla (Electric Vehicles), Xiaomi(Smartphones), and Ubiquiti Networks (Enterprise/Carrier Technology). What is important to note is that although these companies deliver technology value very efficiently, all take concentrated R&D approaches to produce leading edge performance products which in turn generate evangelism for their brands.

http://www.rjpblog.com/

Here is my one possible concern about Pera: the distraction as an owner on the Memphis Grizzlies. If you follow Pera on Twitter, you’ll see that his NBA team is what he tweets about the most (by far). His last blog post is the one I linked and is over a year old. Google him, he does not seem to be out in the public selling his vision, compare him to Hastings (NFLX), Musk (TSLA), Hoffman (LNKD) or Benioff (CRM). I don’t see these other visionaries distracted by such outside interests (It’s hard to imagine a guy like Jobs ever tweeting about basketball!) To change the world as you describe takes focus. Did Pera become too rich, too early? Is he still hungry enough to take Ubiquity to the next stage?

I’d be interested in your and others’ take on this."

I became a bit more comfortable with Pera’s dual roles after I listened to this excellent interview on sports radio (of all places!). This is a long interview, but for those interested in UBNT and Pera it is worth the time:

http://media.espn929.com/a/93682549/grizzlies-owner-robert-p…

Best, Swift…

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#10

Here is my one possible concern about Pera: the distraction as an owner on the Memphis Grizzlies. If you follow Pera on Twitter, you’ll see that his NBA team is what he tweets about the most (by far). His last (UBNT) blog post is the one I linked and is over a year old. Google him, he does not seem to be out in the public selling his vision, compare him to Hastings (NFLX), Musk (TSLA), Hoffman (LNKD) or Benioff (CRM). I don’t see these other visionaries distracted by such outside interests (It’s hard to imagine a guy like Jobs ever tweeting about basketball!) To change the world as you describe takes focus. Did Pera become too rich, too early? Is he still hungry enough to take Ubiquity to the next stage?

Thanks Swift, I was thinking I was the only one. You know, the adjective about him that I see most often in the sports news clippings is “bizarre behavior”. I just don’t see that about Musk.

Saul

#11

By the way, Pera’s begins talking about UBNT at minute 41 in the interview linked in my previous post. Before that its all talk about his role as owner of Grizzlies, which will give you good insight his role there and to his personality and the way he thinks about management and leadership. However, if you just want to hear what he says about UBNT, start at minute 41.

Saul, regarding your concerns about Pera, I would encourage you to question whether or not some of your concerns are based on a bias you might about young leaders. I see Pera as a new generation of leader who is adopting and expressing the values of the millennial generation: which include a belief in social connections through technology, collaboration over hierarchy, a distrust of bureaucratic “old school” institutions, and an inclination towards building community and transparency to address societal challenges. Look at the growth of the craft brewing industry as a place where the millennial are changing the industry and they’re doing it the above values as the foundation.

Regarding all the articles you posted about his challenge to Jordan. I see that as a pretty saavy PR move that brought lots of free media to the Grizzlies as opposed to “foolishness.”

Best, Swift…

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#12

Saul,
I wasn’t trying to get you to change your mind. I believe you have some valid points about how the company is performing but I just didn’t think that his owning the Grizzly’s had anything to do with the performance of the company. I think you should manage your portfolio the way you see fit because it has done you well. I don’t have your skills or aptitude for making those decisions so I need to think a little further out and think where can this company be in 5 years.

Andy

#13

Musk also works more than 60 hours a week. He is CEO of 2 of his companies but the head of the BOD of SCTY and says he spends little time with SCTY.
He definitely has little free time for sports. because his companies and his family are everything to him.

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#14

He definitely has little free time for sports. because his companies and his family are everything to him.

I think Pera is very interested in both of his companies, one of them happens to be a basketball team and the other happens to be a communications equipment company. Both of them are companies that any “Professional” would be happy to own.

Andy

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#15

Good point. But basketball and UBNT are completely different.

Musks investments are interrelated.- for instance he used Space X techs to help with aluminum body problems at Tesla. And SolarCity is using Tesla batteries and will be a customer of the gigafactory. Tesla will be using Solar City panels eventually at most of their Superchargers. And headquarters of all are located close together in California little travel time.

Add to that that Musk is a genius, one hour of his time is worth more than one hour of most CEO. Is Pera that smart? I doubt it but who knows. That being said Musk has admitted that the pace of working 60,70, 80 hour weeks is too much, he will probably leave the CEO post and become head of BOD of Tesla in a few years.

At this point my interest in UBNT is theoretical, I have sold my shares.

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#16

Musks investments are interrelated.- for instance he used Space X techs to help with aluminum body problems at Tesla. And SolarCity is using Tesla batteries and will be a customer of the gigafactory. Tesla will be using Solar City panels eventually at most of their Superchargers. And headquarters of all are located close together in California little travel time.

I am not sure what Musk has to do with Pera, Ubnt, and the Grizzlies. I don’t really think we should be discussing the two together. I can understand why people may want to leave UBNT behind but if its because Pera is involved in the Grizzlies and UBNT I think that is not the way to look at this. Many people split their time up between different ventures. My point is that a business is a business, and while some business’s obviously take different skills, underneath them all there are many skills to running them that are the same. I think if you are going to look at UBNT, you should look at it as a stand alone business and see how it is doing, what it has gone through, and whether the CEO has the ability to keep it growing.

I think the business has declined, but is it in long term declined? I personally do not think so. Pera said you must look at this business in 3 year increments. He said that it tripled in the last 3 years and it will even do better in the future.

Does the CEO have credibility. I would say yes, he brought the company out of the counterfeiting problem in 2011, 2012 and grew it again. Even through all of those problems he was working on buying the Grizzlies. The company has tripled during all of that turmoil and the counterfeiting problem has been stopped with the Chinese government cracking down on the counterfeiters.

http://dl.ubnt.com/newsletters/0148.html

Does the CEO have the ability to grow the company. I would say yes. He started the company from scratch in 2005. He is the founder and this is his baby. Believe me he has not gotten tired of his company but has other interests also. I believe him when he says the best is yet to come.

I hold my shares long and expect good things to come in the next three years. But what do I know?

Andy

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#17

Great interview. Thanks

I became a bit more comfortable with Pera’s dual roles after I listened to this excellent interview on sports radio (of all places!). This is a long interview, but for those interested in UBNT and Pera it is worth the time:

http://media.espn929.com/a/93682549/grizzlies-owner-robert-p……

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#18

After listening to the interview, I wouldn’t say that he sounds distracted. He even said at around 1 hour that he is very dedicated to the idea of changing the world. “I am not buying anything that will weight me down. In fact, everything I do is designed to accelerate the business. Of course, owning a team is a passion.” Owning the Grizzlies is something he is passionate about, but from his description in this interview he is way more focused on growing his company.

This discussion has actually made me convinced that he is going to do something amazing with UBNT.

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#19

This thread made me think of a couple of points…

  1. the saying - if you want a job done give it to a busy person

  2. similar CEOs in high profile bifurcated situations involving public attention and performance pressure in multiple spheres of life.

Leaving aside whether or not you want to compare Pera with Jobs or Musk. Some comparisons that spring to my mind included:

  1. Ranadive Vivek
    http://en.wikipedia.org/wiki/Vivek_Ranadiv%C3%A9
    This guy is quite an good analog for Pera. He was a technology entrepreneur, a founder and CEO of Tibco systems and is also the leader of the ownership group for the Sacramento Kings in the National Basketball Association (NBA). He also found time to coach his daughter’s team. He had a very hands on role and exhibited high accountability for everything that was going on at Tibco.

  2. John Mackey
    http://en.wikipedia.org/wiki/John_Mackey_(businessman)
    Mackey is the founder and CEO of Whole Foods but is also the leader of the conscious capitalism movement and author. He is also very public and vocal about matters beyond Whole Foods including economics, healthcare, climate change etc.

Both these 2 are extraordinary as is Pera. I don’t necessarily believe that Pera is unduly distracted. I will judge his abilities purely in connection with UBNT and the performance of UBNT according to its business fundamentals and ability to capture potential.

Ant

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#20

. That’s not saying Pera’s basic concept for UBNT is wrong. It’s excellent. It just makes me wonder about future execution when he seems so preoccupied

What I worry about is if the model can really scale beyond being a good product loved and improved by the tech geeks. While they will have a lot less overhead due to the lack of marketing/sales staff, they are probably distributing their products through the same Distributors and partners that will sell Cisco, Aruba, Rucku, etc

Those companies will have channel and distributor account managers that work with them on marketing programs, rebate programs, and maybe more direct sales people that can help with vertical knowledge. All of it is kind of expensive.

So when they sign a new distributor in Asia without any local account manager to support them, that distributor will also not put in any resources to push the product. They will just ask for a margin and only order more if it moves without them having to put in any effort.

I give little bonus points to any announcement that is about signing up a new Distributor partner in a region and completely discount any release that talks about them having a minimum order commitment. These type of commitments are seldom enforced.

I hold some UBNT and will watch to see if they can scale. I would guess at some point they will put some resources in to help manage the channel in order to get to the next level.

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