SUNNYVALE, CA— Zoho is up for sale following the failure of its proposed deal with Starwood Hotels & Resorts to act as the e-purchasing platform for the hotel conglomerate. The e-procurement provider is exploring three options, said President/CEO Chris Hjelm. “We either have to find a way to raise money, sell the company or just shut it down,” said Hjelm. “We’re pursuing the sale— that’s our primary option— and we have sent materials to in excess of 30 companies to solicit interest.” According to Hjelm, a promotional kit has been sent out to several companies to find a potential buyer. About half of the companies contacted have responded and expressed various degrees of interest in the offer. Furthermore, Hjelm says the May 1 article published in the Wall Street Journal detailing Zoho’s financial woes has resulted in five more leads. Though there are several factors behind Zoho’s derailment— including slow adoption of technology within the hospitality industry and a drop in the market valuations of tech companies— the failed deal with Starwood has left the biggest scar on Zoho’s financial records. “We were unable to complete the Starwood transaction. The deal fell through in the end of February, and we lost our lead customer. We think a lot of other hospitality companies out there would have followed Starwood’s lead in joining us, and we lost momentum when we lost them,” said Hjelm. “We developed a custom product for Starwood and started to build ourselves up quite a bit to service them. This raised overhead quite a bit and then the deal fell through,” Hjelm added. Hjelm was unable to pinpoint an exact price range of what he expects the company to fetch, but he was sure that it would be in the sub-$50 million range. “It’s hard to set a price range because it depends on the buyers. It depends on what they plan to do with the company and how many companies, if any, end up bidding for Zoho. Since the value of technology-driven companies has dropped, our price has dropped. Going back, we could have gotten four to five times what we will end up selling Zoho for,” said Hjelm. Although Hjelm plans to stay on at Zoho and see the company through its sale, Greg Morse, the company’s vp/corporate marketing, is actively seeking a new position. Zoho’s staff is currently down to 25 employees from a former peak of 200. Finally, Hjelm noted that it’s not certain that a hospitality-related company will purchase Zoho. He mentioned that tech companies interested in picking up Zoho’s solutions, as well as companies with marketplaces in other industries have expressed interest in purchasing the company. Hjelm, however, hopes that Zoho’s technology will stay within the hospitality industry. “In a macro sense, it’d be nice to keep the technology in the industry and keep the competition up so prices and products available keep getting better and better,” said Hjelm. Zoho is not alone in its financial woes. In early November 2000, hsupply.com, an e-procurement company also serving the hospitality industry, shut down due to lack of funding.
