Monday, November 1, 2010

Microsoft, Cisco Alumni Use Tech Savvy to Get Giants to Series


The San Francisco Giants, backed by owners from Microsoft Corp., Cisco Systems Inc., Yahoo! Inc. and Intel Corp., are bringing Silicon Valley knowhow to bear as they take on the Texas Rangers in the World Series.

Under former Microsoft General Counsel Bill Neukom, who took over as managing general partner in 2008, the team is increasingly using technology to hone players’ skills and draw more fans. The Giants also put a bigger emphasis on pitching after years of relying on Barry Bonds’s home runs.

The Giants use motion-sensor suits to help evaluate throwing and hitting mechanics and a specially outfitted pitching machine that shoots different-colored balls at more than 100 miles per hour (160 kph) to help batters overcome blind spots. The team also is the first to use software that sets ticket prices based on supply and demand, similar to airlines or hotels. Such innovations, along with players’ raw talent and a $357 million waterfront ballpark, have helped boost the club’s value almost fivefold since the ownership group took over.

“The point is to be restless about where technology can help us on the baseball side and on the business side,” Neukom, also the Giants chief executive officer, said in an interview in the team’s offices at AT&T Park. The Giants got an early lead in the series last night, beating the Rangers 11-7 in game one.

Franchise’s Value

The ownership group, called San Francisco Baseball Associates LP, bought the Giants for $100 million in 1992, saving them from moving to Florida. The team is now worth $483 million, making them the ninth-most-valuable franchise among the 30 clubs in Major League Baseball, according to Forbes magazine. The Giants also own a third of Comcast Sports Net Bay Area, the cable channel that carries their games.

The Giants’ backers, who get seats between home plate and the dugout along the third-base line, include Arthur Rock, a former Intel chairman and Apple Inc. director; Yahoo board member Arthur Kern and the company’s former president, Jeff Mallett; Cisco executive Dan Scheinman; and venture capitalist Paul Wythes. Hewlett-Packard Co. co-founder William Hewlett was an owner before his 2001 death.

“We’re talking about some of the premier guys in Silicon Valley,” said Larry Baer, the club’s president and chief operating officer. In addition to the technology industry veterans, the 31 owners include investor Charles Johnson, chairman of Franklin Resources Inc., a mutual-fund company in San Mateo, California.

Monetary Boost

Reaching the World Series is worth “several millions of dollars” in additional revenue, Baer said, without elaborating. About 4,000 new season ticket applications have been received by the club since the beginning of September, when the team began its push toward clinching the 21st National League title in its 127-year history. The Giants haven’t won a World Series since moving to San Francisco from New York in 1958.

“The real benefit is 2011, where you can drive season tickets, where you can drive sponsorships, where we can drive pricing,” said Baer, 53.

Playing in the World Series will bolster the Giants’ season-ticket sales, merchandise orders, endorsement deals and TV revenue, said Richard Walden, the head of sports business at JPMorgan Chase & Co.’s Private Bank unit. Still, consistently winning year after year does more for a team’s value than a single championship appearance, he said. JPMorgan helped the Giants finance their ballpark, which opened in 2000.

Long Run

“It will translate over time if they maintain the same discipline with regard to the on-the-field and off-the-field management of the club,” Walden said. “It doesn’t necessarily make a huge difference unless you have a long history of winning.”

The team’s investors aren’t seeking a short-term moneymaker, Neukom said.

“The basic business model is to invite investors who are passionate about baseball to make an investment and to recognize, however, that it is not a near-term strategic investment,” Neukom said. “If you want to have a fund for your grandchildren to go to private schools in case the public schools aren’t what you want them to be, then don’t put that money here.”

Neukom, who became an owner in 1995, orchestrated Microsoft’s legal defense against antitrust allegations by the U.S. government in the 1990s. He first started working with Microsoft after Bill Gates’s father asked Neukom to help the younger Gates build the software company, which had about a dozen employees at the time.

Gates’s Pitch

Neukom, 68, also helped give Gates some pointers on baseball. In the late-1980s, Gates was invited to throw out the first pitch at a Seattle Mariners game. To practice the day before, Neukom, Gates and Mariners catcher Dave Valle went into the woods behind Microsoft’s headquarters for a few warm-up throws.

“He threw about six pitches, went back to work and the next night in the Kingdome he threw a nice pitch,” Neukom said.

Neukom took over as the team’s managing general partner after former Safeway Inc. CEO Peter Magowan stepped down. Magowan and Baer led the effort to purchase the Giants and build the ballpark adjacent to San Francisco Bay.

When the Giants sought investors to help keep the team from moving to Florida in the 1990s, technology executives were an obvious option because of Silicon Valley’s proximity to San Francisco, Baer said. The technology hotbed, home to Apple, Intel and Hewlett-Packard, is about 40 miles from the city.

“We were dialing for dollars,” he said.

Dot-Com Boom

The Giants’ ballpark was the first privately financed major league venue since Los Angeles’s Dodger Stadium in 1962. The effort was aided by the dot-com boom, Baer said. It would have been tougher to get funding to build the ballpark after the bubble burst in 2000, he said.

The stadium was the first to offer Wi-Fi Internet service to fans in 2004. Now the Giants are exploring ways to distribute content on mobile devices and social networks, Neukom said.

When he took over, the team was five years into a six-year playoff drought and rebuilding after Bonds’s departure. Bonds, who set home run records as a Giant, saw his career marred by steroids allegations. He is scheduled for trial in March on charges of obstruction and lying to a federal grand jury in 2003, when he said he never knowingly took the drugs.

Neukom aimed to create a new vision and wrote a manifesto called the “Giants Way,” outlining priorities, including identifying and nurturing talent, teamwork and conditioning.

The Giants’ four starting pitchers in the World Series came up through its minor league system. That includes two-time Cy Young Award winner Tim Lincecum, who pitched 5 2/3 innings in last night’s game. The bearded reliever, Brian Wilson, and rookie catcher Buster Posey also were drafted by the team.

“We’re very proud of that,” said Neukom, who was showered with champagne in the team clubhouse after the Giants defeated the Philadelphia Phillies to win the National League pennant and earn a spot in the World Series. “If we’re playing good baseball, lots of other good things will follow.”