"In the end, with his company hanging by a thread,
Rebel.com chairman and majority owner Mac Brown didn't recognize
his peril. He was in his lawyer's office in downtown Ottawa on July
6, wrapping up a three-hour conference call with Fuji Xerox
executives based in Tokyo and Palo Alto, California. It was the
latest of a series of talks over the terms of a proposed
partnership that carried huge possibilities for Rebel. Fuji Xerox
is $7.9 billion-a-year conglomerate that markets digital colour
copiers and other office technologies. The Japanese firm wanted to
market Rebel's flagship computer server, the NetWinder, to its own
customers in Asia.
The key provision of the proposed deal was that Fuji Xerox was
prepared to invest heavily in Rebel's NetWinder unit -- the line of
small business computers Brown acquired from Corel in exchange for
roughly $5 million worth of Rebel shares early in 1999.
Negotiations had been running off and on for nearly eight
months. The Fuji Xerox team had examined Rebel's operations and
technology to the point of exhaustion. Brown and his colleagues
were convinced Fuji Xerox was ready to sign. But the July 6 call
should have set off alarms. The Japanese were questioning Brown
about the pricing details of the proposed licensing agreement. They
also wanted Rebel, not Fuji Xerox, to pay the Japanese withholding
tax applicable to future sales of NetWinder products in Asia. Brown
figured that arrangement could mean a substantial reduction in
Rebel's profit margins."
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