During July and August, Simon devoted most of his energy to overseeing the Westeros Corporation's financial reports for the second quarter of 1991. Due to the company's expansion and the initial stages of merging, the first quarterly financial report following the merger with MCA under Daenerys Entertainment wasn't finalized until August 21st.
From April to June 1991, the newly formed Daenerys Entertainment Group reported total revenues of $1.93 billion, making it the second largest in Hollywood after Time Warner, which boasted annual revenues in the tens of billions.
However, compared to the substantial profits of the same period last year, this quarter saw only a modest net profit of $28 million post-tax, due to significant expenditures related to staff reductions, debt settlements, and asset write-offs during the merger process.
Large mergers and acquisitions often lead to considerable losses over one to two years, as seen with Time Warner in the recent past. Steve Ross, dealing with the massive debts from previous acquisitions, was in a particularly tough situation.
Thus, Simon was generally satisfied with the financial results given the circumstances.
Following the successful IPO of America Online, the IPO for Cisco began to accelerate. With the internet industry's rapid growth over the past year, Cisco's revenue had also increased sharply. In the second quarter alone, Cisco's revenue reached $298 million, a 26% increase from the first quarter. At this rate, the company's annual revenue for 1991 was projected to hit $1.2 billion.
Despite most income being reinvested into business expansion, Cisco still posted a quarterly net profit of $16.79 million. With the Westeros system almost monopolizing the core patents of the World Wide Web, Cisco held over 95% market share in the production of routers and switches. Given this clear monopoly, management projected that net profit margins could exceed 20% in the coming years if Cisco maintained its dominance in the internet equipment market.
Unlike America Online, which operated primarily on the East and West Coasts, Cisco targeted the broader North American and overseas internet equipment markets. Coupled with its monopoly on foundational web patents, this positioned Cisco's IPO as highly anticipated by the capital markets.
Before America Online's listing on NASDAQ, Cisco had already submitted its prospectus to the Securities and Exchange Commission (SEC). The planned IPO would issue approximately 40 million new shares, about 15% of the adjusted total share capital of 271 million shares post-IPO.
Moreover, the IPO introduced a dual-class stock structure for Cisco. Post-IPO, Westeros Corporation's ownership would decrease from 57.5% to 50.1%, but with Class A shares holding ten times the voting power of common shares, Westeros would still control 56.7% of the voting rights.
There was natural opposition from other shareholders regarding Westeros Corporation's aggressive stance on maintaining absolute control over Cisco. The stakes were not as high as America Online's pre-IPO ownership of 75%, which almost led to an IPO crisis.
However, after Simon's uncompromising declaration that he would either maintain the dual-class structure or cancel the IPO altogether, the reluctant shareholders acquiesced.
Unlike the America Online IPO, which used a 35 times forward price-to-earnings ratio due to the company's negative net profits, Cisco had maintained a relatively healthy profit margin in the first two quarters of 1991, with expected annual net profits around $65 million.
Morgan Stanley did not base the valuation on Cisco's 5% net profit margin from the second quarter alone but considered factors like corporate revenues, cash flow, and market share, resulting in a valuation comparable to America Online's at $3 billion.
Simon, however, was not satisfied with this valuation. He remembered that during the peak of the dot-com bubble in 2000, Cisco's market value had soared past $600 billion, while America Online had not exceeded $200 billion—a threefold difference.
Even now, although the two companies had similar revenue scales, the disparity was evident. America Online operated only in a few states along the U.S. coasts, while Cisco almost monopolized the North American internet equipment market and faced no competitors overseas.
Therefore, Simon insisted that Cisco's valuation should be significantly higher than America Online's. After several rounds of negotiations, Cisco's IPO valuation was set at $5 billion, with an initial share price range of $17 to $19 proposed in the revised submission to the SEC.
Despite America Online's IPO success, Simon's insistence on a high valuation meant that Cisco's IPO had to implement a greenshoe option to manage potential post-listing price volatility.
However, this greenshoe mechanism did not involve issuing new shares but rather relied on 6 million shares provided by other Cisco shareholders as a reserve.
Cisco's shareholders, some of whom had been invested since the company's founding in 1984, exhibited a strong desire to cash out. Redwood Capital, among others, saw the greenshoe option as an opportunity
to satisfy their needs.
Per the agreement with Westeros Corporation, if Cisco's share price increased post-IPO, other shareholders would offer an additional 6 million shares to investors. If the share price fell, Westeros Corporation would buy up to 6 million shares to stabilize the stock price.
In fact, if necessary, Simon was even prepared to buy all of Cisco's public shares and take the company private again.
Nevertheless, Simon was confident that Westeros Corporation's need to purchase shares to stabilize the market would be unlikely.
With preparations underway, Cisco's IPO was scheduled for September 6, a Friday, approximately two months after America Online's IPO.
These consecutive IPOs made Simon realize he had already kickstarted the internet era ahead of schedule. Historically, the World Wide Web standards had only begun to take shape in 1993, with the internet industry booming by 1995. Now, with Simon's introduction of a complete World Wide Web technology plan in 1990, the internet era had arrived earlier.
The internet had its beginnings in the 1960s, and computers emerged in the 1970s. After decades of development, the internet industry had cultivated fertile 'soil.' The World Wide Web, planted three years early in this rich soil, quickly took root and spread.
Moreover, with Simon—a 'farmer' with decades of future experience—nurturing it, technologies like graphical interface browsers, the Egret portal site, and America Online's early efforts all provided super nutrients for this seed's growth and dispersal.
Cisco's roadshow, beginning on August 26, did not require Simon's personal involvement.
After his trip to Europe in early July, Simon had spent most of the past month in Los Angeles, working and accompanying Janet, who was five months pregnant.
After several prenatal exams, the baby's gender was confirmed to be a boy, which delighted Janet.
She had been particularly pleased because she couldn't imagine a girl named 'Melbourne' and had already planned to claim the backup name 'Seattle' from her female assistant if the baby were a girl, as 'Seattle' seemed more suitable for a girl.
Of course, being able to give birth to the Westeros family's firstborn son was another reason for her happiness.
After detailed genetic testing confirmed the baby's health, Simon's last bit of worry dissipated.
Certain marital relations have persisted for thousands of years and still exist in most modern societies, which speaks to their rationality. Simon's concerns were more a product of the cultural and educational environment from his previous life.
At Daenerys Studios.
It was August 28.
The internal screening of "Toy Story" concluded at 4 PM in the screening room of Administrative Building No. 1.
The Pixar team had been busy for over two years on this 3D animated film, which ultimately cost $35 million, $5 million more than the original timeline's version.
This did not even account for some of the technological research and basic equipment investments.
To support the production of "Toy Story" and the development of CG technology at Daenerys Special Effects, Simon had built a rendering farm at Daenerys Studios, consisting of 1,000 top-of-the-line graphics workstations.
The concept of a 'rendering farm' did not yet exist in this era. Many studios involved in producing computer animations typically just accumulated a large number of variously configured workstations in one room for graphics rendering, making this the world's first rendering farm, which alone cost $20 million.
Following the success of heavy CG-utilizing blockbuster films like "Batman Begins," "The Dark Knight," and "Terminator 2," the rendering farm built by Daenerys Entertainment gradually garnered industry attention.
However, few were willing to invest such an amount. For small animation and special effects companies, $20 million was an unreachable sum, and the major Hollywood studios capable of such investment lacked the suite of professional software developed by Daenerys Entertainment over the years.
Fortunately, Daenerys Entertainment's special effects studio and rendering farm did not turn away external orders.
This was also part of Simon's strategy; in the short term, he did not wish for a second studio with top-tier special effects capabilities to emerge in Hollywood.
In the prime timeline, Disney, having acquired both Pixar and Lucasfilm—which owned Industrial Light & Magic—was distinctly ahead in special effects technology. The clearest comparison was between the Marvel Cinematic Universe and the DC Extended Universe.
The "Avengers" films could produce long daytime special effects sequences that thrilled audiences with superheroes smashing through obstacles.
Conversely, most DC superhero films felt 'dark.' Many special effects scenes occurred at night, and some shots even seemed reminiscent of low-budget online games. This was not accidental; night-time effects require lower CG quality and are cheaper to produce.
Now, Daenerys Entertainment led the industry by at least three years in special effects. Pixar's 3D animation software, Randerman rendering software, and Daenerys Special Effects' Maya software were unparalleled
in the industry and protected by early-established software patents.
With Simon's continuous investment in film special effects technology, this advantage was set to endure.
The new version of "Toy Story," though released four years early, was technically more mature due to Daenerys Entertainment's unwavering support and investment. Both the 3D visuals and character animations were smoother than those of the version Simon remembered, which took five years of trials to complete.
Although those involved in the test screening were uncertain whether a 3D animated film would be well-received by the market, they all agreed they had spent a very entertaining 90 minutes.
After the screening and a discussion on the film's promotional strategy, Simon pulled John Lasseter aside to generously praise his work.
"One more thing, John," Simon said as they walked through the studio complex. "Didn't the 'Lion King' production team want to visit Africa for inspiration?"
John nodded. "They're hoping to see the landscapes of the African savannah to enrich some of the film's scenes."
"Coincidentally, Highgate Studios is preparing a documentary about the African savannah. You should contact Ella tomorrow and select some people to join them."
The idea for a documentary about the African savannah was sparked by the successful Antarctic documentary "Ice World" during the summer season.
With a production budget of $3 million, "Ice World" had grossed $51.69 million in North America over three months, outperforming many major summer films with budgets over $30 million.
As a result, Hollywood studios were scrambling to greenlight various documentary projects.
Having tasted success, Daenerys Entertainment naturally planned to produce more than just one documentary.
Following "Ice World," the original team had begun preparations for a penguin documentary similar to "March of the Penguins" from Simon's memory.
Additionally, Simon had approved a documentary about the African savannah, with the production team set to travel to Africa next month—perfect timing for the Pixar team working on "The Lion King" to join them.
After a brief chat, the two parted ways in the parking lot.
Returning to Cape Doom Manor, Janet was already preparing dinner.
Since becoming pregnant, she had stepped down from her role at Cersei Capital but remained busy managing the Simon & Janet Westeros Foundation, planning the Westeros Medical Center, attending regular prenatal classes, and monitoring the progress of the Westeros Tower project, among other activities. This kept her from feeling the loneliness and insecurity that some expectant mothers experience.
Simon had initially worried that his work commitments and occasional trips away from Los Angeles might trouble Janet, but he soon realized such concerns were unfounded.
After dinner with Janet, Simon had to leave Los Angeles overnight.
This time, he was headed to New York for Time Warner's long-prepared stock offering, which was set to take place the following day.
Steve Ross had personally called Simon several times, hoping he would make an appearance, and Terry Semel had also personally invited him. Thus, Simon had no choice but to head to New York to support the event.
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