Non-Profit Tech Blog

Straight off the latest EDGAR filing for Kintera:

GREENWAY CAPITAL

January 26, 2007

To the Directors of Kintera, Inc.
Alfred Berkeley
Dennis Berman
Philip Heasley
Allen Gruber
Robert Korzeniewski
Deborah Rieman
Hector Garcia-Molina
Harry Gruber

c/o Kintera, Inc.
9605 Scranton Road, Suite 200
San Diego, California 92121

We currently hold approximately 5.8% of Kintera, Inc. common stock and have become increasingly troubled by Kintera’s pattern of losses, progressively dilutive financings, inaccurate guidance, and plunging credibility within the investor community. We believe that Harry Gruber, Chairman & CEO, has reached his limits with respect to moving Kintera forward. This letter is not a personal broadside on Mr. Gruber who exhibited the entrepreneurial vision and skills necessary to lead Kintera through its formation and initial public offering. However, after reaching a high of $17.29 during the months following the IPO, Kintera’s share price has plummeted to the $1.25 levels. With Mr. Gruber at its helm, Kintera has not demonstrated a sufficient ability to achieve its own projections, to drive operational efficiencies and the integration of acquisitions, to manage a productive salesforce which delivers organic growth, or to even provide a credible estimate for when the Company will be profitable. At the same time, it appears to us that Mr. Gruber runs Kintera more as a family business than as a value maximizing public company, while repeatedly accessing the capital markets without regard to the dilution of existing shareholders. We believe that Kintera, under the continued leadership of Mr. Gruber, is squandering the terrific potential that its solution and targeted markets represent. We simply do not understand how the Board of Directors can in good faith continue to endorse the leadership of Mr. Gruber given these results.

It then goes on to discuss the suggested remedy for Kintera’s maladies.

Why is this record of losses and demonstrated inability to run this business as a profitable business model acceptable? Isn’t it time for Mr. Gruber to step aside from day to day management and allow seasoned operators to run Kintera as a profitable business? We believe it is your duty as directors to hold management accountable and to make replacements as necessary.

We also believe that it is poor governance for the Chairman and CEO to be the same individual. In all likelihood, because it endows him with the ability to control the agenda at Kintera, Mr. Gruber’s role as Chairman has allowed this sort of unacceptable performance by a CEO to continue far longer than we believe would be typical.

In the latest quarterly press release Mr. Gruber actually trumpeted being named to a list of local high growth companies in a quarter when Kintera’s revenues declined year over year. We believe that Kintera is capable of achieving more for its shareholders than just immaterial accolades. We urge the Board of Directors of Kintera to act on behalf of Kintera’s shareholders and exercise its fiduciary obligation to replace Mr. Gruber with a professional manager who can deliver on the enormous potential that we believe Kintera’s targeted markets hold.

Ahem… Meanwhile, in other news, Blackbaud reported a 15% increase in revenues over last year. Expect to see from this blog the following pronouncement this year… “And then there were four: Microsoft, salesforce.com, Raiser’s Edge, Convio”. My little poll is going to have change soon, I think. Any comments?

UPDATE: There’s more information on the letter at the San Diego Union-Tribune. The article notes that the chances of a proxy battle going the way of other investors is unlikely due to the way most of Kintera’s stock is divided amongst the Gruber brothers and their co-founder, Dennis Berman.