dave.
pretty sure you wanted this posted on the PMCS board, but i think it'll do just nicely here:
192.41.19.35
(btw, i'm assuming the $1T remark was said tongue firmly planted in cheek.)
cheers,
-chris.
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To infinity, and beyond | Riding the stock rocket | With price gain topping 5,000%, local chip maker dwells among the giants
Bruce V. Bigelow
STAFF WRITER
San Diego Union-Tribune
22-Feb-2000 Tuesday
union-trib.com
Dave Rickey | Applied Micro Circuits Corp.
Corporate turnarounds don't get much better than this.
In the four years since Dave Rickey took over as chief executive at Applied Micro Circuits Corp., the San Diego company has exploded from obscurity to become one of the area's dominant businesses.
Based on its current market valuation of roughly $12 billion, AMCC now ranks third among the publicly traded companies based in San Diego -- behind only Qualcomm and Gateway.
Based on Friday's close of $215.06 1/4 per share, AMCC's price has gained more than 5,270 percent from its initial stock offering at a split-adjusted price of $4 a share Nov. 25, 1997.
"This is great!" gushes Rickey, who estimates there could be as many as 200 millionaires among AMCC's 450 employees. At this rate, he says the company's market value should top $1 trillion by December.
With nearly $1 billion in cash, Rickey is now shopping for other companies, recruiting another 180 employees and building a new engineering design center near Qualcomm's Sorrento Valley headquarters.
Rickey, a 44-year-old CEO with a penchant for M&Ms and powdered doughnuts, characterized AMCC's phenomenal growth as a turnaround -- combined with being in the right market at the right time.
AMCC specializes in making high-performance chips used in telecommunications and data networks -- which basically means the Internet. The company sells its chips to Nortel Networks, Cisco Systems, Alcatel, Ciena and Lucent Technologies.
"I don't understand our stock market value," Rickey confessed, "but I understand our peer group."
AMCC's peer group includes JDS Uniphase, a San Jose company that makes components for fiber-optic telecommunications and cable TV networks, which has a market value of roughly $73 billion. That's nearly 60 percent more than the current valuation of General Motors.
By the same token, Cisco Systems today has a higher market capitalization than General Electric.
"They just really hit it right in terms of being a semiconductor company for the telecom industry," said Bud Leedom, editor of the San Diego Stock Report. "It also looks like they're going to be in a leadership position for the next two or three years at least."
But it wasn't always so.
AMCC only moved to specialize in communications chips after Rickey was named as AMCC's chief executive in 1996.
Before then, the company made a variety of components for computers -- including so-called PCI controllers, clock devices used to time computer functions and various add-in circuit boards.
"The company always dabbled in so many markets, it was like betting on eight different horses," Rickey said. Spreading out the business like that is less risky, but it's a corporate strategy that also offers less reward.
"We'd been breaking even for years and basically just keeping the lights on," recalled Brent Little, a senior marketing executive at AMCC. "Revenue was growing, but basically we were making $50 million and spending $50 million."
Rickey was all too familiar with the strategy.
He had worked as AMCC's vice president of operations in the early 1990s, but quit in mid-1995 out of frustration and disillusionment.
"I thought the company wasn't very good at computer things," Rickey said. But AMCC's top marketing executives were committed to the industry. As Rickey put it, "The marketing and engineering executives were 180 degrees out of phase."
Rickey joined NextGen, a small semiconductor maker in Milpitas.
AMCC had lost about a third of its work force, but some employees described Rickey's departure as the last straw that finally motivated the board to take action. Another factor undoubtedly was an unsuccessful effort to sell the company to Raytheon in 1995.
"They couldn't even get $40 million for the company," said Rickey, who says the value of the private company's stock was just 25 cents a share at the time.
"The one thing you could say about the company was that it was ill-focused; it was trying to do too many things," said AMCC's chairman, Roger Smullen. "The thing that developed was a consensus among the board to see if we couldn't do something to get this company jump-started."
The board saw its opportunity when NextGen was acquired by Advanced Micro Devices, and invited Rickey to return to AMCC as CEO. Rickey, who already had moved his family to the Bay Area, says he told them: "I wish you guys had said something six months ago."
On the day Rickey officially rejoined AMCC -- Feb. 12, 1996 -- the new CEO scheduled an all-hands meeting in the company's cafeteria. The audience that greeted him that morning was listless and skeptical -- if not cynical -- but the transparencies he put on the overhead projector that morning are revealing.
Rickey titled his presentation "To infinity, and beyond," an allusion to the popular 1995 animated film "Toy Story," and featured character Buzz Lightyear.
One transparency, labeled "My Biggest Concern About AMCC," says, "That too many people have lost perspective about the extremely competitive world of high-tech, or never had the perspective from the start."
Another transparency predicts that AMCC will "Achieve $175 million in revenue in 2000 A.D., with $50 million net income." For the sake of comparison, AMCC posted revenue of $45.8 million in the last quarter of 1999 -- which pencils out to revenue of $183.8 million if sales continue at the same pace.
On his first day at work, Rickey also predicted AMCC would launch its initial public stock offering on a specific date -- Aug. 26, 1998. AMCC's IPO took place about 10 months earlier, on Nov. 25, 1997.
What may be Rickey's most ironic transparency was labeled "I'll feel good if ... " and includes the comment "We break the hearts of everyone who could have bought stock before 1998, but didn't."
Rickey's presentation was brash, but his strategy was clear.
He wanted to focus AMCC's resources on its strength in high-speed data communications chips, which accounted for less than 30 percent of the company's business at the time.
Rickey wanted to emphasize the use of bipolar technology, which offered far higher processing speeds than CMOS, a conventional chip design formally known as Complimentary Metal Oxide Semiconductors. He also shunned galium [sic] arsenide, a then-promising material for making the wafers used in semiconductor, in favor of silicon germanium.
His strategy seems prescient in hindsight, but Rickey has his own explanation.
"It wasn't that I knew the Internet was going to be so good," he recalled. "But the truth is the company wasn't going to be good at anything else."
Rickey also was unabashed about confronting employees, said Little, who is now AMCC's vice president of marketing.
After Rickey finished his first-day presentation, Little said he was called to meet with the new CEO -- at 8 p.m. that same day.
"It was not a pleasant conversation," recalled Little. "It was 'Why did you do this?' and 'Why did you do that?'
"Dave pushes people out of their comfort zone all the time," Little added. "He makes them evaluate what they're doing, and how they're doing it."
Depressed after his first meeting with the new boss, Little drove home that night thinking he'd better update his resume. Although Little never left the company, other senior executives fled from AMCC as Rickey began pushing his staff to meet his goals of "compelling products" and "relentless improvement."
"It's not a lifestyle company," Little added. "It's pretty demanding.
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2 PICS | 1 GRAPH; Caption: 1. Buttoned up: AMCC chief executive Dave Rickey (foreground) in the clean room of the company's silicon wafer fabrication facility with employee Tyler Johnson. The company makes high-speed-communications chips. 2. Hyperanimated -- Since its initial public offering in November 1997, the value of AMCC's stock has increased almost 54 times its split-adjusted IPO price of $4 a share. 3. (Buzz Lightyear) |
