RADU VANCO - CATALYST SEMICONDUCTOR INC
(CATS)
CEO Interview - published 11/27/2000
DOCUMENT # LAF606
RADU M. VANCO was named President and Chief Executive Officer of
Catalyst Semiconductor, Inc. in March 1998 and brings to the job a very
strong technical expertise and business background. Mr. Vanco joined
Catalyst in November 1992 as Vice President of Engineering and was
promoted to Executive Vice President and COO in October 1996. He was
elected to serve on the company's Board of Directors in November 1995.
As Executive Vice President, Mr. Vanco had the responsibility of
overseeing and coordinating all engineering activities including design,
product/test engineering, technology development and managing the
company's business units. Mr. Vanco also played an important role in
business development activities including licensing, foundry, steering
the new product strategy and in establishing the company offshore
engineering activities in Eastern Europe. Before joining Catalyst, Mr.
Vanco was Product Line Manager of the High Density PLD at Cypress
Semiconductor since February 1991, contributing to substantially
increasing the revenues and market share of the business. Before that,
since 1985, he held various senior engineering and management positions
with SEEQ Technology, one of the EEPROM technology pioneering firms. At
SEEQ Technology, Mr. Vanco is credited with developing a number of
creative high endurance, high speed military grade EEPROM products. Mr.
Vanco was born and educated in Romania. He earned his MS degree and
graduated at top of his class from the Politechnical Institute of
Bucharest, Romania in 1972. Between 1972 and 1984, Mr. Vanco held
various technical and managerial positions at the Research Institute of
Semiconductors in Bucharest, Romania, where he performed pioneering work
in the development of the first MOS LSI circuits in Romania. He
immigrated to the US in 1985. Mr. Vanco has authored a number of
scientific papers, made presentations at ISSCC and is the author of a
number of patents.
Sector: semiconductors
TWST: Would you mind providing our readers with an overview of Catalyst
Semiconductor?
Mr. Vanco: The company was founded about 15 years ago, in 1985, and went
public in 1993. From the beginning, the company was very focused on non-
volatile memory technology. Over time, the company has grown a presence
in this area including both segments ' the smaller density memories,
called EEPROM, and the larger density, which are called Flash memories.
For the most part of these years, the company has been very focused on
this business. The company always had an international presence and has
developed very strong relationships with key partners, some of which
have lasted since the inception. The best example is our 15-year
relationship with Oki Electric, our principal foundry. More recently, we
have opened a secondary foundry with X-Fab in Texas, which is owned by
our principal shareholder, Elex, NV.
TWST: What significant trends or developments do you see taking place in
the semiconductor industry over the next year or so?
Mr. Vanco: What I see happening is what is already being called the
possible third industrial revolution, driven by the rise of the Internet
and global communications between individuals. As a result we see a
wealth of applications and substantially increased demands for
semiconductors in general. We have yet to see how far this will go over
the next year and beyond. It may not be business as usual. Of course, I
still think that the supply demand equation is going to be valid going
forward; we'll just have to see at which new level it is going to
settle.
TWST: What are your plans for taking the company forward?
Mr. Vanco: Obviously we have some history to take into account, and in
our previous interview we discussed that in some detail. We made our
decisions, stuck to them, and now we have some material results. Our
decision was to focus first on the profitable core business of the
company, which includes a variety of EEPROM ' small- to medium-density
non-volatile memories. These products have a very large applications
base. We also continue to operate in the Flash memory business in medium
and lower densities, where we feel we can be profitable. At the same
time, we have determined that we want to expand into additional business
segments. The strategy was to leverage as much as possible our non-
volatile memory business. This includes technology, sales channels,
customer base and applications base. We have determined that expanding
in mixed signal analog products with programmable elements will be the
right direction for the company. We have invested in this direction, and
over the last couple of years have started to generate the first visible
results in terms of product introduction, gaining first design wins and
some first orders. We are at the stage now where we have a fairly large
volume of products at various stages in the development channel.
TWST: Do you plan on leveraging the technology and the customer/sales
base through acquisitions, or will internal growth continue to be the
main factor?
Mr. Vanco: Both. We certainly are working very hard to do anything we
can with our own resources, and now we have more resources. We have also
done a lot of cooperation with other parties through partnerships,
contracting and so on. I regard acquisitions as a very important element
of our strategy. We've spent some time looking around and discussing
with a variety of possible partners. I think we are quite focused in
that direction as well.
TWST: Would you say that the Flash memory business will provide a pretty
high potential for revenue growth?
Mr. Vanco: I think that both the EEPROM business segment and Flash
business segment, at one time or another, have been and will be strong
revenue drivers for the company. Again, right now we have limited our
focus to medium- and lower-density Flash memories where we feel we can
be competitive and profitable. We are trying to stay away from the DRAM
effect, large price variations which would probably continue to take
place in some of the Flash memory segments. We continue to see
opportunity for growth in the EEPROM business segment as well. In spite
of the recent growth over the last year plus, we still have less than
10% market share.
TWST: Earlier you said that the semiconductor industry will not be
business as usual. Would you care to elaborate on that?
Mr. Vanco: Certainly. I think about people I know who, a couple of years
ago, would not touch a PC. Then they went and purchased one a year ago.
Now they communicate with one another and do stock market trades via the
Internet. So I've seen people who basically had no knowledge, and no
desire to do these things, investing money in purchasing the equipment
and software. To me, this shows very unusual things happening. The
younger generation, which is almost 100% computer literate, will drive
this much further.
TWST: Has the Internet played a very big role at Catalyst Semiconductor
in the way you conduct business?
Mr. Vanco: Certainly. More than five or six years ago, we may have been
one of the first companies to recognize the potential of using the
Internet when we established a relationship with an offshore entity
based in Eastern Europe that is doing engineering development for us. At
that time, we installed an Internet connection which has been incredibly
efficient in helping us work together. Of course, we have used this in
many other ways since then.
TWST: How extensive is your global presence?
Mr. Vanco: We are quite proud of it. Because we had a global presence
for many years, we were able to maintain a very efficient operation here
in the US. We have a number of sales offices throughout the world, five
of which are in the United States; two are in Europe; three are in the
Far East and one in Japan. We partner with foundries in Japan from Oki
Electric and in Texas with X-Fab (owned by Elex, NV). We conduct
assembly and test under contract in seven locations in the Far East. We
have an operation involving about 60 people in Bangkok, Thailand. They
basically run all the back-end operation and finished goods. All the
shipments are made from Bangkok. We are presently shipping through this
channel approximately one million units every day. Adding to this is the
relationship with the engineering outfit in Eastern Europe, which has
been very beneficial for us for many years now. Managing an operation
that ships every day out of the door one millions units is no small
matter. We have done it very effectively and also very cost efficiently.
TWST: Would you say you are more cost efficient than many of your
competitors in the same space?
Mr. Vanco: I would let the numbers speak for themselves.
TWST: What are analysts projecting with regard to revenue growth in the
next year, and what comments can you make?
Mr. Vanco: I can just say that due to the situation of a couple of years
ago, we were de-listed from NASDAQ. So we have been a bulletin board
stock for quite a while. We have just recently become listed with NASDAQ
small cap less than a couple of months ago. We have followed by applying
for national market listing in mid-October. We hope that in a couple of
months, we will be listed on the national market. As a result of this,
we did not have and still do not have any formal analysts' coverage. We
hope this will come as a result of NASDAQ listing.
TWST: Do you have any thoughts or comments on the value that the market
has placed on your stock?
Mr. Vanco: Certainly. By using the normal tools one would use in a
situation like this, we obviously, as we speak, our p/e ratio based
valuation or revenue base multiplier valuation, is much lower than
companies that are quite similar to Catalyst. I would just mention Xicor
and ISSI which have a much larger p/e ratio as an example.
TWST: What do you consider the most significant challenges or risks that
Catalyst will be facing in the next couple of years?
Mr. Vanco: Obviously, the most important challenge is diversifying while
not losing focus on the core business. In very strong relationship with
this, Catalyst has been able to look for and find people with expertise
needed in a very competitive environment. I think this has been
difficult for many years ' and it is in particular a difficult situation
right now for every company. Catalyst has been quite creative in
addressing this issue so far. Our main challenge is to continue to do so
and to do better in the future. Getting the story out and creating a
better understanding of the improved results the company has produced is
important. Doing a better job in PR is very important for Catalyst going
forward.
TWST: As CEO, how would you say you spend most of your time at Catalyst?
Mr. Vanco: I am dividing my attention around what I regard to be the
principal priorities in the company. Of course, I am involved on the
operational side, making sure we get the product out to the customers
and we make the numbers. On the sales side, in providing all the support
we can to our sales force. We are driving a very strong activity here
which is centered and focused on customer satisfaction. I visit and
spend time with customers who visit us, in order to maintain a very
strong tie with our customer base. I am very involved in new product
definition and all the aspects that lead to the introduction of new
products to the market. As I just said, I am starting to spend more of
my time supporting the company's PR activities.
TWST: Of the products that Catalyst has put out, which ones would you
say that you are most excited about?
Mr. Vanco: We have recently introduced the first products with Motorola-
compatible SBI Bus. We have a strong business segment in serial
memories, which includes two product lines. We did not have the SPI. I
am very excited about this because it is the principal area of growth in
serial memories. SPI offers about 10 times the performance factor in
terms of speed than I2C or Micro-wire can offer, which is very important
for many applications. It is also very important for effectively
building higher density memories as well. I am also very excited about
introducing the first products and beginning to see some interest and
first results in our analog mixed-signal product line. I think over the
next few months, we are going to see more of these products coming out
and that is extremely exciting because it is, in effect, starting to
build a new identity for the company. It is a very exciting process.
TWST: How do you feel about the overall quality of people that work for
Catalyst?
Mr. Vanco: Absolutely great. We had tough times but we had very low
employee turn over ' by any standards. If you look at the company's
history and what is typical in the Valley, these people have stuck with
this company and this company's challenges through very difficult times.
They work very hard and there were times when we were not paying the
best salaries. In the end, because of our increase in stock price,
everybody was able to share in our success. In addition, this is the
second year when we'll pay a Christmas bonus to everybody, which is not
a large reward ' just a sign of appreciation. I am very proud with the
people we have here and the results they have produced. Just look at the
productivity on a run-rate basis. We have 60 people who are Catalyst
employees. We are now at a run rate exceeding $120 million, based on
last quarter results, which we just published. This is $2 million
revenue per employee. This is tremendous productivity. Of course, part
of this is that we subcontract, in a very effective way, a lot of our
activity. We are obviously doing things, which I hope investors will
take time to assess and understand. We have no analyst coverage, so it
requires a little bit more effort. I think comparing our present
situation and our results with some of our peer companies would be a
good exercise.
TWST: Thank you. (JF)
RADU M. VANCO
President & CEO
Catalyst Semiconductor, Inc.
1250 Borregas Avenue
Sunnyvale, CA 94089
(408) 542-1000
(408) 542-1405 - FAX
www.catsemi.com
e-mail: investor@catsemi.com |
