It's all about the "Vision Thing."..........................
Computer News
May 06, 1996
--------------------------------------------------------------------------------
C-Cube's young CEO has seen the future, and it's on digital video
By Dean Takahashi
Knight-Ridder Newspapers
SAN JOSE, Calif. - Alexandre Balkanski hardly ever watches his television at home, disdaining the tube's appeal to the prurient and the lowest common denominator. He yearns to turn TV into a medium that caters to individual tastes.
Balkanski's semiconductor company, Milpitas, Calif.-based C-Cube Microsystems Inc., may play a key role in that transition. His company's mission is to move us into the age of digital video, where the merger of computer and communications technologies delivers gee-whiz services like video on demand, sing-along karaoke and hundreds of satellite TV channels.
Just 35 years old, the baby-faced, French-born CEO rubs shoulders with the elder titans of Silicon Valley, legends like Intel Corp. Chairman Gordon Moore and LSI Logic Inc. CEO Wilf Corrigan. In the next stage of the high-tech revolution, Balkanski humbly promises to be a step ahead of them, producing chips that could someday be as important as the microprocessors that serve as the brains of personal computers.
In 1988, when he co-founded C-Cube with entrepreneur Edmund Sun, he was well ahead of his time. The company's name invoked what later became a cliche: the ``convergence'' of computers, consumer electronics and communications.
Balkanski and his colleagues believed, in particular, that the compression of digital video - squeezing video images into compact computer data - would be crucial technology because the data ``pipes'' through which we get information have limited capacity, and video contains vast amounts of data. He religiously championed compression and predicted that digital video would have a bigger impact on the world than color TV.
Now, though superhighway fervor has evolved into skepticism, products based on the idea of convergence are beginning to show up and promise profits - one reason C-Cube's stock rose 658 percent last year.
``Alex is the visionary, sort of like the spokesman for the industry,'' said John Marren, analyst at Alex. Brown & Sons in San Francisco.
The vision is paying off. With many other chip makers struggling from a slowdown in personal computer sales, C-Cube's profits in the most recent quarter were up 325 percent to $13.6 million while revenues were up 298 percent to $8.1 million. In 1995 the company's revenues grew 176 percent, making C-Cube the fastest-growing chip company in the San Jose Mercury News' Silicon Valley 150 list of top companies.
Last year, the company shipped 1.7 million compression chips for video karaoke players, which took the Far East by storm. Huge Japanese and Korean consumer electronics makers from JVC to Samsung rely on C-Cube to provide the chips that power their devices. In October, C-Cube even won a technical Emmy award for its pioneering work in digital encoders, which compress analog videos into digital format.
While the world is starting to catch up with Balkanski's vision, he's amused when people describe him as a wunderkind. He didn't land in the catbird seat overnight.
``It feels weird being successful if you look at it as a snapshot in time,'' Balkanski said. ``I have had very tough times at C-Cube. I found that, no matter how difficult it was, I could not help but keep going.''
Born in 1960, Balkanski was raised in Paris. His mother restored ceramics at the Louvre museum, and his father was a prominent physicist at the University of Paris.
Balkanski studied elementary particle physics at Harvard College and wound up getting a doctorate in business and economics, developing skills that proved helpful to the future CEO. He briefly ran a digital-video consulting firm in Massachusetts, moving to Silicon Valley when entrepreneur Sun recruited him to co-found C-Cube.
Profits were elusive in the early years, and Balkanski and Sun disagreed often. In 1991, they brought aboard a new chief executive, Bill O'Meara, co-founder of LSI Logic Inc., a much larger custom chip manufacturer. O'Meara slashed several projects and gave the company the focus it needed to get products out the door. He also brought in new directors and attracted crucial new capital.
Sun left C-Cube in 1993 to start his current company, Santa Clara, Calif.-based Digital Video Systems Inc., now a customer of C-Cube's. C-Cube went public in 1994. Balkanski, who owns about 145,000 shares of C-Cube, became a multi-millionaire.
``It's always a struggle to make a market,'' Sun said. ``Alex and Bill O'Meara did a very good job carrying on.''
Balkanski almost didn't survive the corporate overhaul. He worked late on weeknights and many weekends, worrying that, as is tradition in many start-ups, the founder would be permanently shoved aside.
After evaluating Balkanski for a year, O'Meara decided to groom him for the top job, gradually adding to his responsibilities.
``Alex was brilliant, but he had no experience,'' said O'Meara, who retired last July and turned the company over to Balkanski. ``In everything he has done, he has learned it on the job and he has been successful.''
Don Valentine, C-Cube chairman and a partner at Sequoia Capital in Menlo Park, Calif., praised the transition. O'Meara ``turned around the aircraft carrier and Alex has executed its mission,'' he said.
Balkanski does particularly well, said Valentine, when offering high-minded visions of the future for digital video - how technology can improve video content.
A decidedly less lofty view came from Joe Parkinson, CEO of Santa Clara-based 8x8 Inc., which uses compression in video phones. In a recent panel discussion with Balkanski, Parkinson said sex had driven every technical revolution, from X-rated videos driving VCR sales, dial-a-porn fueling 900 numbers, and electronic erotica steaming up the Internet.
``With phone sex, think what video conferencing could do for that,'' he said. ``That is my idea of a killer application.''
Parkinson hopes C-Cube will offer excellent but too-expensive technology, leaving room for competitors to steal the mass market. ``That's my goal, not to be first, and to ruin the market for Alex,'' he said.
Balkanski retorted: ``There is a great advantage to be the market leader. It's a spectacular advantage to be dominant in a market. If you're a pioneer and you're good enough, you clean up.''
Pioneers endure intense schedules. Balkanski starts his day with a scroll through e-mail and then a call to Europe during his 30-minute drive into work. Arriving around 8 a.m., he checks for messages from his assistant, Anna, whom he calls ``the real boss.'' He has so many business dinners that he eats at home just three nights a week.
Around mid-morning, he usually strolls through C-Cube's two-building campus - the company has about 325 employees - to hold meetings at workers' cubicles or offices. He relishes the days when business trips are suddenly canceled. Then he has a morning to himself, before employees discover him working quietly in his office.
Though he can understand the technical matters of applications, engineering is not his specialty. He's also not a gadget freak. And he's not afraid to ask for help when he doesn't understand something.
Balkanski's style is like a private investigator's, constantly probing with detailed questions to get at what he wants. In meetings with the company's other French executive, Didier Le Gall, vice president for research and development and one of the few remaining executives from the early years, the men frequently break into passionate Gallic chatter, punctuated with wild gestures.
When Balkanski wasn't happy with Le Gall's report on the company's rate of hiring engineers, he said so, stared at Le Gall and awaited an answer. Le Gall just stared back; his eventual answer wasn't polite.
Balkanski, comparing his own style with the affable O'Meara's, acknowledges his rough edges and sees room for improvement. During one meeting, his face flushed red and he uttered curses at a vice president who wasn't making a proper sales pitch to a strategic customer.
``Look, I wouldn't lie to you,'' the executive replied.
C-Cube's success and the burgeoning video market have drawn the attention of bigger companies. Everyone in the field sees big growth in digital video. Dataquest, a research firm, expects chip sales for digital video systems to hit $7.6 billion in 2000, compared with $1.9 billion in 1996.
Some think it is only a matter of time before the big guys close in. On March 25, C-Cube's stock tumbled 22 percent when IBM announced it was entering the MPEG-2 encoder business. Encoder technology, in which C-Cube has enjoyed a long lead until recently, uses complex mathematics to compress video images.
That day, Balkanski's receptionists fielded 1,741 phone calls from worried investors, analysts and the press. With each call, Balkanski said that C-Cube had already been planning its reaction to IBM's plans for 18 months and was about to launch new encoders.
To ease the pressure, Balkanski has carved out a refuge from the world of technology. He spends weekends toiling in the gardens of his 5-acre lot in Woodside, Calif., with his wife, Sybilla, whom he met at the Woodside Rodeo square dance a few years back.
``I discovered a wonderful person who grew up in Woodside and didn't know where Silicon Valley was,'' he said. ``I thought, that's the lady for me.'' They got married two years ago in the renovated castle in Normandy that Balkanski bought with his money from C-Cube.
Occasionally he flies to Paris for the weekend, to pay bills and talk about the 350-year-old castle with his 69-year-old father, who oversees maintenance. Then Balkanski flies back to Silicon Valley for work on Monday.
``I have no family here in America except my wife,'' he said. ``The castle gives me the ability to be close to my roots.''
Meanwhile, he's sinking new roots in Silicon Valley - on weekends in his garden, where the worst problems he faces are the deer that come in to eat the tulips.
``With my personal life, I try to draw a line,'' he said. ``In my first year of marriage, I developed more balanced habits. I've kept those habits because that is what will enable me to stay in this for the long run.''
X X X
(This article is from the San Jose Mercury News.)
X X X
X X X
(c) 1996, Knight-Ridder Newspapers. Distributed by Knight-Ridder/Tribune Information Services.
AP-NY-05-01-96 0637EDT |
