AMCC's new CEO has begun to put his stamp on the money-losing chip maker
By Mike Freeman
UNION-TRIBUNE STAFF WRITER
September 2, 2005
During his first five months as AMCC's chief executive, Kambiz Hooshmand has spent much of his time sitting down one-on-one with employees of the San Diego chip maker.
Kambiz Hooshmand joined San Diego's AMCC as chief executive in March after nine years with Cisco Systems. He managed several divisions at Cisco, including a unit in switch routing and a team in optical networking.
"That's not just vice presidents and directors and managers," said Hooshmand, a former division head at Cisco Systems. "I've talked to everyone, including the receptionist downstairs, about her ideas of what we can do better."
In all, Hooshmand has met with 120 of Applied Micro Circuit Corp.'s 700 workers since he took over as CEO in March. These hour-long get-togethers are part of Hooshmand's plan to put his stamp on AMCC.
But Hooshmand's new job won't be easy. While former CEO Dave Rickey made tough moves, including laying off hundreds of workers, the company hasn't posted a profit in five years. Sales plunged from $436 million in fiscal 2001 to $254 million last year. The company's stock has fallen from $102 a share on Sept. 1, 2000, to $2.81 yesterday, adjusting for splits.
Like many companies that make complex chips used in communications networks, AMCC competes in a landscape that was devastated by the tech downturn in 2000. Even as signs of a recovery are beginning to emerge for telecom chip firms, the turnaround remains tepid at best.
"The market itself is a little sluggish just because there's a lot of competition," said Victor Lim, an analyst with Susquehanna International. "Capital spending by the telecom carriers and even (big business) is not the gangbuster-type growth you need to sustain all of the companies in the space."
Rumors surfaced early this year that AMCC was in talks to merge with Vitesse Semiconductor Corp. of Camarillo – a deal that apparently died before Hooshmand was hired in March.
AMCC makes complex chips for the communications industry, but the company has pegged its growth on diversifying into data storage and embedded microprocessors.
"They and Vitesse have always danced around," said Sandy Harrison, an analyst with Pacific Growth Securities in San Francisco. "But I don't think they'd put a new management team in place and then turn around and sell."
As with many rivals reeling from the telecom bust, AMCC pegged its growth on diversifying into other businesses beyond telecom chips – namely data storage and embedded microprocessors.
In the past two years, the company has spent $240 million buying data storage firms JNI Corp. of San Diego and 3Ware of Sunnyvale. It also forked over $247 million for two microprocessor product lines from IBM, including its PowerPC business.
The results have been mixed. While the acquisitions boosted revenue, they've yet to result in profit. AMCC lost $4.2 million during its most recent quarter, mainly because of one-time charges.
To Hooshmand, however, AMCC has a bright future. An operations wonk, he doesn't talk about emerging markets or hot new products that will usher in AMCC's turnaround.
Instead, he talks about being a data-driven company, about cutting bureaucracy so decisions are made faster, about execution.
"These things matter," Hooshmand said. "A lot of people talk about products. But these things are incredibly important if you're going to create a company that's going to last."
An engineer by training, Hooshmand joined San Jose-based Cisco Systems nine years ago when his previous company, StrataCom, was acquired by the network equipment giant. He managed several divisions at Cisco, including a 1,500-employee unit in switch routing and a team of several hundred employees in optical networking.
Shortly after Rickey, the former CEO, announced he would step down to spend more time with his family, Hooshmand was called by an executive recruiter. He found the potential post interesting. As a division manager at Cisco, he had purchased AMCC integrated circuits and admired the engineering talent at the company.
More than that, Hooshmand liked what he saw on the company's balance sheet.
AMCC didn't have far to travel to become profitable, Hooshmand said. In fact, AMCC posted a tiny operating profit during the past two quarters, excluding one-time charges.
In addition, the company has a big stash of cash.
"When you have a company that close to break-even with $400 million in cash, I wasn't worried about the future," Hooshmand said. "I figured I had a long runway. And it takes a long runway to turn a company into a great company.
"The tough part was I was leaving a great company. That said, the opportunity to run a company – to run sales, to run finance, to live and die by my own decisions and my team's decisions as opposed to having air cover all the time from other divisions within a larger company – that was clearly a deciding factor."
During his first few months, Iranian-born Hooshmand spent his time getting to know the people and organization, including meeting personally with many AMCC employees.
"These meetings do two things," Hooshmand said. "It surfaces the information that may have been caught in all the layers of the organization and it recharges the employee base."
Hooshmand created a blog on the company's internal Web site to share what he learned and to address key employee concerns.
Today, Hooshmand is done studying AMCC and has begun making his mark on the company. In July, he laid off 5 percent of the work force to trim the firm's internal bureaucracy.
"In some cases I've taken two layers out of the organization," he said. "Once you get the right organization and the right people in the right places, all sorts of good things happen that you as a leader couldn't anticipate."
Hooshmand, an avid soccer player, is bringing many of the tools he learned at Cisco to AMCC. The key one, he said, is creating a "data-driven company" where managers get information quickly.
"As a division manager at Cisco, I would get a profit and loss statement weekly," he said. "Cisco is probably the best company in the world at getting data to the fingertips of people who make decisions. That's what I intend to do here, and hopefully we'll do it better than Cisco."
Several AMCC executives have left. They include chief operating officer Tom Tullie, considered a top contender for the CEO job before it went to Hooshmand.
"If you look at several high-level departures and several high-level hires, he's bringing in a lot of his sergeants who were with him at Cisco and StrataCom," said Harrison, the Pacific Growth Securities analyst.
Harrison views AMCC as a turnaround stock. It has new management, some promising new businesses as a result of the PowerPC and data storage acquisitions and lots of cash in the bank.
"They have done the right things in terms of cutting overhead to get to the point where they're profitable," Harrison said. "But we call it fragile profitability. For customers and investors, they'd like to see it a little less fragile."
Hooshmand thinks that day is coming.
"I believe we'll make a lot of quiet changes that will make the company a better company," he said. |
