idahostatesman.com
Micron director: Appleton must go
Senior board member Gordon Smith says he'll seek to replace the Boise chipmaker's CEO in September. Appleton and other board members didn't comment.
The senior member of the Micron Technology board of directors says the board failed to aggressively confront the company's losses, and he will ask his colleagues to replace board Chairman Steve Appleton at the board's September meeting.
Gordon Smith told the Idaho Statesman that Appleton, who also is Micron's CEO, is "not a money-maker," should not have held Micron's three top jobs at the same time, and failed to craft a strategy to successfully diversify the company.
Phone calls and e-mails to four of Micron's five other directors were not returned. Director Lawrence Mondry declined an interview, referring questions to Micron. Micron spokesman Dan Francisco said Thursday that Appleton and the company had no comment.
Smith, who joined the board in 1990 when he was an executive at the J.R. Simplot Co., said he doesn't believe there is consensus on the seven-member board to remove Appleton. But Smith said he will make that case to the board.
"What I'm saying is: The company is in a very bad need of some real solid strategic direction, OK?" Smith said Wednesday. "I'm one of seven, but I'm gonna say this: Steve — he's really a dedicated guy. He doesn't drink. He doesn't smoke. He works hard. But I think as far as running a company and making money, that's not his bag. ... I'd have made a change a long time ago. But I don't think the rest of the board is ready."
Smith said he faults himself for not speaking up earlier. "I'd say we started losing the competitive edge five, six years ago. ... I feel real bad about the whole situation, and I think, here again, had the board been a little more aggressive and maybe a little more inquiring, maybe we could have stopped some of this. But we didn't."
Among Smith's criticisms is that the talented work of the research and development team is slow to get to market. "We have got some really great people out there at Micron," he said. "A lot of these guys that work in all these departments and work in those fabs and in the R&D. And I've seen those guys — most of them are young guys with a lot of good ideas — and shoot, they'll work all hours of the day to get the job done."
Are more layoffs coming?
In an interview from his home in Baker City, Ore., Smith said Appleton has tried to save Idaho jobs and was reluctant to make cuts, but he was pressed to do so by the board.
"We'd had a number of conversations about the lack of shareholder value," he said. "We weren't making enough money, we weren't making money, our stock prices were way down from where they had been in prior years. ... This is the first real positive step that the management group has taken."
But for Micron to make money again, Smith said the company must make competitive gains. That may mean a shift in strategy, more layoffs, transfer of willing workers overseas and further expansion in Asia. Micron opened a plant in China in March and has plants in Singapore and Italy.
Appleton himself told KTVB-TV recently, "What's good for our shareholders is not necessarily what's good for Idaho, or America."
Smith said some workers may keep their jobs if they're willing to transfer, "very possibly" to Southeast Asia, including China, Singapore and Taiwan.
But, Smith said, Micron is fighting to keep jobs in Boise. "I know Steve (Appleton) would do everything he can to keep as much of it here as he possibly could. I think the board would feel that way. There's none of the board members that want to see our foreign operations grow at the expense of what we've got here in the U.S."
Appleton has said Micron was laying off 10 percent of its work force in the near term and an additional 5 percent in the next six to eight months. Last week, in a letter to the state, Micron said it had laid off 875 people at its Boise plant.
Smith said he can't say whether there will be more layoffs than already discussed by Appleton. "That I can't tell you for sure because I don't think anybody at Micron really knows. ... What they're gonna have to do is get to a level where they can make money, they can lower their costs, and they're not there."
Smith said he couldn't predict what Micron's Idaho footprint will be in five years. "There's a lot of ifs. But my feeling is if we are able to do some of the things that I think need to be done, I think there's a heck of a good chance we can have a viable company and it'll be doing good."
Board is ‘very passive'
Smith said he's raised concerns about Appleton's performance with the board but until now hasn't called for his replacement. "The only thing I can do is express to the board how I feel. And if the board doesn't want to go along with that, then nothing will happen. If they feel like they should, then something will."
Smith said Micron's board, which includes four members who have joined since 2005, has not been aggressive or well-informed enough to act to head off Micron's woes.
"This board that we have now, in my estimation, is very passive," he said. "They all come from big companies. They've all got their own problems. And for them to turn around and get right into the middle of the Micron problems, I think it's a little more than what they want to take on, OK? Now, that's my opinion."
Smith said Micron may well need to do more than replace Appleton. "It might take a whole new management group that can get this job done, including maybe a new board of directors."
‘Too many titles'
Appleton, 47, became CEO in 1994. Last year, Forbes magazine said he was the worst performing boss in America. The magazine based its rankings on his six-year average compensation of $7.8 million, coupled with an annualized 22 percent negative return for the company over the same period.
In fiscal 2006, Appleton made $1,914,500 in salary and bonus. He also was granted restricted stock valued at $3,778,900 in the company's 2006 proxy statement. The fair market value of Appleton's restricted stock at the close of the fiscal year in August was $6,163,189.
In June, the manufacturer of memory for computers, cell phones, iPods and other devices reported a $225 million quarterly loss. Before the layoffs, Micron had employed about 11,000 workers in Idaho and about 22,000 worldwide.
Smith said Appleton should not have held the company's three top jobs — chief executive officer, chairman of the board and president. "That's too many titles, too many jobs for one guy in a company the size of Micron," Smith said.
Appleton gave up the president's position to his top deputy, Mark Durcan, last month.
Too big, too cumbersome
Over the last year, Micron stock has traded between a high of $18.65 on Sept. 12 and a low of $10.88 on April 17. Micron closed Thursday at $13.60, down 6 cents. Its highest price in the past five years was $25.13 on July 19, 2002.
Micron began diversifying a few years ago to reduce reliance on dynamic random-access memory, which experiences wide price swings. One of the products it added, NAND flash memory, also proved to have volatile prices. A second set of products, imaging sensors, was slow to catch on. "They tried some different strategic moves which, I'd have to say, at the best were maybe just barely successful," Smith said.
DRAM is the most common memory used in personal computers. NAND flash is primarily used in digital cameras to record images, in music players and in portable memory devices. CMOS image sensors are used in camera cell phones.
Micron's biggest competitors are South Korean firms Samsung and Hynix. Both firms have larger profit margins and lower operating costs.
Appleton has said that 70 percent of Micron's products are sold overseas, yet most of its manufacturing is still done in the United States.
In 2003, Micron laid off 10 percent of its work force, including about 1,100 in the Boise area. But still, Smith said, the company grew inefficient. "I think probably where the mistake was made is that we let these departments and everything grow too big and become too cumbersome."
Micron's problems are deeper than cutting expenses, Smith said. "It goes back to strategic planning. What direction are you gonna go? That's where I kind of think we fell down — is not being able to put that road map out in front of everybody and say, ‘This is the direction we need to be going.'"
Dan Popkey: 377-6438. Business reporter Ken Dey contributed to this story. |
