It actually gets worse. Halla who I thought was doing a good job perhaps bit somewhat more than he could chew with Cyrix.
Now talk of being axed. That's Yosemite Sam with Acme Dynamite:
----
Trouble At National Semi
By Lewis H. Young and Jim DeTar
Santa Clara, Calif.--The wheels are falling off Brian Halla's turnaround at National
Semiconductor Corp. Last week the company warned investors that revenues would fall below
analysts' most recent forecasts, a loss in the current quarter ending on May 31, and a possible loss
in the next quarter. It was the fourth financial warning the company has issued in the past four
months.
Much of the problem is rooted in the Cyrix subsidiary, which reported continuing problems
producing its microprocessor chip. Trying to correct the problems, Mr. Halla is said to have
refocused the company's research and marketing budgets so that as much as 70 percent of the
funds are going to Cyrix, starving the analog and communication chip businesses.
According to insiders, the reduction in funds has created dissatisfaction and unhappiness among
staff members at those businesses. One rumor had the wireless group asking the company to spin
it off as a separate company.
National offered a litany of excuses for its disappointing performance: production difficulties at
Cyrix, a slowdown in PC sales because of inventories at manufacturers, the impact of the Asian
economic crisis on sales of chips used in cellular phones and the shift to under $1,000 PCs which
hurt sales of components to mid- and high-priced PCs.
But some of National's problems were self-inflicted. A couple of years ago, the company had a
virtual lock on the chips for the LAN market. But the head of the business used the company's
dominant market share to raise the price of the chips. 3Com asked LSI Logic to develop an ASIC
for it to do the same thing at a much lower price. With its new chip, 3Com became the dominant
supplier of LAN chips and National is abandoning the market.
Initially, Mr. Halla acquired Cyrix to get microprocessor technology for embedded systems. His
plan was to sell the microprocessor chips to get cash flow until there was a major industry shift to
the use of embedded microprocessors. But trying to solve the problems in making the discrete
microprocessors has made National lose sight of its strategic goal.
Mr. Halla may have a shortened time to fix the troubles. Rumors circulated in Silicon Valley that
Charles Sporck, National's long-time former CEO and still a major influence at the company, was
losing patience with Mr. Halla's strategy.
One factor that may affect National's future significantly is its manufacturing capacity. National has
limited capacity at its own facilities in Portland, Maine and Santa Clara, Calif. and has contracted
with the new foundry powerhouse, IBM, to make its Cyrix 6x86MX processors. However, Cyrix
may have to compete for foundry space against x86 market rivals Advanced Micro Devices
(AMD) and Integrated Device Technology (IDT), which are also both using IBM as a foundry
(EN, The Antenna, March 23).
National bettered its position in the market slightly when it settled a patent dispute with Intel earlier
this year (EN, Feb. 9) heading off what could have been a costly legal battle at a time when both
companies' sales had gone flat.
Under terms of the new patent cross-license agreement with Intel, National gained access to Intel's
Slot 1 interface patent, dubbed the P6, that connects the Pentium II chip module to a PC's
motherboard. Until that time, Intel had not licensed or granted access to the interface to its
competitors. The settlement of the dispute between the semiconductor giants--that began last year
when National's Cyrix unit filed a patent infringement lawsuit (EN, May 19, 1997)--calls for an
extension of the previous cross-license patent agreement between the two companies that dates
back to 1976, as well as dismissal of the Cyrix case.
National is not the only company with financial difficulties, although its troubles may prove to be a
major hurdle to its hoped-for recovery and raise questions about Mr. Halla's future at the
company. When Intel first reported in early spring that its 1Q98 revenues would be below
previous estimates (EN, March 9) it was a surprise to the market which knocked Intel's shares
down by about 10 percent. Other semiconductor companies also have reported disappointing and
declining earnings as the industry continues to grapple with the ongoing Asian financial crisis and
the lower margins that accompany the market move to sub-$1,000 and lower PCs.
----
Shane (somewhat unrelated to the above but for now at least the NSM talk of a "challenge to LSI" has quietened - yet another excuse of impending disaster for LSI down the tubes (if anyone's counting). When Halla took over NSM Corrigan said "right idea wrong company". Should be interesting to see just how right Wilf was. Also goes to show (and I hope this is the crux of it) you ain't going to develop SOC expertise overnight - it takes a few years to get all the pieces in place.) |
