High-tech CEOs of the new millennium: Where are they now?
Note: I edited out the Microstrategy stuff
EB revisits three profiled CEOs—Michael Saylor of MicroStrategy Inc., Kevin Kalkhoven of JDS Uniphase Inc., Henry Nicholas III of Broadcom Corp.—to see how they’ve fared after two years
By Tam Harbert, phogrgraphy by Katherine Lambert/Blackstar
In January 1999, Electronic Business published a story called “Stars of the new millennium.” It was our attempt at identifying three rising CEOs who had the potential to become the Andy Grove or Bill Gates of the next century. When you stick your neck out, you risk getting your head chopped off. We weren’t 100% on the money, but we did peg one out of three. Henry Nicholas III of Broadcom Corp., performed much as we expected (see article). Kevin Kalkhoven, formerly of JDS Uniphase Inc., also performed very well, but his life took an interesting twist (see article). The third—our cover-boy Michael Saylor of MicroStrategy Inc.—has become an example of how far an ambitious young CEO can fall when he tries to fly too high, too quickly. Thus, we feature him in our reprise of that story, in which we share the difficult management lessons he’s learned.
In the hard-charging, cut-throat competitive environment of high technology, it’s rare when a highly successful executive decides to walk away from it all just so he can smell the roses.
That’s exactly what Kevin Kalkhoven did when he quit in May 2000 as CEO of JDS Uniphase Inc., San Jose, CA, and dropped out of public view. EB reached him at his home in Aspen, CO, (he has another house in Woodside, CA, of course), as he was headed out for a day of skiing. Why’d he check out of the rat race?
“It was really to get my life back,” says the 57-year-old Kalkhoven. “For the last 10 years, I had been working 100-hour weeks.”
Why did he check out at that time? Was it the money or something else? Kalkhoven’s response to these questions: “There is never a good time to leave, just the right time, and that’s how it was.”
While estimating his net worth at somewhere between $500 million and $1 billion, Kalkhoven still drives a 1992 Acura and a 1996 BMW. The first thing he did after his resignation? Went on a scuba-diving vacation in the Caribbean. Next, he “spent time getting fit again and catching up with old friends and acquaintances.” He’s also spending more time with his long-time significant other.
He’ll never again be a CEO, says Kalkhoven. “Like good football players, there’s a time to retire and become a coach, or perhaps buy the football team.”
Indeed, Kalkhoven certainly retired at the top of his game. When EB interviewed him for our January 1999 story, the company was a relatively unknown small fiber-optics component company called Uniphase Corp. Kalkhoven, hired as CEO in 1992, had embarked on a grand plan of acquisitions to build it into a fiber-optics component powerhouse. Net revenue for fiscal year 1998 was $175.8 million, the share price was around $58, and the company’s market cap was $2.2 billion. For the year ended June 30, 2000, revenue was $1.4 billion. By the end of the year, JDS Uniphase shares, which have split three times since July 1999, were trading at about $41 and its market cap was about $40 billion. As of press time, its proposed $41-billion merger with SDL Corp., announced in July, was still pending and under antitrust review. (The value of the transaction, if approved, will change to reflect current stock prices.)
Although Kalkhoven has been enjoying his freedom and luxury, he still intends to keep his hands—or more appropriately, his money—in the fiber-optics market. With an initial pool of $100 million, he and two close friends—Dan Pettit, former CFO at Uniphase, and Jack Levin, former director of legal affairs at Nationsbanc Montgomery Securities in San Francisco—have formed KPL Ventures, a venture capital firm in Menlo Park, CA. The partnership has already invested in five start-ups, and intends to invest in other optical- and broadband-related companies.
Still, Kalkhoven insists that he spends only 60% of his time with KPL Ventures (which he regards as fun because the three partners discuss business and debate strategy while diving or skiing) and other business (he remains as a “strategic adviser” to current JDS Uniphase Co-Chairman and CEO Jozef Straus). The rest is his, to spend how he likes.
“I’m delighted with my decision,” he enthuses. “I’ve rarely been happier. It’s wonderful to have a life again.”
General Patton of the chip world
Broadcom’s Henry Nicholas III says he’s winning battles on many fronts
In our January 1999 story on Broadcom Corp.’s CEO, Henry Nicholas III, company co-founder Henry Samueli compared him to a military commander. He tells subordinates what’s expected of them, Samueli said, and “if they don’t deliver, he’s right in their face about it. It’s very much a results-oriented style.”
And results he has gotten. As of early December 29, 2000, Broadcom’s shares were trading at $84, after splitting twice, and the company had a market cap of $20 billion. Compare that to December 1998, when its share price was around $31 (split adjusted) for a market cap of $5.4 billion.
If Broadcom decides to acquire a company, Nicholas stresses Broadcom’s work ethic and take-no-prisoners aggressiveness. The staff of the prospective target then “either embraces the way we work or they go screaming out into the night.” —Henry Nicholas III, CEO, Broadcom Corp.
A graduate of the U.S. Air Force Academy, the military-minded and aggressive Nicholas turned to engineering after his dreams of becoming a fighter pilot were thwarted. (The six-foot, six-inch tall Nicholas was two inches too tall to qualify for flying those small planes.) “Being a CEO is an outlet that vented my frustration at not being able to fly,” he said back in 1998.
While working as an engineer at Redondo Beach, CA-based TRW Inc. in the early 1980s, he met up with Henry Samueli. The two found their working styles and skills complementary, and their relationship blossomed when Samueli left TRW to become a professor at the University of California at Los Angeles, and Nicholas became his first doctoral candidate. The two left academia to found PairGain Technologies Inc., Tustin, CA, which makes communications chips to speed data transmission over phone lines. They soon realized, however, that there was an even more lucrative market in broadband over all sorts of media. They left PairGain to found Broadcom in 1991. (PairGain was acquired by ADC Telecommunications Inc., Minneapolis, in June 2000.)
At first, Broadcom was waging war on only a couple of fronts, says 41-year-old Nicholas. Today, “we’ve accelerated our war on a couple of fronts and [expanded] the battle to eight fronts,” he says. Those include digital cable set-top boxes, digital cable data modems, high-speed modems, wireless (both terrestrial and digital broadcast satellite), optical networks, home networks, copper twisted pair, carrier access and enterprise networks.
While being particularly acquisitive—the company has bought 18 companies since January 1999—Nicholas insists that Broadcom is not acquiring companies as a way to enter new markets. “We always enter markets first through our own internal development, and then we complement that with an acquisition of a particular company,” he says.
Over the last two years, he’s learned a lot about how to integrate these acquisitions, while still maintaining Broadcom’s notoriously workaholic culture. Employees are known to work ridiculous hours. In fact, the night before our interview, Nicholas held a staff meeting that started at 8 p.m. and ended at 2 a.m. “Daytime is for customers,” remains a company motto.
His technique for achieving successful acquisitions is to first collaborate with a company. It’s the equivalent of “try before you buy,” he notes. Then, if Broadcom decides to acquire the company, Nicholas stresses Broadcom’s work ethic and take-no-prisoners aggressiveness. The staff of the prospective target then “either embraces the way we work, or they go screaming out into the night,” he says. And he bids the screamers a fond farewell. Better, and less expensive, to weed them out sooner rather than later, he notes.
Today, more than 50% of Broadcom’s staff has come through acquisition. And Nicholas is particularly proud that “we’ve retained every single CEO and senior executive of every company we’ve acquired.” In fact, since its inception, the company has lost only 35 people, he says. That’s less than 1% turnover a year. The key to this success, he believes, is that Broadcom doesn’t try to change the acquired company. Rather, it helps the new acquisition capitalize on its strengths and tries to learn from what the acquired company does best.
As of the last quarter, ended Sept. 30, 2000, Broadcom became the fastest growing semiconductor company in history, says Nicholas. In that quarter—the 36th quarter of the company’s life—it surpassed the golden $1-billion run rate.
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