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Technology Stocks : CRUS, good buy? -- Ignore unavailable to you. Want to Upgrade?

To: Calvin Scott who wrote (5487)	4/2/1998 9:55:00 PM
From: Grand Poobah	Read Replies (3) \| Respond to of 8193

Calvin, Hackworth and everyone else were surprised by what happened to Cirrus in early 1996. Or maybe shocked is a better word. They had had some trouble before that with the cycles of the disk drive industry, but before 1996 the big questions at Cirrus were whether they would grow 30% or 50% a year. I haven't been in a lot of meetings with Mike Hackworth but I'm sure that a lot of his troubles had to do with the fact that he never had to deal with failure at Cirrus before. It's not easy to admit that a ship is out of control when you're the captain. He may not have dealt with input well at that time, but it's also possible he's learned from his mistakes since then. He is definitely an intelligent man, and if he has some humility as well, perhaps he has gained some wisdom from the last couple years. You say you don't like to give people a second chance with your money, and I respect that, but I'm not convinced that all is lost with Hackworth at the helm. I don't agree that "Tom was hated at Cirrus only because he challenged people to perform or get lost." One of the biggest reasons he was disliked was because he did exactly what you say Hackworth did: refusing to listen when people would report bad news that was true and needed to be dealt with instead of being swept under the rug. I don't know if you remember a certain very spectacular scene at an employee Q&A meeting, or if that was after your time, but the leader isn't very popular when he squashes an employee for saying what everyone else is thinking. It didn't help his popularity that everyone knew he was responsible for the extreme penny-pinching ways that were instituted in 1996, but I think they also understood that cost-cutting was necessary and somebody had to do it. He also didn't make friends by the way he treated all the employees, including the good ones. The whole attitude by management during the hard times of the last couple years seemed to be that the grunts were at fault and the management wasn't. I suppose management didn't actually think that way, but when employees are called on to make repeated financial sacrifices and management isn't, it doesn't go over real well. All these things combined are what gave Kelly a negative aura at Cirrus. The old-guard management didn't treat employees that way in general, but the new guard that came with Kelly did. That's why Cirrus has had so much trouble retaining its good people. The Mass Storage and Crystal divisions are somewhat exceptions to that because they acted more on their own and took better care of their people. I'm not sure that the rest of upper management that was cleared out was all deadwood, either. There is still deadwood at the VP level that should have been cleared out during the RIF's, and some of the guys who did get pushed out were real losses. For example, I think the company lost out when Caparelli left. He could really fire people up, which is what you want from your VP of sales. Trading Sena Reddy for Ed Ross in Manufacturing didn't win them that much, either. And seeing Suhas fade into the background made a lot of people there feel like the soul of the company was being lost. I do agree that there were a lot of poor decisions in the Personal Systems group under Kenyon Mei, and they seem to have done better without him. My biggest concerns with management were not the personalities involved. It was that the design and project management functions got out of control. When Cirrus was growing like crazy, they were used to getting what they wanted, and they took on all kinds of projects without coordinating them or considering their consequences. Graphics especially was a disaster, but the other divisions had their problems, too. Around 1996 the graphics chips were getting so big and the clock speeds so fast that they faced a lot of obstacles they hadn't faced before in designing them. And the design methodologies were not in place to deal with them. A lot of my optimism for Cirrus is that a lot of these problems have been fixed or are in the process of being fixed. They have started instituting scan in their designs, which dramatically improves testability and hence both the design and yield enhancement processes. They have improved and standardized EDA tools. They have also really worked on project management, which is evidenced by the fact that they are actually killing projects that get severely off track or behind the competition (e.g. Laguna 128). Cirrus has its problems, certainly, but I am optimistic that the future will be better than the last two years, because of both the good technology/IP and the business processes which are being fixed. I do, however, believe that Cirrus faces strong competition in most of its markets, and there is no guarantee they will ever be the company they were before 1996. But I will settle for some slow and steady growth, and a home run now and then to go along with a few strikeouts. G.P.