Some 15 years ago (before there was a Planet Analog), I was the chief editor of a trade magazine that was failing. I had done what I could to make the publication more appealing to its readers (especially the analog guys), but advertisers were slow to respond. The Dutch publishing conglomerate that owned the trade publication was convinced they'd get better margins from consumer magazines and wanted out of the American trade magazine market.
At first, the publisher passed around a memo to all staff members saying that the publication was not for sale, and asking us to vehemently deny any rumor that it was. Then, when it became clear that too many people knew the secret, revisionist historians asked us to put on a happy face and to talk about growth opportunities that would come from a new partnership.
Behind the scenes, I was asked to clean up the financials, so that the publication would look good to a prospective buyer. Nobody specifically said "cut heads," but I was asked to do what I could to "reduce expenses." I was not aggressive in that task. My staff, many people with mortgaged homes and families to support, was absolutely terrified.
I was reminded of this talking to people inside Agilent's Semiconductor Products Group (SPG). In January, the Group used the Consumer Electronics Show (CES) to lift the lid on its financial structures. The briefing projected margins for the group, separate from the Agilent corporate parent, right down to the breakeven points. Investment costs were low, the group's principals were careful to emphasize. Why would the semiconductor group being showing us this level of detail if it wasn't for sale? I wondered aloud.
The group is not for sale, Agilent semiconductor spokespeople repeated. The "deep dive" on the financials was meant to instill confidence in the company, and a number of analysts agreed.
Then a report in EE Times in early June indicated the group was for sale. SPG president Young Sohn, who presided over the January briefings, had departed in the interim. "It's not our job to comment on rumor," one person after another at Agilent said when I called them. But no one denied the rumor outright. "It must be pretty scary in there right now," I commented. "Yes it is," one of my contacts admitted, off the record.
Now the same people are buoyed by the news that an investment group — Kohlberg Kravis Roberts & Co. (KKR) and
Silver Lake Partners — would acquire Agilent’s Semiconductor Products Group (SPG). It might be a prelude for taking the group public as a separate company, but the party line is that the entity known as Agilent's Semiconductor Products Group will be a privately-held independent semiconductor company — at $2.66 billion, one of the largest private companies in the world. I'm told that people inside still wonder what's going to happen with benefits, the administration of their medical insurance (perhaps, their Agilent stock). But, for the most part, they are breathing easier with the assumption that SPG's 6600 employees will be carried, along with existing management into the new company.
In its CES briefings, SPG positioned itself as a player in certain kinds of markets. The company produces GaAs power amps and FBAR acoustic resonators. The parts have utility in cell phones, and little head-on competition. Agilent SPG is also a player in CMOS imagers, the kind used in camera phones. Most of these are 1-Mpixel sensors, and I was troubled in January by the hesitancy to follow other CMOS imagers into the 3.3-Mpixel arena — the kind that will convert the coming-generation of camera phones into full-blown digital still cameras (DSCs). The effort will be made in product development, I'm now told; the manufacturing can be accomplished by TSMC.
It's clear the value of Agilent's SPG — or whatever it will be called — will hold up as long as the company has interesting products to sell and customers who want to buy them. For the time being, the company is protected from the rough seas of public stock trading and quarterly financial reporting. Too often, it feels like Wall Street is governing the semiconductor industry, pushing otherwise generous humanistic managers to cut heads because it lowers the cost of doing business, raises margins and ultimately earnings-per-share. ("Shareholder value" it's called.)
I recall the popular business strategy consultant, Tom Peters, saying something to the effect that you need to get laid off at least once in your career to strengthen your orientation toward business practice. As editor-in-chief of an ailing property, I told my panicky staff that they were the jewels the new publishers would be interested in having when they acquired our publication. It wasn't the building; it wasn't the word processors or page layout equipment. It was the editors and reporters that gave the publication its flavor and authority. And, sure enough, each of my staff members were given formal job offers by the new management when the publication changed hands and the takeover was complete. But it was my head that stuck up just a bit too high, and my own orientation toward business which got strengthened.