Cypress Semiconductor Cashes in Some Chips : Computers: The company announced it will sell Ross Technology, a key subsidiary, to Fujitsu for $23 million.
Ask T.J. Rodgers who’s responsible for the problems at Cypress Semiconductor, his computer chip company, and you’ll get a straight answer: “T.J. Rodgers.”
Characteristically, there were few excuses on Wednesday as Rodgers announced that Cypress Semiconductor will sell a key subsidiary, Ross Technology, to Fujitsu Ltd. for $23 million. Cypress thus abandons its five-year effort to become a major producer of SPARC microprocessors, sophisticated chips that are the brains of powerful computers from Sun Microsystems and a few other companies.
Analysts applauded Cypress for getting a good price for the money-losing unit, which is based in Austin, Tex. The sale will help Cypress’ bottom line, which has suffered over the last 18 months after years of impeccable performance. Cypress shares were up $1.25 Wednesday to close at $12.
While the Fujitsu deal has enabled Cypress to salvage a financial victory from a strategic defeat, preserving a moral victory may be a bit tougher. Chief Executive Rodgers, after all, has achieved more than his share of fame with his slashing attacks on U.S. technology policy and his brethren in the domestic computer chip industry, and he’s often exhorted U.S. companies to do more for the nation’s competitiveness.
Yet Ross Technology is known for having some of the leading chip-design talent in the country, and Rodgers is selling it to a Japanese firm. That takes Cypress out of the microprocessor business, the most promising growth area in semiconductors.
“My patriotism doesn’t include trying to eliminate free-market transactions when I think it’s a win-win situation,” Rodgers insists.
In fact, Cypress is fortunate to get off so easily. The market for SPARC chips hasn’t developed as expected, with no companies other than Sun buying in significant quantities. Sun recently chose to go with Texas Instruments rather than Cypress as its primary chip supplier.
Just last year, Rodgers backed down from a longstanding commitment to keep jobs in the United States when he moved a big San Jose manufacturing operation to Thailand, resulting in 400 layoffs. He said the move was a vital cost-cutting measure at a time when Cypress was suffering its first-ever losses.
The financial problems of 1992 were a rude comeuppance for Cypress, which grew rapidly in the 1980s by building a broad variety of specialized, high-performance chips that weren’t sold in high enough volumes to be attractive to the big Japanese chip makers.
With his libertarian politics and colorful style, Rodgers emerged as the chip industry’s leading contrarian. He denounced government efforts to aid high-tech--and especially the Sematech chip research consortium--and lambasted the large chip companies for mismanaging their businesses and then blaming the problems on the Japanese.
In 1992, though, Cypress began to feel the heat itself as its markets got big enough to attract the big players, even as lucrative defense orders started to fall off. The company lost $21 million in 1992, contrasted with a $34-million profit in 1991, as revenue fell from $287 million to $272 million.
Even in light of these results, Rodgers isn’t taking back any of the barbs he’s fired at Advanced Micro Devices, National Semiconductor and other big firms.
“I do not regret one goddamned word,” he says. “The U.S. semiconductor industry was losing market share because it wasn’t managed right, and I still think all this government (aid) is bullshit. Anything that goes on welfare gets weaker.”
Even his own company had grown “fat, dumb and happy,” he says. But he insists that those problems have been solved, although many analysts say Cypress faces a difficult future.
As for the resurgence of the big U.S. chip companies over the last two years, he credits good management, not government policy: “Congratulations to (Intel CEO) Andy Grove and Intel employees. . . . It would be a God-awful insult to them to give the credit for their success to some organization like Sematech.”
But criticizing what he calls “techno-pork” may prove to be easier than turning Cypress around. Some analysts question whether the company can really compete toe-to-toe with far larger rivals in commodity chip markets, as it’s now committed to doing. Without specialized, high-profit niches such as the SPARC microprocessors, Cypress’ future promises to be tough.
