The Micron Mystery : Sudden Departure of Three Execs Goes Unexplained
Every Monday morning at Elmer’s Pancake and Steak House, the board of directors of Micron Technology Inc. meets to talk semiconductors. It’s an idiosyncratic group: four smartly suited Micron executives, a few local businessmen and, with cowboy hat, J.R. Simplot, the billionaire potato magnate who controls more than 20% of the company’s shares.
This Monday, the meeting dragged on longer than usual. Later, after it was over, Micron announced in a terse statement that its top three executives had resigned for “personal reasons.” Monday night, outside the large white chip factory that rises up from the sagebrush, Micron Chief Executive Joe Parkinson stood beside his newly elected successor--34-year-old Los Angeles native Steven Appleton--and reassured the attentive Boise population that all was OK.
What he didn’t explain, though--and what nobody involved will explain--is just why the management change is happening, especially at a time when the company is performing extremely well. After years of struggling against the behemoths of the chip business, Micron is now something of a behemoth itself--and big profits are beginning to flow.
Apparently it was a boardroom coup, Idaho-style. Simplot, the aging potato man, wasn’t happy with the strategy of Joe Parkinson, a lawyer who co-founded the company with his twin brother, Ward Parkinson, or so the speculation goes. He wanted higher dividends, some suggested. He just wanted fresh blood to chart a new course for the company, others said. But even Ward says he doesn’t know for sure.
This isn’t how these things are handled on Wall Street, and stock analysts on Monday night flooded the company with panicked calls. But no information was forthcoming--and folks around Boise didn’t seem too surprised or exercised by the lack of comment. People from Los Angeles and Silicon Valley and other urban centers have flooded into this rural region over the past decade in search of a more civilized lifestyle--and even corporate politics, it seems, is conducted in a more polite if not necessarily more honest manner.
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But no matter how it is handled, the change is a dramatic and risky one for Micron, which specializes in the volatile business of making computer memory chips called DRAMs. The company is now going strong and is expected to announce revenue in the year ended Aug. 30 of $1.5 billion, up 80% from the previous years, with profits tripling to more than $300 million. Why change management now?
“It’s the same explanation we have given for anybody that has ever left.” Appleton said, obliquely, in an interview. “It’s like a layoff. Our philosophy is just ‘boom.’ You just do it.”
On Wall Street, once the initial shock had worn off, investors did not seem too concerned about the shake-up. Micron shares closed down just $1.75 at $37.875 on heavy volume after trading as low as $35.625. Analysts praised the youthful new management team and remained bullish on the firm’s prospects.
If the change here is difficult to explain by the ways of traditional corporate America, that’s fitting. For Micron is a company that prospered in the semiconductor business doing things in its own peculiar way, ignoring the path set out by its Silicon Valley counterparts.
It was founded in 1978 by three design engineers who had left Mostek, a now-defunct chip maker. They set up shop in the leaky basement of a dentist’s office, initially working as consultants but then expanding their ambitions. They were soon joined by Joe Parkinson, an attorney and the twin brother of Ward Parkinson, one of the engineers.
The young entrepreneurs wanted to build a factory on a ranch southeast of Boise. They had cheap land, power and labor, but they didn’t have enough water. One of the small businessmen who decided to invest in the venture used a witching stick to hit a gusher that still serves the company.
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To keep costs low, the first chip plant was built using plans drawn up for a supermarket, with the space for the meat locker being expanded into a large “clean room.” Equipment was purchased secondhand.
“Other chip makers were spending more than $100 million for their plants. We built ours for $7 million,” Parkinson said.
What the company lacked in facilities, it more than made up for in smart designs that enabled it to manufacture more chips out of a single wafer.
Trouble came in 1985 from the East: Japanese companies had overinvested in production of memory chips and prices plummeted. Micron was forced to lay off half its 1,400 workers. But even as 11 companies in the memory business shut down or quit making the money-losing chips--and cried for government help--Micron pushed forward.
A key investor during the company’s early years was John R. Simplot, a legend in this farming region. J.R., as he is known, began his own business raising hogs at age 14.
Today Simplot supplies virtually all of McDonald’s french fries. He lives on a hill south of Boise with a panoramic view of the city and Micron’s operations. Outside, a large American flag flies.
“Everybody knows that is where Mr. Simplot lives,” said Tom Warnecke, a circuit designer who left Silicon Valley and joined Micron two years ago to find a better life for his three kids. “He influences every business he is involved in.”
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Simplot ascribes his success to a simple business philosophy: “The only way to win is to be the lowest-cost producer of the highest-quality product,” he likes to say. While Silicon Valley chip makers have focused on more expensive, more profitable products, Micron made memory chips better and more cheaply.
To succeed, Parkinson sought out competitive people with book smarts and put them on the production line. One of those recruits was Appleton, who went to Boise State on a tennis scholarship. He joined Micron in 1983 as a production worker earning $4.46 an hour, quickly moving up to production manager, director of manufacturing and finally president of the chip subsidiary in 1991.
Sitting in the company cafeteria Tuesday afternoon, Parkinson was approached by one employee after another quietly thanking him. “It’s been a thrill, every minute of it,” he would respond, slapping each on the back.
After a joint television appearance Tuesday, Parkinson shook hands with Appleton. Turning to a reporter he said: “I’ll leave you to Steve. He’s the new star.”
Micron Technology at a Glance
Founded in 1978, Micron Technology for struggled for years to carve out a profitable place among the giants of the chip industry. Micron specialized in so-called DRAMs, memory chips that are used in all computers and many other products, even as nearly all other U.S. chip makers pulled out of the market in the face of brutal Japanese competition. The company thus had influence beyond its size, and played a major role in chip-trade negotiations with Japan.
Micron’s perseverance has finally begun to pay off: riding the personal computer boom, the company has posted big profits over the past several years. It has also begun to diversify into PCs and other non-chip products--a strategy that may not have played well with shreholders. According to proxy information filed in December, officers and directors of the company hold about 10% of the shares. But the J.R. Simplot Co., a major agribusiness firm, holds 11.77%, and John R. Simplot holds 8.44%, giving the Simplot family enough leverage to change the company’s management.
* Headquarters: Boise, Ida. * Chief executive: Joe Parkinson. He will soon be replaced by Steve Appleton as part of a management shake-up announced Monday. * Employees: 5,500 * Major products: Computer memory chips, computers, communications systems and display devices. * 1994 revenur for nine months ended June 2: $1.13 billion * 1994 profit for nine months ended June 2: $258.63 million * 1993 earnings per share: $2.57 * Tuesday stock price: $37.88, down $1.75 Sources: Bloomberg Business News; Disclosure; wire reports; Tradeline Researched by ADAM S. BAUMAN/Los Angeles Times
