Just over a year ago Fairchild Semiconductor’s new CEO changed the company’s course to transform the analogue business, focus on emerging markets and reassess other existing businesses to make them more valuable.
Highlighting the initiatives that he put into place since then, CEO Mark Thompson reported back on their progress during the company’s Financial Analyst meeting last week.
“It’s been a year of significant change and significant obstacles,” Thompson said. In the 13 months since Thompson took over to lead the company from founding CEO Kirk Pond, he “reconstructed the management team to really peel the company apart and fully understand what its strengths are and how those strengths map into opportunities in the world. And to develop some new strengths.”
Thompson told the analysts of his enthusiasm over the prospects of transforming Fairchild into a dramatically more valuable company in the next few years.
China represents one of the biggest opportunities for Fairchild going forward, Thompson said. In addition, the company has worked to transitioning to higher value businesses.
“We’ve made a transformation from being a standard products-oriented company to a high value products company,” he said.
In addition, Thompson made changes to the management team over the last year, and focused on changing the culture at the South Portland, Maine-based maker of power management chips.
“The analogue space has been one of the biggest focus spaces for us,” said Thompson. “We put one man unambiguously in charge. We’ve gone from shrinking business with disappointing margins to a tremendous trajectory both in top line growth and improving margin and profit contribution.”
Soon after Thompson took over as CEO, the analogue group set new goals.
The transformation focused on changing the division’s status from being a cost leader to focusing on differentiated products that are highly valued by customers.
“We felt we had many of the fundamentals in place to make that happen,” said Bob Conrad, executive v-p and general manager of the company’s analogue group. Specifically, in August 2005 Conrad’s group set a goal of $500m in revenue and 50 points of gross margin for the analogue group.
“We set that as a goal because we believe we can do it,” Conrad said. “A bottom’s up analysis told us we could do $450m to $500m by 2008.” That goal required revenue growth of 15 per cent to 20 per cent.
“We are very much at the high end of doing that,” Conrad said.
Another focus for Thompson and his new management team was to reassess one of Fairchild’s biggest acquisitions – the business Fairchild acquired from Samsung in 1999. The Samsung purchase had been described by Fairchild’s previous CEO as one of his smartest buys because it offered a built-in market for its products – Samsung itself.
But the market had changed in those years since the acquisition and, according to Thompson, Fairchild was no longer tracking what was important with Samsung. While the division had a very large fab capability in Korea and a strong captive supply, the colour televisions that it focused on represented a shrinking market.
“We were not participating in emerging display technologies and cellular phones,” Thompson said. “Within a month of my being appointed we put in place two very experienced Koreans…We went from having a negative growth rate to rates of five per cent and seven per cent [in the most recent quarters].
“Korea is one of our most important countries,” he added. “We made the local changes to make us successful there.”
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