Was Linear Technology's decision to phase out its involvement in the cellphone and consumer markets when those markets accounted for a third of its revenues as ballsy a play as Intel's decision to get out of DRAM when DRAM accounted for 75 per cent of Intel's business? Probably Yes.
Linear's will go down as a great decision because, at the time it was made, every analyst and exec in the industry was repeating the (erroneous as it turned out) mantra that consumer (including cellphones) was going to account for 50 per cent of the semiconductor market.
As with Intel's decision, which was made by Gordon Moore and Andy Grove, Linear's decision came from the top, Bob Swanson, Founder, first CEO and now Executive Chairman of Linear Tech.
"We made the decision in 2006 because we didn't like the way the future looks", Swanson told me earlier this week, "we recognized there was no pot of gold at the end of the cellphone rainbow, just red ink."
For 'We' read 'I'. Linear execs told me last week the decision was made by Swanson alone and driven through by him in the teeth of criticism from both inside and outside the company.
"We knew there'd be a bunch of people in
For daring to defy the wisdom of Wall Street, the analysts refused to recommend Linear stock which stayed pretty static for years.
This upset some execs in Linear who had options to consider.
But now, with wireless companies fighting for the exit - viz: NXP, Freescale and TI -and with the consumer market tanking, it is clear how exceptionally prescient Swanson's 2006 decision was.
Linear's sales have been pretty static as it diversified out of cellphones and consumer into other areas but, as Swanson put it: "We've replaced less performing businesses with better performing businesses."
With even the Wall Street analysts belatedly appreciating the validity of Swanson's strategy, Linear stock began to rise before the recent crash which brought down all stocks.
"I was," commented Swanson, "more correct two and a half years ago than I ever knew."
So should we read this as a re-assessment of the negative tone of your post NXP Out of Wireless?
Touche as the French say.
But there's an important difference: NXP gave as the reason for their 2008 decison the fact that they couldn't afford wireless R&D and their fnancial backers seem to have supported the decison; Linear Tech's 2006 decision was because they thought wireless would become a low margin market and their financial backers (as a public company represented by the Wall St analysts) strongly opposed that decision.