The stand-off between Wall Street and the semiconductor industry represented by Wall Street deciding the IC business is low-growth and its shares low-value, and the IC industry's belief that it is poorly served, poorly advised and under-valued by Wall Street, is a recent phenomenon.
The phenomenon reflects a shift in the balance of power between shareholders and company management.
It used to be axiomatic that a company management's two top priorities were to its employees and to its customers.
The shareholders were expected to endure the ups and downs of the company's fortunes.
The two most influential businessmen in the semiconductor industry were Sherman Fairchild, who backed Fairchild Semiconductor, and Pat Haggerty, the greatest CEO TI ever had, who took TI into transistor manufacturing.
Back in 1965, these two great men made surprisingly similar statements about their attitude to business.
"You do things in this world to make it a more comfortable place to live. Make it more comfortable, healthier", said Fairchild, "you do not do things just to make more money."
"We do not exist to make a profit", said Haggerty, "we exist to create useful products and services and it is opportunity to operate at a profit that is the incentive to create, make and market these useful products and services for our society."
In the 40 years since Fairchild and Haggerty made their remarks, the semiconductor industry has delivered an unending stream of useful products which have made the lives of everyone more comforatbale and healthier.
Yet has the semiconductor industry always grown? No, the value of its markets have fluctuated wildly. Has it made consistent profits? No, it has lurched erratically from profit to loss.
In pursuit of Wall Street-mandated growth, companies will now go to the limits of legality, and beyond, to extend their revenues, will sack any number of employees to boost their profits, and will cut any costs, including R&D costs, to sustain margin.
But ultimately, as everyone knows, these are routes to disaster.
An unregulated Wall Street, as the credit crunch has shown us, will happily destroy itself in a pursuit of growth which ignores law, morality, social responsibility and common sense.
So which should change? The semiconductor industry which continually improves living conditions? Or the financial industry which measures the value of companies by metrics so narrow that they exclude the importance of semiconductor products?
If stock exchanges fail to fulfil their primary function of raising funds for productive industry, then stock exchanges must either change, or be marginalised, before they actively start destroying productive indsutry, just as they so nearly destroyed their own industry.
In the meantime, companies which wish to protect employees, serve their customers, conserve their assets and preserve their future, have to follow a different path to the Wall Street- mandated route of growth at all costs.
They have to give the finger to Wall Street.
TOMORROW MORNING: THE TEN WORST CAR MODEL NAMES
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Comments (3)
David,
I thought you would have at least commented on the "excellent" Q3 results by KRR.
http://www.pehub.com/56234/kkr-reports-q3-profit/
I just received an email detailing what a marvelous result it was, especially given the "chronic under-performance of its asset portfolio (read NXP et-al)". The email concluded that, it's a good job that quick thinking financial minds are driving KKR and printing these results, even in difficult times.
Ah what more can one say..
God bless the fee machine!
Posted by Robert | November 20, 2009 4:41 AM
Posted on November 20, 2009 04:41
Looking at KKR's results is not high on my agenda, Robert, but they've got a heck of a cheek complaining about the under-performance of its assets - NXP was doing very well before KKR came along and slapped a debt on it which meant them having to pay $480 million in interest payments a year.I wonder how KKR would like it if someone bought them and said 'Carry on performing but, by the way, we've imposed a debt of $6 billion on you'. It just can't be done. They're evil so-and-sos ,and I hope the EU bans them from operating here.
Posted by David Manners
|
November 20, 2009 10:57 AM
Posted on November 20, 2009 10:57
Hi David,
I agree whole-heartedly with the sentiments you have expressed. The "free-market" has failed; unleashing extreme darwinian forces in the name of "efficiency", "democracy", "free-market principles" simply results in the strong feeding on the weak, and a race to the bottom. Effectively, we end up playing a high-stakes version of the head-on car game of chicken, where the one who blinks first "loses", but the other - well he just hits the wall harder, but in the Wall-Street version, he end up taking the rest of us with him.
Anyway, I don't want to be perceived as a pedant, but i noticed a couple of typos in your original post, so I ran it through my email (Outlook) spell checker, here it is.
Of course, please don't put this up on the website...!
The stand-off between Wall Street and the semiconductor industry represented by Wall Street deciding the IC business is low-growth and its shares low-value, and the IC industry's belief that it is poorly served, poorly advised and under-valued by Wall Street, is a recent phenomenon.
The phenomenon reflects a shift in the balance of power between shareholders and company management.
It used to be axiomatic that a company management's two top priorities were to its employees and to its customers.
The shareholders were expected to endure the ups and downs of the company's fortunes.
The two most influential businessmen in the semiconductor industry were Sherman Fairchild, who backed Fairchild Semiconductor, and Pat Haggerty, the greatest CEO TI ever had, who took TI into transistor manufacturing.
Back in 1965, these two great men made surprisingly similar statements about their attitude to business.
"You do things in this world to make it a more comfortable place to live. Make it more comfortable, healthier", said Fairchild, "you do not do things just to make more money."
"We do not exist to make a profit", said Haggerty, "we exist to create useful products and services and it is opportunity to operate at a profit that is the incentive to create, make and market these useful products and services for our society."
In the 40 years since Fairchild and Haggerty made their remarks, the semiconductor industry has delivered an unending stream of useful products which have made the lives of everyone more comfortable and healthier.
Yet has the semiconductor industry always grown? No, the value of its markets have fluctuated wildly. Has it made consistent profits? No, it has lurched erratically from profit to loss.
But Wall Street is saying this industry must show consistent growth in revenues and profits.
In pursuit of Wall Street-mandated growth, companies will now go to the limits of legality, and beyond, to extend their revenues, will sack any number of employees to boost their profits, and will cut any costs, including R&D costs, to sustain margin.
But ultimately, as everyone knows, these are routes to disaster.
An unregulated Wall Street, as the credit crunch has shown us, will happily destroy itself in a pursuit of growth which ignores law, morality, social responsibility and common sense.
So which should change? The semiconductor industry which continually improves living conditions? Or the financial industry which measures the value of companies by metrics so narrow that they exclude the importance of semiconductor products?
If stock exchanges fail to fulfil their primary function of raising funds for productive industry, then stock exchanges must either change, or be marginalised, before they actively start destroying productive industry, just as they so nearly destroyed their own industry.
In the meantime, companies which wish to protect employees, serve their customers, conserve their assets and preserve their future, have to follow a different path to the Wall Street mandated route of growth at all costs.
They have to give the finger to Wall Street.
Posted by Fabio | November 24, 2009 10:07 PM
Posted on November 24, 2009 22:07