The root of company success
02/01/1997
The root of company success
I liked your analogies for the current industry climate that you expressd in the November SST issue ("For everything there is a season," p. 14). Well, some of them anyway. I`m going to continue the trend of asking you the questions, with the following. You include downward pressure on stock prices as a "dark side" factor of a downturn, and then in the following paragraph appear to be criticizing financial short-termism. Are the two statements not contradictory? Surely a poorly-traded company with overvalued stock is in a potentially worse situation than one with a realistic share price?
I would argue that the latter is more likely to be awake to its real problems, and obviously offers better earnings potential to prospective investors. I am very much against short termism, but equally, I am for realistic share values. OK, we occasionally see absurdities where a company is valued at less than the value of its realizable assets, but these are very much exceptions that quickly get adjusted out.
[In response to a followup e-mail, the author added, "I take your point about market fears engendering short-termism in the boardroom. Difficulty clearly lies in balancing "market needs" against the "real" needs of the company and its various stakeholders."]
I`m not trying to defend wild share price fluctuations, but quick profit-taking is a feature of all stock markets, and all markets are imperfect. High-tech companies do not need or merit any particular protection from this fact of life. These companies also do things fast - important, strategic, technical things, which give them or relieve them of a competitive edge and change their real worth much faster than happens in most other manufacturing industry sectors. Take a look at the data storage or telecoms industries for example, or, closer to home, ask yourself where on earth did ATMEL come from?
My own company is entirely focused on optoelectronic components, and is in another category again: We can`t "get there" without enormous R&D effort, and absolutely have to use the type of "out on the edge" equipment that any normal fab would not touch with a barge-pole. Our enabling technologies are far from reliable and mature. We therefore have to play a longer-term game, but are equally faced with shorter development cycles and an increasing unwillingness to accept the "strategic" argument. These pressures are, I believe, being felt once again in the planning stages of the 0.18-micron and below facilities, and will be a shock to the 6- to 8-inch transition managers who are about to inherit these roles. (As an aside, I think that going "6 to 8" was much easier than "4 to 6" inches, and the scaling problems of going to 12 will prove to be major headaches).
Your comment about a possible start-up binge is interesting, and I think promising. Are there likely to be any real technical and manufacturing start-ups, or will we just see a lot of consultants and would-be gurus fulfilling the same roles and providing the same services as when they were directly employed? Not everyone wants to work for him/herself, or is cut out for it. The social and team aspects of company success may be notoriously hard to quantify, but should not be forgotten. We all know it when we experience it, and for many it is a key motivating factor. Farming out cleaning and cafeteria services is one thing, but how far do we go?
Thankfully, our industry is still led to a great extent by people with technical and marketing vision, not by the bean-counters. Let`s hope it stays that way a good while longer.
Simon Rack, technology manager
Alcatel Optronics