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Freecscale revamp is a 'work in progress'

Posted: 08 Dec 2009     Print Version  Bookmark and Share

Keywords:Freescale restructure  automotive  networking 

Facing the challenges head on, Freescale Semiconductor Inc. has made tough discussions behind closed doors some 18 months ago.

Those discussions led to the tough decision to exit the wireless IC business, layoff 25 per cent of employees, refocus on a handful of market segments, dump some manufacturing facilities and reinvest millions in an old 8-inch fab, tighten costs controls to boost operating margins and boost cash flow and focus on debt reduction.

There is no let up today in the tough love being doled out by Freescale's board of directors. A fly on the wall during a senior management meeting at the company's Austin, Texas, office would be amazed, though, to find executives reserve the bluntest criticisms and toughest goals not for the rank-and-file employees, but for themselves. And they are not even reluctant to share the message that Freescale is a "work in progress," with outsiders.

"We are on a journey and we are not where we should be yet," said chairman and CEO Rich Beyer. "Until we get perfection in every area, we are not good enough yet."

It's not that the company has not made significant strides in its turnaround programme.

Since Rich Beyer joined as chairman and CEO about 18 months ago, the company after refocusing on the automotive and networking equipment markets has turned free cash-flow positive—ahead of its first half 2010 target—scored major design wins in key industry segments, paid off almost $2 billion (Rs.9,348.37 crore) in long-term debt and raised cash and short-term investments to a more comfortable $1.3 billion (Rs.6,076.44 crore) as at the end of the September quarter.

The more significant changes that are expected to drive the company's growth are not in the financial numbers, however, but in the key executive appointments made by Beyer over the last one year. Freescale today has a new slate of top executives, some of who have been with the company less than a year.

"We like working together, we like winning together and we like supporting one another," Beyer said. "We recognise the foibles of one another because each of us has them and we have ways of backing each other up. We have a common purpose in mind, which is to take this company, which in our judgement once was a great company, and turn it back into that great company."

New exec team
The list of requirements for staying on or for getting hired as a senior executive with Freescale was rather short though quite stringent. Primarily, Beyer wanted people who believed Freescale could be a winner once again and were willing to commit the time and efforts to rebuilding the company.

The selected executives also had to assure Beyer they would not bail out during the difficult years. During a November management meeting Beyer squeezed out from his team a commitment to "be here not just for a short-term improvement in the business and then move on."

"I wanted only those people that were very confident and committed to the hard work that it was going to take to turn this company around," Beyer said. "I needed a group of people that was willing to do it what it takes to make this happen."

Who made Freescale's senior management team under Beyer? Alan Campbell stands out for his longevity at the company and its predecessor Motorola Inc.'s Semiconductor Products Sector.

A native of Scotland with more lives than the fabled cat, Alan Campbell is the longest-serving executive currently on Freescale's management. Campbell joined Freescale when it was a part of Motorola 25 years ago and was named chief financial officer in 2001, a position he held onto through the company's IPO and the leveraged buyout that took it private years later. Campbell also survived Beyer's management shakeup.

"I've seen some difficult management changes at this company over the last year," Campbell said. "It's now all about winning and execution. We have great chemistry in the management team and I do see us operating at the highest level for success."

Tom Deitrich, head of Freescale's RF, analogue and sensors group, agrees the company is now headed in the "right direction" but noted the "job is not done yet." Deitrich believes Freescale must move towards 100 per cent customer satisfaction in all of its operation, including manufacturing where the company is aiming for zero defects on all of its products.

"Zero defect means zero defect," Deitrich said, echoing earlier comments by Chris Magnella, general manager of Freescale's Oak Hill fab, an 8-inch plant the company is retrofitting to take advantage of its fast-growing MEMS and foundry business.

"My job is only as safe as my ability to keep this fab efficient and competitive," Magnella said. "If I can't do that, I will be out. It's that simple."

That sentiment permeates the company. Reza Kazerounian, a former STMicroelectronics Inc. executive who joined Freescale recently as head of the microcontroller solutions business, talks amiably enough but is avidly carving out an unrelenting strategy that would help the company take on rivals and win more designs in the sector.

Former chief technology officer and now head of networking and multimedia business Lisa Su appears even more deceptively laid back but hints of a steely resolve to help re-energise the company are obvious in her answers to questions related to the unit's goals.

"I've seen brutal changes at this company," said Su, a former executive at IBM. "But we are moving this company forward and we are winning in the marketplace. The energy level is different today."

Henri Richard, head of sales and marketing, has the same resolve. An industry veteran with more than 30 years of experience at Advanced Micro Devices Inc., IBM Corp., Bell Microproducts Inc. and WebGain Inc., Richard notches more than 300,000 miles in the air every year and took on the Freescale job because the company "has the potential to be greater than it is today."

The task CEO Beyer has given Vivek Mohindra, head of strategy and business transformation and a former top executive at Dell Inc., is to help keep the company focused on what it needs to do to regain momentum and eventually move towards an initial public offering.

"We have to stay on our toes," Mohindra said. "We have the potentials but we cannot afford to be complacent." Will Freescale, even with a more focused strategy and newly energised executive team, make it? Beyer is definite the company is again headed for greatness but the former Intersil CEO is not taking anything for granted. Neither is he papering over the challenges still facing the company.

"If you were a doctor, how would you assess Freescale's health," EE Times asked Beyer. His answer was as equally blunt as the assessment earlier given by members of his management team.

"The brain is healthy in the sense that we now have a winning strategy," Beyer said. "The heart is a work in progress. The other extremities are functioning but they are not strong enough yet. We need to improve the muscles, for instance. We have very good quality in many respects but until we get perfection we are not good enough."

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