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Ex-CEO looks back at IDT hedge scuffle

Posted: 10 May 2016     Print Version  Bookmark and Share

Keywords:IDT  MaxLinear  activist investor  Starboard Value  semiconductor 

Tewksbury: While I was there, I think I fought them successfully. But that's not without some caveats. We sold flash controllers to PMC Sierra, we also sold smart power meters to Atmel, and sold high-speed data converters to Apple. Had IDT kept high-speed data converters, they could have been extremely effective in the 4.5G and 5G markets.

EE Times: After that lengthy battle, what made you decide to leave IDT?

Tewksbury: When they told me to get out of the RapidIO business. At that time, our RapidIO products were just getting designed into Huawei. But I was told to let our customers know that IDT is exiting the next-generation RapidIO market.

That's when I said, 'enough is enough.' [Such an action] would compromise my integrity and commitment to customers.

Jeffrey McCreary

EE Times: That's when McCreary took over. But he didn't last long. He was there for less than six months and Greg Waters took over as IDT's president, CEO and board member in January 2014.

Tewksbury: He [McCreary] was absolutely a wrong guy to do the job. He implemented new active strategies, which resulted in a customer revolt. They started walking away from IDT. The board had to take him out and put Greg Waters in.

Greg understood IDT and he went back to the strategy we had, and kept several important product lines including RF, wireless charging and RapidIO.

EE Times: Do you recommend other CEOs to do what you did at IDT when a company gets attacked by activist investors?

Tewksbury: No. Once those guys move in, it's all over. When the bulldozer starts, it won't stop. But you could do a few things to delay the clock.

EE Times: How so?

Tewksbury: You can mitigate [the disaster] by being compliant, taking their recommendations seriously, offering them small incremental cuts, and selling some product lines as a token cut. Make incremental concessions and buy time, until they leave.

EE Times: Any more specific advice to CEOs?

Tewksbury: I would say: keep them [hedge fund intruders] off the board as long as you can, until you can put the right defences in place. We didn't have this at IDT, but there are things like cumulative voting*. [*Cumulative voting, for example, can promote more proportional representation among the board of directors than winner-take-all elections.]

More advice: Hold constructive conversations, keep emotion out of it, and make incremental cuts.

EE Times: When you were installed as an interim CEO at Entropic, Entropic was in fact under attack by activist investors. You were brought in to cut costs and sell the company.

Tewksbury: Yes, Entropic was first under attack by Starboard in late 2013. A year later, it became a target by Eric Singer [who founded New York-based Vertex Capital Advisors LLC]. Activist investors were angry about Entropic's acquisition of Trident. The scandal of Patrick Henry didn't help, either.

EE Times: So you took the job.

Tewksbury: Look, I know this sounds very self-serving (because I took the job). But activists' involvement isn't all negative. Entropic needed some changes, the board wasn't making those changes fast enough. In the final analysis, I brought Entropic back to being profitable and sold it.

CEO's biggest challenge

EE Times: What's the biggest challenge of CEOs today?

Tewksbury: It's to strike a balance between short-term and long-term goals. Without investment in long-term projects, you are setting the stage for a longer-term decline of your company. Of course, things go in cycles. After one CEO invests in the long-term goal, the next guy comes in to reap the benefits. But then, he gets complacent by not investing in the future sufficiently.

EE Times: When we were researching our story on activist investors, we were kind of surprised at the lack of any studies, commercial or academic, analysing the impact (or damage) of hedge fund investors' campaigns.

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