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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: To keep score over multiple years is hard. Especially, running companies successfully beyond a one-to-two year window is tough.

As you know, it's relatively easy to maximise profit by cutting R&D and more layoffs in workforce. You don't need a degree for that.

Hedge fund guys like to say that they have a stellar record. Of course, they do, as long as you are looking at their short-term results. But what matters is the state of a company past the initial three to five years, after damages were already done.

EE Times: Earlier you said not all activist involvement is negative. Can you explain further?

Tewksbury: I think basically there are three different scenarios for outsiders to come in. First is when companies have dysfunctional issues, like they lost sight of business goals, and they need a new voice.

In my mind, Marvell and Entropic fall into this category. Marvell was under investigation for accounting irregularities last fall [the company delayed filing reports on the second and third quarters of fiscal 2016.] Entropic had the CEO scandal.

The second category is when companies have their opex (operating expenses) higher than that of their peers. They become the target. IDT is a good example.

Third is a scenario under which hedge fund investors are smart and do their research, identify value and an explosive growth opportunity for technologies. They try to hitch the wagon by coming into the company.

EE Times: The third scenario doesn't particularly sound realistic. We haven't seen that sort of hedge fund investors in the semiconductor industry, at least not yet. Will you see yourself working for hedge funds?

Tewksbury: I actually believe in a role as constructive investors in this industry. Instead of hostile, slash-and-burn style of investment, you can play a role by actively helping guide CEOs, balance short and long-term goals, making their business sustainable.

EE Times: In closing, tell us about where you think the U.S. semiconductor industry is heading.

Tewksbury: As I said before, I'm worried about the state of the U.S chip industry.

I am, however, very bullish on the tremendous opportunities chip companies have. Take an example of IoT. IoT is an overused term and I don't like it, but think about trillions of wireless sensors, and the networks they form. They need energy harvesting. They must use electronics that consume an order of magnitude lower power. Innovation opportunities for 5G are so big, including macro infrastructure, WiFi and small cells.

I am, however, disappointed that many U.S. companies are operating under pressure from activist investors with short-term agendas.

EE Times: And you're saying that getting bought by Chinese investors isn't a panacea, either.

Tewksbury: China has reputable and professional private equity firms, but there are many unsavoury wheelers and dealers, cowboy types in China. Frankly, some of the honest private equity firms in China are worried about them.

I think we all need to recognise that the U.S. semiconductor industry has been at the heart of our technology society. [By selling out to firms overseas,] the U.S. should be concerned about its security and losing competitive edge.

Semiconductor R&D spending

Figure 7: (Source: KPMG Global Semiconductor Outlook)

- Junko Yoshida
  EE Times

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