[nasional_list] [ppiindia] Marvell's power
- From: ANDREAS MIHARDJA <mihardja@xxxxxxxxxxx>
- To: ppiindia <ppiindia@xxxxxxxxxxxxxxx>
- Date: Thu, 28 Sep 2006 12:33:31 -0700 (PDT)
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http://informasi-beasiswa.blogspot.com ** Marvell wants to be next TI
So it bought Intel's mobile phone chip business
By Tony Dennis: Friday 28 July 2006, 08:23
THE COMPANY that bought Intel's mobile phone chip business, the Marvell
Technology group, has explained its philosophy to David Whelan of Forbes
magazine. It simply wants to displace the existing mobile chip Number One ?
Texas Instruments. The group agreed to the purchase back in June for $600
million. Essentially it got the rights to Intel's PXA9xx (Hermon)
communications processor which is inside Research in Motion?s (RIM's)
Blackberry 8700 and the PXA27x (Bulverde) applications processor which is used
in the Palm Treo and the Motorola Q. Marvell is a family run business. It's
founder, Dr Sehat Sutardja, his wife - Weili Dai and brother - Pantas Sutardja
between them own 22 per cent of the company's shares. "We want to be the next
Texas Instruments," Sutardja said. Marvell claims to have dominated every
market it has chosen to enter. It says it knocked Texas Instruments out of the
disk drive chip business and displaced Broadcom in key communications markets
such
as Ethernet ports and Wi-Fi radios. Marvell's chips can also be found inside
a Cisco router; an Apple iPod; a Microsoft Xbox 360 and most hard drives. It's
main competitors besides TI are Qualcomm and Freescale. None of whom are a
push-over. Marvell's strategy is quite simple. It will wring profits where
Intel failed to find them - by moving the manufacturing from Intel plants
(which it did not acquire) to cheaper Taiwanese ones. This sounds like bad news
for its existing 1,400 employees such as those based at Intel's Chandler,
Arizona factory. Nevertheless, its philosophy might just work - marketing the
mobile phone chips with more vigour to phone makers than ever the PC-centric
Intel did. µ
===========================================
This chip outfit has quietly and ruthlessly found a way to thrive in every
market it has entered and made its founders into billionaires. More than a few
people were saying "Who's Marvell?" one day in June when Intel (nasdaq: INTC -
news - people ) announced the sale of its mobile phone chip business. The buyer
was Marvell Technology Group (nasdaq: MRVL - news - people ), an 11-year-old
firm in Santa Clara, Calif. Marvell was spending $600 million in cash for an
operation that has never made money, and it rushed into this purchase only 22
days after Intel put the division up for sale. Who would be so brash?
Answer: Sehat Sutardja, 45, and Weili Dai, 44, the husband and wife who
co-founded and run Marvell. The pair spent the next week jetting around the
country to meet their new employees (numbering 1,400) and customers. At an
Intel factory in Chandler, Ariz. Sutardja and Dai held a question-and-answer
session with 300 engineers. "What's Marvell's culture and philosophy?" asked
one worker.
Sutardja took the question. He could have warned them about how Marvell is a
tough place to work, with its up-all-night work habits and short-fuse product
development. He could have painted a brighter picture: Hundreds of engineers
have become millionaires from Marvell stock. Instead, he chose his words
carefully.
"We're a little like Hewlett-Packard (nyse: HPQ - news - people )," he said.
Engineers walk into each other's cubicles to share ideas. But we're also like
Intel, he said, the tough old Intel under Andrew Grove, where engineers ruled
and only the paranoid survived. The crowd's products had so far failed
commercially. Chips are supposed to be not just engineering marvels but
moneymakers, too. Sutardja added: "By the way, some of you forgot about that.
Do you remember that?" Nervous laughter ensued.
Sutardja, the chief executive, and Dai, the chief operating officer, are open
about their ambitions. "We want to be the next Texas Instruments (nyse: TXN -
news - people )," Sutardja says. He and his wife are billionaires, as is
Sehat's younger brother Pantas. Together the three own 22% of the shares.
Marvell has dominated every market it has chosen to enter, with superior
designs at a premium price: It knocked Texas Instruments out of the disk-drive
chip business and rivals Broadcom (nasdaq: BRCM - news - people ) in key
communications markets like Ethernet ports and Wi-Fi radios. Rip open a Cisco
(nasdaq: CSCO - news - people ) switch, an Apple (nasdaq: AAPL - news - people
) iPod, an Xbox 360 or any big corporate disk drive and you'll find a Marvell
chip inside.
With the Intel deal, Marvell is going after the more formidable cell phone
franchises of Qualcomm (nasdaq: QCOM - news - people ), Freescale Semiconductor
(nyse: FSL - news - people ) and TI. Intel had flashy customers like BlackBerry
and Palm's Treo. Marvell says it can wring profits where Intel failed by moving
the manufacturing from Intel plants (which it did not acquire) to cheaper
Taiwanese ones and marketing with more vigor than the PC-centric Intel ever
could. "The unofficial motto," says Marvell's first investor and former
chairman Diosdado Banatao, "is: 'Wait for a market to get big enough and kill
whoever is there.'"
The company has grown every quarter since it first sold shares to the public in
2000, and its shares are up fivefold. Marvell's chips, which cost a few dollars
each, typically feature what's called mixed-signal circuitry. They translate
analog signals that move through a cable or over the air into digital bits,
which form the binary code that's comprehensible to a computer. Revenue this
year should exceed $2 billion, with $400 million in profit, says Marvell. This
is a company in a hurry. "I've never met anyone who executes as quickly in 25
years at Intel and doing hundreds of deals," says Intel Capital President
Arvind Sodhani.
Sehat Sutardja and Dai run the company as an obsession and in their own image.
The two never take vacations and have no hobbies. Current and former employees
complain of unending work obligations and microscopic attention from the
founders. At least one ex-employee claims he was capriciously fired over a
seemingly trifling disloyalty. The company has gone through three sales vice
presidents in six years and is dogged by ugly lawsuits and a criminal
indictment for theft of trade secrets.
"They impaired their ability to recruit large talent because they had this
incest thing going on," says Henry Nicholas, the billionaire cofounder of
Broadcom, Marvell's archrival. Dai says Nicholas likes to spread
misinformation.
The Marvell story starts with kids tinkering with electronics in Indonesia. The
Sutardjas are of Chinese ancestry and grew up in Jakarta, part of a wealthy
family that owned a Mercedes parts business. When Sehat was 12, he taught
himself analog signal processing by taking apart his family's Philips
six-transistor radio and rebuilding it one component at a time. Pantas almost
electrocuted himself taking apart an air conditioner. The two separated when
Pantas was sent to a Chinese boarding school in Singapore. But they would talk
on the phone. Sehat needed Pantas to translate Hong Kong electronics magazines
into Indonesian.
Sehat breezed through Iowa State University's electrical engineering program in
six semesters. Pantas went to UC, Berkeley, followed by Sehat, and both
eventually earned Ph.D.s in electrical engineering and computer science. While
at Berkeley Sehat met and married Weili Dai, a sprightly undergraduate
programmer from Shanghai.
After Sehat left Berkeley in 1988, he boasted that he was the best analog
engineer in the world, according to several sources. (Sehat says others might
have said that but he never did.) "He was cocky at the time," Pantas remembers.
"I was cocky earlier." Sehat went to work at a new analog chip firm. Pantas
joined IBM's Almaden research lab. Canon hired Dai as a programmer.
Pantas says he was bored at IBM, and Sehat and Weili knew they wanted to start
their own chip company. In 1995 the three founded Marvell with money from
friends and family and $200,000 from licensing one circuit design. They worked
almost two years without pay before raising $1 million from chip entrepreneur
Banatao, who became chairman. Banatao was a legend in the business because he
had started S3, the first big PC graphics-chip success.
Sehat and Pantas planned to design a fast analog chip but needed a market. They
picked disk drives, for two reasons: There were no standards bodies dominated
by big companies. And hundreds of millions of drives are sold each year. Sehat
says he knew he could make chips for processing disk data that were smaller,
cooler-burning and speedier than chips then on the market.
Dai started cold-calling potential customers. She reached a scientist in
Seagate (nyse: STX - news - people )'s office in Minnesota named Kenneth Burns
who was then struggling with speed. TI had been supplying a chip that ran data
in and out of drives at 200 megabits per second. Dai told Burns that Marvell
could do better and volunteered to send out her "two best engineers." The
Sutardja brothers were soon on a plane and returned with a development deal.
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Marvell spent a year designing a chip that moved data 20% faster than TI's.
Sehat and Pantas were so sure of their design that they sent it to Seagate
before it had been fully tested. It worked. Seagate kicked TI out of its line,
and Marvell later chased NEC and Infineon out of other disk drive makers.
Marvell now supplies chips for 90% of big corporate disk drives and half the
chips for mass-market PC drives. Sehat and Pantas plan to double their storage
business by getting their silicon into optical drives, especially the new
high-definition DVD burners.
Dai and the Sutardjas next went after networking products, designing a chip
that would transmit data through Ethernet ports at a billion bits per second,
ten times the speed of the then current standard. Marvell and Intel signed a
development pact.
The promise of the networking business fueled hopes for Marvell's initial
offering in early 2000. The firm was already profitable, with $88 million in
annual revenue. But it wasn't the smoothest deal. Morgan Stanley (nyse: MWD -
news - people ) reportedly rejected the group, as did late-stage venture
capitalists, because of concerns over how the family-run company would handle
corporate governance. Many also felt Marvell was too dependent on the
hard-drive business.
To make matters worse, Marvell's chief financial officer, Gordon Steel, was
fired unceremoniously two months before the public offering. According to
Steel's rendition of the story, he was summoned into a meeting with Banatao,
along with other vice presidents, to ask for unfiltered feedback about the
company on the eve of the initial offering. The other vice presidents kept
silent, says Steel, who had previously been chief financial officer at
chipmaker Xilinx (nasdaq: XLNX - news - people ). He told Banatao that Dai
hired and fired too many secretaries. While he admired his bosses' technical
abilities, they told underlings only what to do, not why they should do it.
The next day Sehat Sutardja summoned Steel to his office and, according to
Steel, fired him. Steel says he was shocked by Banatao's betrayal. Sutardja
says that he fired Steel because he wasn't working hard enough on the stock
offering. Steel sued Marvell in August 2000 for wrongful termination and won a
small award in arbitration.
Marvell's networking ambitions ignited the ire of Broadcom, the leader in chips
for network switches, modems and set-top boxes. Broadcom's then chief, Henry
Nicholas, tried to tank Marvell's offering, says Dai, by calling Fidelity and
other institutional investors to tell them that Marvell's planned gigabit
Ethernet chip would fail. Nicholas, who is no longer with Broadcom, denies ever
having done that.
After the stock offering Marvell beat Broadcom to market with a gigabit chip
and stole away with 80% of Broadcom's business with Cisco Systems, which is now
a $100-million-a-year Marvell customer. "For a new company to come in and get
it right is rare," says David Leonard, manager of desktop switching at Cisco.
Marvell has a certain win-at-all-costs reputation. In 2001 it was negotiating
to buy the patents of a company called Jasmine Networks. Some Marvell
executives forgot to hang up the phone after leaving a voice mail with Jasmine
and were overheard seemingly plotting to steal the technology. Marvell's patent
attorney Eric Janofsky wondered aloud if Sehat would go to jail and moments
later remarked: "If we took the [intellectual property] on the pretense of just
evaluating it. ? " Jasmine, now bankrupt, sued Marvell, which denies it was
acting underhandedly. The case is in court.
In 2004 Marvell licensed chip designs and software to a firm called Alliant
Networks that was designing a chip to handle both cellular and Wi-Fi signals.
Months later Alliant stunned Marvell with news it was being sold to Broadcom.
Marvell immediately sued Alliant, alleging theft of trade secrets. In a
convoluted countersuit Alliant says Marvell was trying to "grab" its software
and also buy it with a lowball offer. That case is also pending.
Last year a product development manager named Suibin Zhang at wireless-hardware
maker Netgear allegedly spent two hours downloading 78 documents from Marvell's
extranet, a site restricted to customers. Problem was, Zhang had just received
a job offer from Broadcom. Marvell tipped off federal prosecutors, who indicted
Zhang in December for corporate espionage and computer fraud. (Zhang has
pleaded not guilty.) Broadcom got revenge in May when, for the same crime, the
feds indicted Tien Shiah, a manager Marvell poached from Broadcom. (Shiah's
lawyer says he is innocent and is preparing for trial.)
Marvell's founders have had to loosen their grip as the company grows. Sehat
and Pantas no longer rejigger circuits during the final design stage. Dai knows
it's no longer possible to get involved in every sale. Paramesh Gopi, who
manages Marvell's Wi-Fi business, used to tell Dai everything he's doing; he
now says it's gotten harder to get on her calendar. "Saturdays were good, but
they are getting full," he says.
Should Marvell employees care that their company is being run by a husband and
wife? Marketing vice president Alan Armstrong shrugs: "When they go to a
conference we save money on a hotel room."
These billionaires do have a life, sort of. "We have kids [sons aged 18 and 16]
who are growing up by themselves," Sehat says. "But they know how to cook," Dai
interrupts. Sehat says, "You can't say, 'It's time to play golf.' Life is full
of tradeoffs." Adds Dai: "We like to say, 'This is just the beginning.'"
Three Leaps Ahead Marvell has a knack for breakthrough chips.
1998 Marvell's disk drive chip shuttles data 20% faster than TI chips then in
use. Seagate is first customer. Now has 90% of market for high-end corporate
disk drives.
2000 Releases the first "gigabit" Ethernet chip that moves data between
computers ten times as fast as older chips. Cisco becomes a big customer.
2005 Marvell produces a Wi-Fi chip that's smaller and uses half the power of
other chips, perfect for handhelds. Sony (nyse: SNE - news - people ) embeds it
in its PSP, Nikon in its Coolpix S6 camera.
[Non-text portions of this message have been removed]
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