Summary
Bertrand Cambou has moved into his new role as President at SST, a company mired in a difficult situation: a fabless embedded memory semiconductor company that is trying to re-invent itself as a NAND controller company. In reaching for outside management, the Board acknowledges that the existing senior management team of Bing Yeh (CEO), Dr. Yaw Wen Hu (COO), Paul Lui (SVP), and Chen Tsai (SVP) need an outsider to energize the company.
Analysis
Generally, when a company is in trouble, the Board of Directors has the opportunity to shake up management in the hopes of improving bottom line and top line performance. Usually, bringing in an outsider should be done when the company is at-risk, and the corporate culture is at odds with success in the business. The move is risky for many reasons; the two most important are the corporate culture reacts negatively to the new person (e.g. - Carly Fiorina at HP), or competent executives who feel slighted find positions elsewhere. As such, such changes need to be scrutinized in the context of whether the appointment will likely improve the fortunes of the company and its shareholders.
Dr. Cambou is, without a doubt, an outsider to SST. His history as the senior executive at Spansion is not glowing. His financial acumen led the company to file for bankruptcy. The large wafer fabrication projects that Dr. Cambou initiated at Spansion several years ago were a major reason for the company's cash flow issues today. It was only on the verge of bankruptcy that Spansion filed a patent lawsuit against Samsung, in the hopes of improving its cash position.
SST, in the meantime, exists largely due to its royalty arrangements for its embedded FLASH technology. These arrangements account for approximately 10% of the company's revenue and most of the royalty proceeds drop to the bottom line. It is not clear what signal the SST Board of Directors is presenting when it appoints a CEO, who has integrated device manufacturing experience (IC companies with wafer fabs, such as Motorola, AMD, and Spansion), a scant history of achieving licensing revenues, and a stand-alone memory product background. SST, by contrast, is a fabless company with a signifcant licensing revenue component for ASSP's with embedded FLASH memory. Succintly, Dr. Cambou's experience does not align with SST's current and future business model.
Paul Lui, who is part of the current SST management team, has been the founder, president, and CEO of Macronix, a succesful memory company during Mr. Liu's tenure there. The Board of Directors would be well-advised to ensure that Paul remains with SST, if possible.
It does seem odd that the Board would pass over someone with Mr. Liu's prior record of success for Dr. Cambou's record at Spansion. Whether the Board's choice is well-founded or not will be answered within eighteen months, after the economy has recovered.
