The Company Money Almost Killed

One CEO's struggle against a culture of excess

Chip-maker Seeq Technology, launched in 1981 with bushels of venture capital, has had to learn the hard way that good business involves more than a parking lot full of German cars.

By the time the current CEO, Dan McCranie, took over, the money was gone and bankruptcy was imminent. His mission? Remake the way a whole company thinks about resources. -- E.O.W.

As the applause welled up around him and he surveyed the roomful of expectant faces, Dan McCranie said to himself: I'm not sure I'm ready for this.

He was -- had been -- a salesman. He knew nothing about finance. His engineering degree had collected 12 years of dust. And now they wanted him to run a company that made state-of-the-art semiconductors. This, he thought, was crazy.

J. Daniel McCranie had just been made the chief executive officer of Seeq Technology Inc., a San Jose, Calif., company of once-spectacular promise that now had come to rest at the brink of Chapter 11. Between 1981 and 1985, Seeq Technology had raised close to $70 million. But instead of saving Seeq when the company met the market, that lucre nearly killed it.

Gordon A. Campbell, Seeq's first CEO and a cofounder, was a charismatic leader who knew how to motivate people and run through cash. He put up a fancy building that looks more like an airport than a factory. Ray Charles entertained at the Christmas party one year. Beer busts, contests, and companywide celebrations were commonplace. So, too, were missed schedules.

Campbell's firing by his venture capitalists in October 1984 blew a hole in Seeq and depressurized the dream state in which the company languished. Campbell was followed by M. R. MacPherson, an engineer with no taste or flair for leadership. In nine months MacPherson was gone, to be followed by a three-man "office of the president," headed by one of the company's venture capitalists.

That was how Seeq had drifted down to this bittersweet day in March 1986, and Dan McCranie's ascension. To what? To the head of a comatose company that had used up $70 million in capital in just five years. A company that had proclaimed itself a leading-edge techno wonder but was now consigned to turning out commodity memory chips that cost more to make than they took in. In 1986, Seeq would lose $24 million on sales of $30 million.

Inside Seeq, the sense of destiny had died. McCranie knew that. He saw the people "sleepwalking toward oblivion." He spoke for 10 minutes that day. His message was charged yet simple; your basic Silicon Valley rallying cry. Seeq was a rocket at one end of a runway. At the other: a brick wall. The way to clear the wall was to stomp on the accelerator. If you hit the wall, fine. At least you'd go out in glory. His message, clichéd yet compelling, suggested at least that Seeq had a future, that redemption lay within its grasp. The people liked it.

The book on Dan McCranie had always been that he was a man of rough edges and thin skin. He swore too much to be a good CEO. When he got mad, it showed. Yet there were ambiguities about him, too. Yes, McCranie the salesman grabbed you by the throat and wouldn't let go -- but no one ever accused him of overselling. His self-confidence emerged in the way he spoke with punch and humor in front of a crowd. Those who knew him best remarked on his humility. McCranie was ambitious, but he had shied away from the CEO's job when it came open. It scared him.

Maybe in this newly anointed schizoid Seeq had found an idiot savant who could return it to glory. Dan McCranie wasn't sure. He saw his rise as an act of simple justice, a recognition that "one of Seeq's own, a worker," was getting a chance to lift the fallen angel. His appointment that day in March signaled a casting off, an exorcism even, of that which had come before: the reign of the profligate prince, the caretaker status of the well-meaning technocrat, the troika installed by an outside regime.

The company's fall from grace had come to serve as a parable of the place and time that spawned it. In the Silicon Valley of almost a decade ago, when Seeq was founded, the boulevards seemed lined with gold. Seeq's founders saw their path to riches assured even before they began. What they did instead was turn their company into an emblem of excess.

Such was the tattered legacy passed down to Dan McCranie.

To understand how Seeq ended up where it did in 1986, you have to return to 1981, when Seeq was founded by a group of Intel Corp. middle managers and engineers who claimed to have seen the future for memory chips. In the 1970s, with its development of the EPROM (erasable, programmable, read-only memory chip), Intel had come to own the program memory chip market. The natural follow-on to EPROMs were EEPROMS, electrically erasable memories. Dubbed E2 technology by the trade, it represented an elegant shortcut -- Seeq's founders believed -- that the world would want. Erasing and reprogramming the circuit on an EPROM required physically removing it from a circuit board and passing it for 20 minutes under an ultraviolet light. EEPROMs could be reprogrammed instantly in place with a five-volt power source, thus presenting the user with significant savings in time and labor.

On January 5, 1981, Campbell and his followers submitted their resignations, dismayed by Intel's lack of initiative in going after the E2 market. Seeq was incorporated a week later. That goosed Intel. Within a month, Intel sued.

Intel's aggressive move gave Seeq a charge. Gee, maybe we've really got something here. Seeq went on to raise a princely $50 million in venture capital and another $18 million from a public offering of stock. The reputations of its key backers, Kleiner Perkins Caufield & Byers and the Hillman Co., only heightened the blue-chip appeal. Gordon Campbell was Seeq's CEO. And Gordie, as everybody called him, was a real pied piper. People walked through walls to follow him.

When Seeq's founders went out to lease space, they found an adequate building, but a stockyard stood down the street. In the founders' minds, cow chips and the silicon variety didn't mix. So Seeq found more gently scented land, hired an architect, and raised a building with a swayback, cantilevered roof and soaring plate-glass windows. They filled it with modular furniture that cost three times as much as the basic bulletproof Steelcase stuff you usually saw around the Valley. Fussing over this monument cost Seeq six months getting to market. And it wasn't that long before the stockyard was gone.