The faithful at Seeq, meanwhile, buried a time capsule in the lawn out front. Among its contents was the prediction that by 1992 Seeq would be a $1-billion company. (Seeq did $45 million in sales last year.) Human-resources director R. Steven Gonia recalls Seeq's early days as a "glorious time. It was a high-profile place, intensely fast, very exciting." The best and the brightest wanted to work for Seeq, and Gonia was in hog heaven. "We could cherry-pick.'
Even outsiders caught the fever. In a national marketing campaign, the company offered a Porsche to the designer who could devise the most ingenious application of Seeq's E2 technology. Thousands responded. When informed that the ovens to bake the chips typically took about six weeks to install and get running, Seeq challenged the Thermco Systems Inc. crew: do the job in two weeks and we'll buy you dinner anywhere in the Bay Area. Soon the Thermco team was working nights and weekends. Recalls Gonia: "It worked so well the best Thermco guy became our maintenance manager. 'The hell with Thermco. I want to work for Seeq.' '
* * *
Dan McCranie didn't want to work for Seeq. The pied piper, however, had other plans. Campbell had sold chips alongside McCranie in Minnesota back in the mid-1970s. He contacted McCranie in early 1981, when Dan was working as a group vice-president of sales for Harris Semiconductor, in Melbourne, Fla. "I had barely heard of start-ups," recalls McCranie. Gordie to him was just another salesman. McCranie said no.
Campbell flew McCranie out to California to meet the team at Seeq and his lead venture capitalist, Frank Caufield. The answer, again, was no.
Weeks later, McCranie's phone rang -- Campbell again. He was flying out to find McCranie in Florida. McCranie kept shaking his head. Campbell was admiring a watercolor. Who painted it? McCranie's wife, Kathy, sighed: Dan did, back in the days when he had time to paint. No problem, said Gordie. If Dan comes to California, he'll have plenty of time to paint. Kathy perked up. Is that right?
In September 1981, McCranie was hired as Seeq's director of sales, with the express mission of cracking open the E2 market. He wondered what he'd done. He had taken a 40% pay cut for a minuscule equity position in a shaky start-up. But strangest of all, the company had no E2 chips for him to sell -- and wouldn't for another 18 months.
That didn't matter to Campbell. By 1983, E2 technology was the talk of the Valley. Sixteen companies had announced their intentions to build the chips. Dataquest, the leading research house in the Valley, fed the fever by issuing a report predicting that the E2 market would grow to $1 billion by 1987. But the technology was complex and held its secret close. An E2 still cost five times as much as an EPROM to make. The market for them remained small.
While Seeq was grappling with E2 technology, it needed to find a revenue stream. It fell back on EPROMs -- the passé product its founders had scorned Intel for dwelling on. EPROMs were fast turning into a commodity product, something best mass-produced by a giant like Intel, not a start-up like Seeq. Making EPROMS suggested a patricidal urge in the collective psyche of Seeq. Make one better than Intel. Blow Intel away and declare our independence. The time capsule, after all, had contained a prediction of what year Seeq would surpass Intel in sales.
Why not diversify the product line instead, find revenue in nonmemory technologies? That idea was debated within the company in 1983 and rejected. Campbell believed in betting on good people and letting their vote guide the group. The vote was to make memory chips. McCranie was torn. He was loyal to Campbell, but he was disgusted by the poor yields and ramp-up glitches the company was running into with EPROMs. This was supposed to be bread-and-butter stuff. If Seeq couldn't make a decent batch of EPROMs, how could it hope to execute with EEPROMs?
McCranie, meanwhile, was out on the road discovering the hard way how small the E2 market was. McCranie would jump on a jet and call on targeted customers. The typical response was: Who are you? What established companies are in this market? Good-bye. McCranie banged on Pitney Bowes, in Norwalk, Conn., for three years. (Today every Pitney Bowes postage meter has a Seeq chip in it.)
When McCranie dragged himself home to Seeq he found people living in a "fairyland." People didn't want to hear how tough the E2 market was to crack. They didn't want to confront the fact of the low yields on EPROMs. And the gilded life inside Seeq began to cloy. McCranie's father had been scarred by the Great Depression. He'd schooled his son in the virtues of thrift. At Seeq, thrift was a dirty word. "We were always rewarding ourselves for things that didn't count," recalls McCranie. "Every other week there was a champagne party for some weird thing -- the Tandem computer came in today. Well what does that mean? It means you've got to start paying the lease on it.'
While Silicon Valley toasted a booming EPROM market in 1984, Japan Inc. was cranking up to flood the world with chips. Then, just as suddenly, demand collapsed. Between the last quarter of 1984 and the third quarter of 1985, the price of a standard 128K EPROM went from $15 to $2. Seeq, reliant on EPROMS for 75% of its revenues, was making them for $5, and would struggle to get the cost down to $3. Life in fairyland was coming to an end.
* * *
When Seeq began to fray around the edges, the chairman of its board, Frank Caufield of Kleiner Perkins, asked for help. He invited one of his partners, E. Floyd Kvamme, a founder of National Semiconductor Corp., to attend a board meeting in September 1984 and critique Seeq's annual business plan. Kvamme, a tall, bespectacled man whose courtly manner and professorial presence veils a sharp technical mind, peered at Seeq's EPROM and saw an immediate flaw. The chip had a fancy quartz lid on it. Seeq had farmed this work out and thus lost leverage over 75% of the chip's cost. This kind of chip should have been made by a vertically integrated giant, not this gilt-edged boutique. The closer Kvamme looked, the more he saw the chip as emblematic of a top-heavy, misguided company. What was Seeq doing in a building big enough to block out the sun? Why did it think EPROM users would embrace the E2? These were two different markets. "The EPROM thing," concluded Kvamme, "was a disaster waiting to happen.'
