Others had told him the company would now crack. You can't squeeze any more blood from this stone, Dan. That intrigued him. McCranie spent a lot more time in the manufacturing area to better understand what he, the impatient and unschooled CEO, could demand of production. The move made him visible among the rank and file. Tough, yes, but maybe also caring. The company stopped buying new wafers for machine setup and replaced them with used ones. Maintenance on machines less crucial to the process was scaled back; the maintenance crew was reduced to working odd, staggered shifts that blurred the line between night and day. The employee badge numbers -- emblems of seniority -- were collapsed, eliminating this vestige of those who had come and gone. Here stood the hard core, the Seeq survivors.
These small changes began to offer the look and feel of a different company. That spilled over into McCranie's perception as well. The past and all its rosy optimism no longer mattered. What McCranie sought to do was "zero base" the operation. He called it "washing your brain." Each month McCranie told his people: we want to end up with more money than we started with. What can we bring in this month in revenue?
In mid-1986, McCranie figured the company could do $7.5 million per quarter in sales. And at that level Seeq could have positive cash flow, provided he could get overhead under control. That would take a big harpoon. Campbell's legacy was the rent. Leasing plant and capital equipment accounted for 35% of Seeq's total outlays, about $1 million a month. Assuming sales of $7.5 million a quarter, McCranie calculated that even if he got direct labor and materials free, Seeq would still lose money at the rate of $4 million a year. He needed a break from his lessors. Otherwise, everything else would mean nothing.
Many of Seeq's leases had been signed when interest rates were touching 20%. Some were for as long as seven years. Yet the customer base for E2 and Ethernet chips was solid. Flash was coming on. The industry was in a slump. Good timing. If lessors yanked their equipment out of Seeq, what were they going to do with the stuff? Sell it to the navy for anchors? McCranie figured they'd be lucky to get 10¢ on the dollar. They decided to ask for an extension of the leases, effectively reducing payments by 50%.
Seeq had six major lessors, some of them more sympathetic to the company's plight than others. Any one of them could scuttle the deal. McCranie decided to work the group, rounding up the more compliant ones and moving them in the direction of the more recalcitrant.
A series of individual meetings in the summer led to a final meeting with all the lessors, most of whom by then were on board. At that meeting McCranie arrived with two sidemen, Seeq's corporate counsel and its "junkyard dog" insolvency counsel. One bore the bankruptcy papers, the other the restructured lease agreements. McCranie's lessors were free to choose which set of documents they wanted to sign.
McCranie knew that to pull this deal off, they had to come up with a carrot. That they did, in the form of warrants allowing the lessors to buy stock in the company. McCranie reasoned that that was only fair. Seeq had signed those leases and was asking for forgiveness.
By mid-October the lessors had fallen into line. That made other pieces fit. Seeq's early investors, General Electric Ventures, Kleiner Perkins, and the Hillman Co., agreed to give Seeq an additional $2 million convertible into preferred stock, in the hope that the company could restructure successfully. In November, Monolithic Memories Inc., another chip maker, bought approximately 14% of Seeq for $4 million and agreed to a four-year joint-technology program. This gave Seeq not only cash but a way to diversify the E2 technology. (A similar deal was made last year in which Seeq exchanged the Flash technology for access to National Semiconductor's manufacturing muscle. Seeq started to ship Flash chips in December, and it currently has about a two-year lead over its competitors in the Flash market.) The CMOS 256K E2 chip started selling briskly in the last quarter of the fiscal year, which ended September 30. In fiscal year 1987, it accounted for 25% of Seeq sales.
In late 1986, McCranie told his board he expected the company to turn a profit in the third quarter of calendar 1987. It started making money in the first quarter and has done so ever since. In fiscal year 1987, Seeq earned 22¢ a share, compared with a loss of $9.48 a share the previous year. It now has $33 million in the bank.
* * *
The chairs in the Seeq boardroom are a soft, glovelike leather. Spaced around the expansive slab of a table are enough of them, it seems, to seat the entire U.S. Cabinet. Late on a Friday afternoon Dan McCranie sits alone at the table, dwarfed by the space. "The biggest worry I have is how many guys with a sales and marketing background are at the top of very large, successful semiconductor companies. This is a fast-moving situation. There are new processes coming along all the time. If something downstairs doesn't work, I'm useless. I'm useless, other than marshaling the forces to fix it."
McCranie's wife calls, wondering when he is going to be home. He tells her soon, says "I love you, baby," and hangs up. I tell McCranie I'm out of questions, giving him an out. He seems to want to stay and talk. He is leaving for Hawaii tomorrow for a week, his first family vacation since the turnaround two years ago. He says he intends to beat his daughter every morning at tennis. He has arranged to be part of a conference call on Friday. The man won't let go. Or can't.
Faster and faster he must now run. In its first seven years, Seeq built 12 basic chip designs. In the next two, it will introduce 18. There now arise again the expectations of investors, employees, customers. There a
