EXAR CORP.'S PUBLIC OFFERING last year looked deceptively routine on the surface: another integrated-circuit maker from Silicon Valley raising funds for aggressive expansion. But Exar is a subsidiary of a Japanese concern, and its offering signals a radical shift from the way Japanese companies traditionally do business.
By taking its subsidiary public in the United States, Rohm Co. chose a route that most Japanese companies avoid because of the complex legal work. "Japanese companies are somewhat wary of Securities & Exchange Commission rules," says Norman Kristoff, vice-president of Yamaichi International America Inc. "They are a little bit afraid to have a public entity in the United States because of the disclosures required." It is common for Japanese companies to raise capital by taking subsidiaries public in Japan, where regulations are looser.
But Exar decided to go public for competitive reasons. The company found itself unable to compete with neighboring high-technology businesses in the intense battle for high-caliber engineers. The reason: it had no public market for its stock options. "In this industry, you almost have to have stock options," says Ronald Guire, Exar's vice-president and chief financial officer. "We're looking for a lot of new talent, and we want to keep the good engineers. Having stock is very important to them."
Japanese securities laws prohibit the use of stock options in that country. But there are about 1,700 Japanese subsidiaries in the United States, and some are sure to follow Exar's lead. "Many Japanese companies and their managements are showing interest in this," observes Masanori Honda, senior vice-president of Nomura Securities International Inc. "It's the American way of management."
Alan Rachlin, a lawyer who works with high-tech companies, expects to see about 20 offerings like Exar's in the next few years. "Now that one company has done it," he says, "they'll all probably jump in."