Scott McGregor isn’t one to give away secrets. But it sure seemed like the incoming chief executive of Broadcom Corp. dropped a big clue about his courtship with the Irvine chipmaker earlier this year.
McGregor, chief executive of Philips Semiconductors, the chip arm of Netherlands-based Royal Philips Electronics NV, faced mounting criticism from European executives in the past year for shifting chip production to contractors,which Broadcom solely relies on for its chips.
Their argument: Philips wasn’t investing enough in production capacity to keep up with demand.
Then in May, McGregor provided an intriguing retort.
“It’s sort of funny,” he told industry publication Electronic Business. “Because nobody asks Broadcom how it’s going to keep up with the industry while not spending any capital.”
Last month, Broadcom said McGregor would become the chipmaker’s third chief executive, replacing Alan “Lanny” Ross, who had held the post since early 2003 after the exit of founding chief executive Henry “Nick” Nicholas.
In retrospect, McGregor’s Broadcom reference,Freudian or intentional,isn’t surprising.
McGregor, bespectacled and 6 foot 2 inches tall, is the pensive, thoughtful and calculating type, according to those who know him. He likes being outdoors and spending time with his wife and two kids. He’s called professional and likeable.
“That was one of the first requirements,that I got along with him,” said Henry Samueli, who started Broadcom with Nicholas and is chairman and chief technical officer.
Said one McGregor associate: “He’s very diplomatic, soft-spoken, polite.”
And apparently Broadcom liked him enough to lure him from Philips with an annual salary of $600,000 and an immediate grant of 2 million stock options.
And another thing people like about McGregor: he fits somewhere in between Broadcom’s first two leaders.
“He has the best qualities of both,” Samueli said, referring to the hard-charging Nicholas and the polished, venerable Ross. “He’s not in your face. But if he has opinions, he’s not afraid to express them. He’s an engineer’s leader, not coming at it like a Harvard MBA.”
Even so, McGregor is far from just being an engineer.
He set off to Stanford University to major in electrical engineering, but switched to psychology after a couple of semesters.
“He wanted to major in something broader,” a close McGregor associate said.
Broad is an apt descriptor of McGregor’s career. Up to now, Broadcom’s leaders have been versed in chips. McGregor is a bit more rounded,starting with a lengthy background in software.
Prior to joining Philips, McGregor was senior vice president and general manager at server software maker Santa Cruz Operation Inc., the remnants of which now are at Tarantella Inc. in Santa Cruz and Utah’s The SCO Group Inc.
McGregor also held positions at Xerox Corp.’s Palo Alto Research Center, where he worked on the first designs of the personal computer and software. He carried that work on at Microsoft Corp., where he helped design the first version of the Windows operating system.
He also worked at Digital Equipment Corp.’s workstation software group and did some consulting work for Scientific-Atlanta Inc.
So far, Wall Street seems to approve of Broadcom’s choice of McGregor.
“What I’ve heard is that he’s very familiar with the overall technology business picture,” said Dushyant Desai, an analyst with C.E. Unterberg Towbin.
The selection also ends Broadcom’s nearly two-year executive search, to the relief of analysts. Ross, a chip veteran, made Nicholas’ exit and the long wait palatable. He also leaves big shoes to fill.
“Lanny has made that a professional organization,” Desai said. “He has made it a professional pace and certainly a more humane place to work. What McGregor needs is to take that as a base, and then give direction to the company.”
There could be some culture shock.
When McGregor became chief executive of Philips Semiconductors in 2001, he praised the strengths of working for a European conglomerate.
McGregor also touted Europe’s business culture in a trade publication story, saying “in Europe, they develop people. They make careers for people.”
McGregor noted that when U.S. companies “need some new expertise, we just hire new people and if that doesn’t work out, we just lay them off,” according to Electronic Engineering Times.
He praised Silicon Valley’s “sense of urgency and openness to new ideas,” but said U.S. business leaders and engineers rarely “evoke the sense of belonging that is common among their European counterparts.”
To be sure, McGregor likely was playing to the Europe crowd. Broadcom in many ways is the epitome of the U.S. tech upstart, growing quickly and then slashing fat once it realized it had grown unwieldy.
Ross personally oversaw the layoffs of hundreds of workers in 2002 and 2003.
McGregor, who’s set to finish out the year at Philips, isn’t working directly with Broadcom now. But Ross said he and others are working to set up meetings with McGregor and division heads as well as customers.
“Scott is going to get into a train that is already in motion,” Ross said.
In recent months, McGregor visited Broadcom several times, according to Samueli. On one occasion, he met Nicholas,who, along with Samueli,owns most of the company’s voting shares,at his Laguna Hills home.
Nicholas, in typical hyperbole, calls McGregor “a god.”
“Scott doesn’t realize it but he’s been working for Broadcom his entire life,” Nicholas said. “He has that mutant Broadcom gene of people who are highly competitive, do not need sleep and are not at peace with themselves unless they leave scorched earth.”
He expects the trio to get along well.
“There’s a very strong chemistry among him and Henry (Samueli) and myself. There’s a power in his being able to call Henry and me.”
McGregor’s wife and kids also visited and played a role in the decision to take the job, Samueli said.
McGregor is leaving a large subsidiary where he oversaw more than 30,000 workers and $6 billion in yearly sales. Philips’ chip arm lost money for several years during the downturn and turned a slim profit in late 2003 and has remained profitable since.
Broadcom’s on track to post $2.4 billion in sales this year.
Samueli said McGregor’s mix of big corporate and entrepreneurial experience made him the “perfect candidate for Broadcom.”
“It might look like he’s come from a very large European company, but if you look at his background, it’s quite the opposite,” Samueli said. “One of his very early jobs was working on the first versions of the graphical user interface (software). He was at Microsoft when they had less than 300 people. He has the entrepreneurial orientation.”
McGregor’s work at Philips also is valuable to Broadcom, according to analyst Desai. His strong background in consumer electronics and wireless technology bodes well for the chipmaker, which gets half its revenue from those markets.y
