His Broadband Baby Had a Big IPO Year
Ten years ago, Dwight Decker was a rising star in Rockwell International’s modem-making division, but he was ruffling feathers. Decker insisted that the unit abandon its mainstay business,providing customized communications chips to IBM and some other big customers,and focus on the broader PC modem market, a fledgling segment that had yet to benefit from the Internet or even commercial online services.
“I pushed very hard,” he says. “I came close to losing my job over it, because there were some very strong feelings at the time.”
And Decker kept putting his neck on the line. In 1997 he urged that the chip division be spun off entirely from Rockwell, an idea that gave birth last January to Newport Beach-based Conexant Systems Inc., with Decker heading up the new public company as its CEO and chairman.
Decker’s convictions have paid off handsomely, both for himself and Conexant. Riding a wave of investor enthusiasm for high-speed data connections, the company’s first year as a public company was spectacular, underscoring Decker’s achievement of creating a new brand identity while turning a money-losing operation into a fast-growing business on the bleeding edge of data communications. It earns Decker recognition as the Business Journal’s 1999 Businessperson of the Year.
Hot Company, Hot Niche
Conexant’s trailing 12-month sales were $1.4 billion, 10 times the level before the Decker-inspired strategic shift of a few years ago. The company has overnight become one of OC’s best-known and most valuable companies, with a market cap of about $13.5 billion,second highest in the county and higher than its former parent, Rockwell.
Conexant is one of the hottest companies in one of technology’s hottest niches. Broadcom you say? No doubt, Conexant’s OC rival in chips for set-top boxes had a big year, too. Broadcom followed up its spectacular IPO year of 1998, which won Henry Nicholas and Henry Samueli the Business Journal’s award last year, with another strong year (see Honorable Mentions, page 15). But as well as Broadcom did on Wall Street, rising 350% in 1999 (with two trading days left), Conexant did even better, rising 588%.
And Conexant is a bigger company, with more than twice Broadcom’s sales. Broadcom’s big edge? Its market cap, at about $22 billion, is some 60% higher than Conexant’s.
The cross-county rivalry between Conexant and Broadcom is fierce, and many industry observers believe the outcome of their battle could shape the future of digital communications.
For his part, the thoughtful, soft-spoken Decker tries to deflect comparisons between the companies, and he strenuously tries to avoid the cult of personalities that envelop Broadcom’s two high-profile leaders. In fact, Decker expressed doubt about whether this paper should have singled him out for the award, saying the recognition should go to the company, not a single person.
Decker likes to call 1999 Conexant’s “miraculous year of redemption.”
“In many ways it was a miraculous year, but it was really about our redemption more than anything,” he says.
In 1998, after more than a decade of market and financial success in the PC modem business Decker had fought for, the former Rockwell division was in a slump, and many wondered if the division had much of a future.
It did. In fact, the new company’s stock has created more than 250 employee millionaires, more than adequate validation for Decker’s 10-year-old vision that the future of the PC lay in communications and that his company could play a major role in it.
Profitability on the Rise
And while plenty of Orange County companies can boast similar stock gains, few can report a comparable rise in profitability. After losing $57.1 million its first quarter of operation, Conexant’s subsequent quarters have netted earnings of $7.6 million, $24.4 million and $38 million. The return to profitability came about a year ahead of schedule.
At least 17 investment banks and investment firms cover the company, and most have issued “buy” or “strong buy” recommendations on its stock.
While the comeback seems instantaneous, Decker calls it the result of more than four years of work and investment. For the first two years or so of the plan, he poured more than 30% of the division’s sales into research and development. And while analysts focused on difficulties in the PC modem market, the division quietly developed new markets such as digital infotainment, wireless communications and network access. Combined, the markets had $100 million niche in 1995; today, they’re estimated to be worth $850 million with more growth on the horizon.
The spin-off helped the company dislodge its image as an old-school technology company more closely related to Rockwell’s historical defense industry business than to the future of telecommunications.
If Decker’s leadership has a weak spot, it’s how the mild-mannered native of Canada has allowed his company to be overshadowed by Broadcom Corp., a company that employs less than a fourth of Conexant’s workforce. Broadcom’s celebrated founding duo has garnered attention from the national press, and several have contrasted Nicholas’ flamboyance with Decker’s more reserved demeanor. And indeed, it doesn’t take a lot of imagination to recognize the difference between the two.
Instead of Nicholas’ turbo-charged lifestyle, the recently married Decker prefers a quieter home life, admitting that Conexant has absorbed most of his outside pursuits. Over the past year, he’s spent at least 12 hours a day, seven days per week at work.
Image A Priority
Decker says one of his biggest priorities this year will be promoting his company’s image, highlighting new products and advances.
Though the market has shifted dramatically from the days of 14.4-kilobit-per-second modems and homespun computer bulletin boards, Decker says the business is fundamentally the same: connecting people and developing the best products.
Much like his early salesmanship convincing PC makers that communications was the future of the home computer market, Decker has spent the year persuading everyone from video game manufacturers to wireless phone makers that data communications will become a fundamental part of their businesses.
Decker also hopes to make Orange County an epicenter for broadband communications. In recent weeks, the company has become more aggressive about its competition with Broadcom, a move he says generates attention for the region as a whole.
Labeling himself “a leader in transition,” Decker plans to take a less hands-on management style, moving from a “selective micromanager” to a more strategic role. He admits he might not have much of a choice as the company grows and ventures into new markets.
“I could argue that I could make any one decision better than anyone else,” he says. “But I can’t be there to make the next decision and the one after that. Nobody has that kind of time.” n
