'We cannot chase a business merely because there is an opportunity'

Post the economic meltdown, many companies went on an ego-sizing trip. The leaders and veterans found the rules of the game changing and boom time became past glory as they struggled to make ends meet in the 'new normal'. Of the many companies that went to the brink in the mid-2000 times LSI was one, and particularly its chosen area - semiconductors, went deep in the red. The iconic LSI Corporation - a leading semiconductor company with big focus on consumer space stared at bleak fortunes and looked at a leader who can steer the sinking ship to higher ground and make it fit to take on to the deep seas again.

In mid 2005 the company went in for top management overhaul and roped in industry veteran Abhi Talwalkar, who took over as the president and CEO of the ailing company. His one-line mandate: 'Profits and Leadership'. And he defied the skeptics and proved as a turnaround man for the company.



He made radical changes, synergized the operations, and exited from what used to be the company's sweet spot' - consumer electronics - and transitioned into a pure-play semiconductor company by focusing on storage and networking communications. In an exclusive interview with Dataquest, Talwalkar talks about a broad range of trends. Excerpts

- Abhi Talwalkar

president and CEO, LSI Corp

You took over LSI when things were not in good shape; how did you revive the company?

Well, the company was in a tough spot at that time. And we had too many product lines thinly spread across, leading with no clear leadership in any of the segments. Moreover there were issues on scale and focus. What I did was, to give a clear focus and granularity in terms of products, strategy, and leveraged our years of expertise.

We transitioned from a consumer electronic centric to storage, networking, and communications centric. This transition is based on the fact that we saw at that time an impending data deluge and the world was becoming increasingly connected with massive amount of traffic routed through networks. We saw these as secular trends that have impacted the industry at large and we banked on these trends and oriented our strategy and energies on those segments which have given us rich dividends.

On the Transition...

We created the blueprint on these secular trends and we scaled aggressively with M&As, assembled a new management, and outsourced our manufacturing. The simple principle we followed: 'Do not invest any money in something that does not help differentiate as you can readily get it from someone else'. We did a number of things and put in place a long-term strategy.

My perspective is, 'Anyone can make a company look good for a year or 2, they can cut costs and deliver profitability, but in 4 or 5 years they will destroy the company if you do not have a long-term roadmap. We do not want quick profits, but a company with a sustainable business model. We wanted LSI to be associated with markets in application areas where we can build deep incumbencies. So our basis of competition is not just pricing rather our large percentage of business in enterprise, service provider, and network equipment.

This strategy worked for us, if you look at the bulk of our product lines. A few years back we were nowhere. But now in the vast majority of our product lines we are either #1 or in the leadership position. In 2005 we had big debt and now we have a solid balance sheet with no debt.

Are you saying long-term vision is the key?

Yes. I think a good planning is fundamental to running a sound business. One needs to look ahead in advance and this is not only roadmap but one should be able to predict the key inflection points and look at opportunities and threats out of those inflections. For instance, flash is becoming a big strategic focus area for us, and we are looking now at it in the long term whether flash based storage will be cannibalistic to HDD.

It is these kinds of stuff that shape our strategy and often times that make the difference. And honestly I have seen lot of companies saying much on strategic planning and I am not sure how well they do that. But at LSI, we follow that with a rigorous discipline. In my view we cannot chase a business merely because there is an opportunity; rather we need to understand what you are getting into.

On Flash Storage vs HDD...

Well, the cannibalistic effect I was talking is far away. Right now both flash as well as HDD have great future. So to put in perspective, estimates suggest that 40 mn SSDs (flash) are likely to be shipped this year against 675 mn HDDs. There is a huge difference. HDD market will continue to grow with data deluge and trends like big data will only increase the demand for storage and backup at remote and multiple locations.

The PC market is the early adopter of SSDs and interestingly 40% of the HDDs have nothing to do with the PC market - they are going into DVRs, game consoles, and set-top boxes among others. Our goal is to keep increasing the market share in both flash and HDD space.

On Selling Your External Storage Systems Business to NetApp...

The idea is to become a pure-play semiconductor business company and to move to a higher operating performance. And we are successful in the semiconductor business, and there is a clear bifurcation needed to have strong semiconductor business model in place and for the sell-out of external storage business.

On the SandForce Acquisition and the Synergies...

It's panning out so well. SandForce is the leading provider of flash storage processors for enterprise, client flash solutions, and solid state drives (SSDs). With this, we are now able to scale our flash business both in terms of cost and manufacturing benefits. For this we have created the Flash Components Division (FCD) and that has integrated the SandForce operation on to our business.

On Your ARM Play...

We are very excited about our ARM relationships and have had a long history of working with ARM's. We have recently announced an expansion of our long-term strategic relationship with ARM. The agreement will lead to new product solutions designed to address critical customer needs for accelerated performance as applications such as mobile video and cloud computing dramatically increase network traffic.