Dear Mr. Splinter,
I don’t frequent the Yahoo stock message boards but every once in a while they’re good for a laugh- especially right before and after earnings calls. I was browsing the boards the other day after AMAT announced earnings that far exceeded expectations while simultaneously announcing that we would lay off 1,500 employees, and someone by the screen name of “Elvisprty” said we all deserve to lose our jobs because we sat idly by and let you move our jobs to China and Singapore. I agree with them.
I’ve been at Applied Materials for nearly a decade and a half, and I’m still sometimes referred to as “the new guy”. I routinely run into folks at work that remember when this Fortune 500 company was a startup operating out of building 1. We sometimes reminisce about the days before e-mail, and of hand-drawn engineering drawings filed away in massive banks of file cabinets, of Friday afternoon gatherings at the Fault Line, and of colleagues that are no longer with us. We also reminisce about the days when AMAT was a place where people cared about what they did.
We joke that work years at AMAT are like dog years for all the hardship we tolerate. Some of this hardship is a result of the cyclical nature of the semiconductor capital equipment industry in general. The upturns are just as fierce as the downturns- one day you can’t build systems fast enough and the next day you can’t sell a system to save your life. When I started at AMAT we were hiring employees so fast that the new hire orientation course was backlogged for six weeks. We were giddy with the euphoria that came from seeing the company’s stock hit 100 and then split like clockwork every 18 months. We worked insane hours- weekends, holidays, whatever it took to build and ship systems. There was never an order that Sales said “no” to, no matter how ridiculous the customer’s demands were for shipment, yet somehow we managed to build them and ship them all, and we reaped the rewards that came from excelling at what we all did. AMAT dominated the semi capital equipment market, and for good reason. We were the technology leaders, the marketshare leaders, the 800 pound gorilla of the industry. When the first “real” downturn hit in late 2000, we watched as friends were laid off. Every single one of us was stunned and angered. We mourned their loss and we vowed that we would come out of this downturn stronger than ever, and we did.
Over the years, there have been numerous upturns and downturns, and more layoffs than I care to count… and somewhere in the midst of this constant expansion and contraction, this frantic cacophony and deafening silence, we have stopped caring. While it’s still very sad when a co-worker loses their job, and we all empathize with their plight, especially during these challenging economic times, a defeatist attitude has permeated the hallways, offices, and conference rooms that were once flush with confidence and pride. We no longer strive to destroy our competition, but simply to not lose too much more ground to them. Our “us first” bravado has been replaced with an air of “me too” resignation. We talk about being innovation and technology leaders while we lick our wounds from yet another failed acquisition and secretly hope to come up with something at least good enough to gain back some marketshare from our competitors who have again out-innovated us. We have, in the words of one very colorful former AMAT executive “lost the fox”.
Why has this happened? Somehow, in the midst of all this turmoil, we have stopped thinking for ourselves and have allowed “everyone” to think for us. I mean “us” both as every employee in the company individually and as the company collectively. As proof of this I offer the sad parade of botched and bungled initiatives aimed at “improving efficiencies”. The subtext of all these efforts is that we are chasing industry trends that were, at least at face value, successful for other companies. We never, for one moment, have stopped to consider whether they were right for us. We outsourced engineering to India because other companies had done so, never stopping to notice that many of these companies were already admitting it was a bad move and bringing this work back in house at the very time we scrambled to engage with India’s own Enron, Satyam. We outsourced complex module integration, only to realize that we were better at building some of these ultra-complex assemblies than our vendors, and ultimately bringing many of them back in house. And now, we, as “Elvisprty” points out, have allowed you to move our jobs, our pride and joy, OUR COMPANY to China and Singapore while we sit idly by and count the days until we, too, get laid off.
You spin tales of a global economy, and of needing to be closer to our customers. What everyone whispers about but nobody has the courage to talk openly about is tax-free zones in Singapore that allow us to avoid paying US taxes, and Chinese workers that make pennies while their dictators trample their rights and we rejoice at the money we’ve saved at their expense. I have no interest in being a tax cheat. We are an American company- headquartered in the United States for the past 42 years. We benefit from the privilege of living and working in this great country every single day, and we should pay our fair share of US taxes. I will not tolerate you eliminating my job and my friends’ jobs so you can set up shop elsewhere and replace us all with workers in countries that cannot write to you freely as I am doing right now. I enjoy voting and I enjoy my human rights and I simply cannot excuse anyone that feels that these things are expendable in the pursuit of higher gross margin.
You talk of Applied leveraging it’s expertise in nanomanufacturing to become a solar company, a “green company”, an enabler of affordable solar power for the world, and yet we continue to burn cash acquiring diverse and often conflicting solar technologies and we can’t make a single one of them profitable. What nobody talks about openly is that for AMAT, solar is largely a play to buffer against the cyclicality of the semiconductor industry. While there’s nothing inherently wrong with diversification, if we’re going to “do” solar we need to do it like we mean it, not just because it’s damage control. While there are undoubtedly many fine people and products in AMAT’s portfolio today that came through acquisition, those of us that have been around longer than you remember a time when we didn’t need to acquire technology to come up with successful products. We found smart people, figured out how to let them do what they do best, and home-grew industry dominating solutions. Then we figured out how to make these people happy so they would want to keep doing this. You talk of recruiting, retaining, and rewarding top talent, yet you announce a 15% headcount reduction at the brink of an upturn, coupled with moving operations overseas, and you point to restoring basepay and eliminating shutdowns as the means by which you will attract and motivate this top talent. Seriously? There’s an expression in Texas- you know, that place where we’ve been manufacturing all our systems for a little while now- “all hat and no cattle”… I think this aptly describes the extent of the thinking that’s gone into this employee retention strategy. You clearly have no idea what motivates us, why we are here, or what it takes to keep us. And yet, you have the audacity to believe that you can lead us.
I, for one, say enough. Applied Materials does not make money by chasing industry trends, by avoiding taxes, by profiting from people that suffer under dictators, or by tacking on catchy phrases to our glossy prospectus and pretending to be something we are not. We are the world’s leader in wafer fabrication equipment. We are the world’s leader in display equipment. One day we may be the world’s leader in solar equipment as well, but not for the reasons you believe and not with the methods you espouse. We need to “find the fox”, find ourselves, and find a new leader.
