Interim CEO Jeff McCreary Discusses Recent Changes at Isola

Estimated reading time: 26 minutes

McCreary: The judge just entered that verdict officially. That is absolutely a last resort. You do not want to litigate anything.

Matties: I think the real testament there is that you guys are willing to defend your proprietary information and your patents, because they’re only good as deep as your pockets are willing to go.

McCreary: We’re not going to ignore the investment that we made. We’re going to protect it vigorously.

Matties: So you’re retracting or reorganizing because business conditions change and you have to change with it, or as you said, more people become impacted if you don’t.

McCreary: This is a great company with a long history. It’s profitable and it has remained profitable. We’re having a tough year, and we’re not happy with that. We’ve missed our original annual plan and we let this capacity situation sit a little longer than it should have. But we’ve got the will to take the right actions and that’s what we’re doing.

In the end, what you will end up with is a stronger, healthier Isola that can continue to invest in the right solutions and that helps the whole food chain. Whether you’re designing a backplane or you’re doing line cards with 100 gigahertz coming into the line card, or a 77-gigahertz collision avoidance system on a self-driving system on an automobile, you’ve got to have great partners.

Matties: How did you guys miss the mark? Were you just overly optimistic in your sales projections for the last period?

McCreary: I don’t know if there was one single thing that did it. I wish there was a single magic card I could lay on the table.

Matties: I was just curious going forward how you will avoid repeating the mistake or finding yourself in the same situation?

McCreary: I think we’re just a little more honest. In general, we had a couple of years of just being too optimistic. My experience with new products is they tend to grow more slowly than you think they’re going to. Knowing your current business, where it’s coming from, and what the trends are is almost backcasting as opposed to forecasting. You have to be a good backcaster. You have to really understand your current business. The things that change overnight, the one-offs, you should be able to know what those are and make an adjustment.

My history, and this has been true at every semiconductor company I’ve been at as well—I’ve served on three public company semiconductor boards as well as Isola—is that generally when you’re investing in a lot of new products, you overestimate how quickly that revenue is going to come to you, and at Isola we were probably no different in that respect.

Matties: I think we’re always excited when the new ideas are on the table and we always see the great success, but there are realities that set in over time. Are there any additional thoughts that you would like to share with industry that we haven’t already talked about?

McCreary: The last thing I would tell you is I still think there’s so much runway in the world of electronics for all of us. Now it’s different than it was in the heydays of semiconductors and board manufacturing, but look at a couple of trends like the personalization of electronics. When you think about the amount of electronics that you carry around and utilize nowadays—they are so personal and so much a part of your experience. You are always connected. And for young people, it is amazing the stats on young people and how many are active on Facebook and Instagram and Twitter and Fling, or whatever the social network of the day is.

That puts enormous pressure on the communications network and the compute network. It’s not going to change. People are not going to move away from these electronics. Then you add to that the efficiency that you get in the cloud. It’s really interesting because cloud computing storage has been a bit of a drag on the industry in this context. When you look at a software-defined network and you’re running multiple software apps up inside of those server farms or you’re sharing your storage space, your capacity utilization is basically twice to three times what it historically was even at a great IT shop when they had it all to themselves, whether it was Texas Instruments or IBM, Motorola or even Cisco. Before it went to the cloud, those servers didn’t run at the same efficiency rate as they do now and that almost worked as a suppression of demand for a few years. But what that really does is the whole system becomes more efficient and more affordable. That spurs further growth. I look at that and I get excited. There are also a couple huge trends right now. People right now use the cool language of the Internet of Things. That’s a pretty cool trend. The idea that now not only am I personally connected through a connected device, but everything I touch is going to get connected to the network at all times. Again, all that does is spur a need for more speed and more bandwidth. That’s good for people who make advanced electronics. 

Throw in the trend of automotive electronics. We got a nice lift in automotive electronics as infotainment became more important. Now look at what can be done with collision avoidance technology. It’s just amazing. That’s going to take a whole bunch of electronics to pull off.

And they are complicated technologies. It’s very RF centric and it is wireless. You’ve got a car connected wirelessly. So again, that portends really good things to the higher performance side of the world of electronics as well. For those of us in the laminate space, we’re going to have to be competitive and feisty to be great. You’re going to have to fight for business for sure and you’re going to have to earn that value every day. I just think it’s still a great place to be.

There aren’t a lot of markets that have the runway left that the world of electronics has. I’m standing in the airport right now, I can see there are probably thirty people within twenty feet of me, and eight out of ten are doing something on a smart mobile phone right now.

Matties: I think electronics is just moving from its infancy to its next level because, when you look at electronics, it’s really only been for around the last 25 years or so that it began to reach the hands of consumers. Now you look at it, and as you’re pointing out, it’s really in the hands of consumers and growing exponentially.

As an example, we just put out our automotive electronics issue, which we called, “Cars, the driving force in electronics industry.” You’re absolutely right. When we look at the autonomous cars, the sensors, the displays inside, it’s truly a computer that you sit in that will take you places. It’s phenomenal.

McCreary: Yes, and that’s why you see companies getting into the automotive industry. A company like Apple is a credible one. When people say, “Apple could never get into the car business.” Well sure they could, because as you just articulated, it’s gone from a piece of transportation to a computer that just happens to have wheels.

We’ve seen this enormous personalization of electronics for an individual, but now it’s just going to be all kinds of other things and sensors that get connected in as well. The amount of connectivity is not going to change. I know a lot of people take a harsh view of electronics and how it’s changed our human interaction, and yes, I’m not going to say it’s not a distraction or whatever. But what we can get done with the amount of information we have access to and the personal connections that we can maintain, I just think that those connection points for all kinds of things in your home, in your life, is only going to accelerate. It will change our experience, but I think there is more good than bad when you go down this path.

Matties: Jeff, I certainly appreciate you taking time to talk with us and sharing your Isola story of what’s going on. We greatly appreciate that.

McCreary: I’m glad your readers are interested, and again I’ll just close by reiterating that we have a number of strategic initiatives that will make us a better company. We feel there’s some urgency with it, but it wasn’t because we were on a path to go out of business or anything close to that. We’re not going to accept being mediocre. You’ve got a very committed and aggressive board and ownership group that wants to be best in class.

For Donald and myself, we feel like we have a good steady hand on the wheel. We’re going to be there through the transition and then we’re going right back on the board. So we’re not going anywhere and I know we’re going to bring great talent in at the top. I’ve spent more time with the candidates than any other board member, as you might suspect, just because of the institutional knowledge that I’ve collected, and I’m very excited about it.

Matties: When do you expect the transition to take place?Page 3 of 4

• < Previous Page
• Next Page >