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Bankruptcy has a way of making a chief executive focus on what’s important. John Kispert, CEO of the once-bankrupt and now profitable chip maker Spansion, used the legal process to pare back and double down on innovation.
Today, the company is launching a new line of flash memory chips that Kispert says can be used in a wide variety of next-generation consumer electronics devices, automobile electronics, and game devices. If they take off, they can help Spansion thrive in a market with larger competitors and at a time of an overall industry recovery. It’s also a test as to whether pressing the gas pedal on innovation will help a once-struggling tech company recover.
The new chips are for the age of instantly accessible devices.
“What has changed in the last 18 months is that everybody wants a device that turns on instantly,” Kispert says. “That means the memory has to be interactive. That’s perfect for our business.”
The Spansion GL-S family of NOR flash memory chips allow you to tap a button and instantly begin using a device such as a car navigation system. They’re not the kind of popular NAND flash chips that are used as substitutes for large hard disk drives in laptops, as the Spansion chips range in density from 128 megabits to 2 gigabits of storage. Kispert (pictured below) says the chips are 45 percent faster than other competing NOR products from rivals such as Micron.
The new GL-S is two times faster than Spansion’s older products and 30 percent faster than rivals, based on third-party benchmark tests. Jim Handy, analyst at Objective Analytics, says the new chip family shows that the company’s technology has room to grow and that Spansion is executing well.
Spansion began working on the new product about 18 months ago, shortly after Kispert became CEO. But the company had high debt just as the big recession hit in 2008. It filed for bankruptcy protection in March 2009, laid off some employees, and transferred many of them to new owners when it sold off overseas manufacturing. The company has 3,500 employees now, compared to 9,000 before the bankruptcy. It exited unprofitable markets and focused on embedded products, or those in gadgets, game devices, medical, networking, cars or smart grid meters. In a car, for instance, the digital displays on the dashboard — which replace the old analog needles on speedometers and other instruments — use a lot of flash memory.
Since emerging from bankruptcy in May, 2010, the company has recovered along with the overall economy. It still has manufacturing facilities in Austin, Texas, and has dramatically improved its financial performance and balance sheet. Spansion is hiring again. Revenue has been growing for five quarters and the company has regained market share in the embedded market where it is focused. The company is still reporting breakeven results, but that’s partly related to a re-valuation of company assets during bankruptcy, and losses are declining. On a non-GAAP basis, the company is making money.
It’s still not completely out of the woods. It has $354 million in cash and is generating more each quarter, but debt is at $450 million. That would seem scary, but Kispert says the company has an advantage with its “charge trapping” nonvolatile memory technology. That technology enables cheaper, more flexible chips with a variety of paths for expansion. The company is partnering with another chip maker to apply the same tricks to NAND memory later this year.
The company has 2,000 employees in a factory in Austin that Kispert says is running “white-hot.” Kispert says, “That’s a testament to our determination.”
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