Author: Steve Szirom, senior analyst, InsideChips

The Beginning: Dueling Jacks

The blowup between the "Jacks" at an industry cocktail reception back in 1982 planted the seeds from which Maximum Integrated Products eventually grew. The "Jacks" involved in this incident were Jack Gifford, who at the time was running GE's Intersil Division, and newly elected GE CEO Jack Welch, who appeared to be reversing his earlier assurances to let Intersil keep its own Silicon-Valley-style stock-option plan for its executives after GE purchased Intersil.

Gifford, incensed, would have none of it, and so the two chip executives came to verbal blows during the party. A recent Electronic Business article recounting that fateful meeting quoted Gifford saying, "...and finally I was so mad, I said fuck you, and I just turned around and walked out." Not surprisingly, Gifford was out of a job soon thereafter. The exit was messy, according to rumors we heard at the time, and Maxim's beginnings were initially mired in legal quicksand. Within a few years, however, Gifford was well in command of his new analog ship, and the rest is history.

Gifford began his career in the 1960s at venerable Fairchild Semiconductor. Originally hired by Don Valentine (founder of Sequoia Capital) as a salesman, Gifford rose through the ranks to become a director of analog ICs. By the end of that decade, and after several promotions at Fairchild, he jumped ship with Jerry Sanders and others to launch AMD. His tenure there as CFO was only two years, as he had a falling out with Sanders--perhaps due to a mighty clashing of two strong personalities. After the AMD debacle, Gifford tried his hand at farming in the Sacramento area. But Cupertino-based Intersil lured him back to the analog IC world with a director job to head up a fledgling data-acquisition division. By 1980, analog was Intersil's biggest revenue generator, with sales of more than $100 million; Maxim Integrated Products, the company Gifford would eventual found in 1983, would take eight years to nudge the $100-million revenue mark.

The original Intersil, then a rising star in the analog industry, caught the eye of GE, which acquired the Silicon Valley upstart for about $240 million in 1983. We believe Gifford went on a mission to convince GE brass to keep Intersil as an autonomous subsidiary and allow the company to maintain Silicon-Valley-style perks and stock options. For a while, it seemed to work; eventually, however, GE minions became jealous of their new Silicon Valley brethren, and the fateful clash of the Jacks occurred as Welch moved to calm his troops.

Gifford, who was already a millionaire at the time, could have retired to his orchard in Marysville--and he did, for a while, until rumblings of discontent at Intersil reached a fever pitch under the GE regime. In 1983, Gifford and nine Intersil mutineers started Maxim. GE and Intersil immediately filed suit against the renegade band of ex-Intersilers, alleging infringement of trade secrets. The companies eventually settled the in 1984, when Maxim agreed to let GE/Intersil pick 10 of Maxim's chips during the ensuing five years to manufacture and market on a royalty-free basis. In return, GE granted Maxim rights to certain product know-how, trade secrets and patent rights.

Maxim began by making second-source analog products, but quickly moved toward developing proprietary analog functions and targeting the high-end performance market. By 1991, when Maxim reached $100 million in revenues, half of its 450-chip portfolio was based on proprietary devices. By the end of the decade, Maxim's home-grown management formula enabled it to crack the $1-billion mark.

Last year, following the death of Dallas Semiconductor's Vince Prothro, Maxim struck a deal with Dallas to acquire the Texas chip maker for about $2.5 billion in Maxim stock--but not before Gifford interviewed 150 Dallas engineers to make sure he was getting some stars for his analog roster. The deal immediately endowed Maxim with a 50% boost in revenues to the $1.5-billion mark in the 2001 fiscal year. It is the second-biggest acquisition in the analog world, after TI's recent purchase of Burr-Brown.

So far, Maxim seems to be digesting the fortuitous acquisition fairly well. Maxim gave up about 11% of its stock for about 50% more revenue and 30% more engineers. Gifford, who we believe is averse to acquisitions, could not resist the hen with the golden egg; in this case, we believe the Dallas board brought the deal to Maxim.

The only caveat is whether Gifford can bring the cowboys of Dallas in line with his management style--we will keep our eyes and ears tuned into this one. From a product synergy point, it should be a good fit. Dallas brings a strong line of high-volume power-management chips to Maxim's portfolio. Some fine tuning may be necessary to prune weaker lines and raise overall gross profit margins, which are lower than Maxim's.

The Profitable Analog Machine

What makes companies such as Maxim and Linear Technology tick? What makes them the envy of the chip world with gross profit margins of 70%?

Japanese companies are wracking their collective brains to come up with the answers; in the case of Maxim, we will shed light on part of the mystery.

1. A Shrewd, Competitive and Aggressive CEO.

It all starts where the buck stops--at the top. Gifford, for all his perceived faults as an occasionally tempestuous soul and an incurable micro-manager, is behind Maxim's success (not to take anything away from his many business directors). Still, some of the micro-managing stories we've heard could easily be called extreme. For example, we heard Gifford was the only person allowed to write with a red pen at the company, so when the troops see red on paper they know it is from the boss.

Clearly, Maxim is not run by a committee. It is interesting to note, however, that Gifford's archrival, Linear Technology chief Bob Swanson, appears to have a very similar management style. One Swanson story we heard is that he assigns cubicle spaces where employees can sit.

Gifford runs the show at Maxim with a tough-as-nails, no-nonsense style. In December 2001, Electronic Business magazine elected "Captain Jack" (as he is sometimes referred to by long-time industry insiders) "CEO of the Year." This was the first time in a decade, as far as we know, that Gifford shed his PR shyness. The article cover, which presents Captain Jack wielding a baseball bat, proudly adorns the otherwise engineering-oriented Maxim web site.

Gifford rules Maxim's world according to his 13 principles...errr, maxims. The only one we will mention here is #12, which states:

"Don't intentionally miscommunicate, not communicate, or lie. The flow of information must always be honest, direct, and complete in order for a team to be successful. Changing facts, not communicating the whole story, or lying will lead Maxim in an incorrect, fatal direction. It is the only principle whose violation will result in immediate termination."

We like this one. Many big companies could prevent major headaches if their people followed number 12 to the letter. Together, the complete set of 13 principles is a great corporate-culture ethos. As far as we know, he is the only CEO in the industry to sign his name to a corporate-culture statement published on the web. That says a great deal about his management style. Readers can view the 13 principles on company's web site at this link.

Gifford is an accomplished baseball player, and is a regular participant on the Maxim Yankees team, which competes nationally and does quite well. One of his idiosyncrasies is that he is prone to hire smart athletes, as he believes they have that tough, competitive spirit, which carries over to business. For example, last year he named Los Angeles Dodger first baseman Eric Karros to Maxim's board.

As far as any potential successors are concerned, it might be hard to dislodge Captain Jack any time soon. As he states in the "CEO of the Year" article, "I'm the youngest 60-year-old you've ever seen. I love this job." We agree; his appearance has not changed much in the past 30 years and he still swings his bat well.

Maxim's top-level organization chart is shown in Figure 1. Several of his top generals retired, including VP Dave Fullagar who left around 1994 and has taken to a sailing life to distant shores. Ziya Boyacigiller, another VP, retired in 2000 to become an angel investor and mentor to software startups.

Several of the newer players in his VP lineup are Hungarian Laszlo Gal, who came over from Applied Microcircuits in 1999. Gal also spent time at Unisys and Motorola. Also arriving in 1999, Parviz Ghaffaripour joined the company from National Semiconductor, where he held various technical and management positions, including product line director for audio ICs.

Maxim Organization Chart

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