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Alliance Semiconductor is selling their operating units and
downsizing in a humanitarian way for their employees, while maximizing returns for
Alliance Semiconductor Corp.
2575 Augustine Drive
Santa Clara, CA 95054-2914
Melvin L. Keating
President & CEO
Interview conducted by:
Lynn Fosse, Senior Editor
July 7, 2006
Melvin L. Keating - President and Chief Executive Officer
Mel Keating is currently President and CEO of Alliance Semiconductor (ALSC - Nasdaq).
Immediately prior to joining Alliance, Mr. Keating served as Executive Vice President,
Chief Financial Officer and Treasurer of Quovadx, Inc. from April 2004 to September 2005.
Prior to Quovadx, from 1997 to 2004, Keating served as a strategy consultant to Warburg
Pincus Equity Partners, a private equity and venture capital firm, where he sourced deals
and performed due diligence.
From 1995 to 1997, Mr. Keating served as President and CEO of Sunbelt Management, a $1
billion net worth private company that owns and manages commercial and retail properties.
From 1986 to 1995, Mr. Keating served as Senior Vice President - Finance and
Administration of Olympia & York Companies (and its successors), a $20 billion private
company that developed NYC's World Financial Center and London's Canary Wharf. From 2001
to 2004, Mr. Keating served on the Board of Price Legacy Corporation, a REIT he helped
create while at Warburg Pincus. In addition, he currently serves on the boards of Kitty
Hawk Inc. (KHK AMEX) and Plymouth Rubber Company, Inc.
Mr. Keating holds two Masters degrees from the University of Pennsylvania, Wharton School
and a B.A. from Rutgers University, where he played varsity lacrosse.
Alliance Semiconductor has been a fabless chip company. It holds a very significant
portfolio of Venture Capital investments.
CEOCFO: Mr. Keating, what was your vision when you joined the
company, and where are you in the process?
Mr. Keating: When I started with Alliance
Semiconductors, I looked at our operating businesses and our relative strengths compared
to the competition and where we stood on that field. The analysis led me to believe that
we needed to be out of the semiconductor business. Consequently, I have begun to sell the
various operating business units. The previous management had operated the businesses at
considerable loss for quite a period, with large cash losses and decreased stock price. We
have entered into two definitive agreements to sell our two largest semiconductor business
units and hope that those transactions will close in the very near future.
CEOCFO: Is this a good
time to be selling your semiconductor units?
Mr. Keating: It is the time for us because I do not
believe we had either the heart, commitment or the talent in-house to thrive in those
CEOCFO: What is next
after the sales go through and where do you end up after the process?
Mr. Keating: We still have two smaller units to dispose
of, and those are two elements of our memory business. We hope to complete those
transactions during the summer. Upon doing that, we will be able to leave the large office
space that we are in, to a much smaller space. We will have reduced head count from well
over 200, to approximately thirty, upon the completion of these first two transactions. We
will have cut the burn, and have eliminated the losses. We have done it in such a way that
99 plus percent of the employees have been offered jobs by the acquiring entities. I did
not want to be known as Neutron Jack. We wanted to do this in a humanitarian way for the
employees while maximizing returns for the shareholders. It looks like we have been able
to do that.
CEOCFO: What is left of
the company at the end?
Mr. Keating: At the end of the process of selling the
operating units, we should have an accumulated pile of cash, some shares of a publicly
traded semiconductor manufacturing company, and a substantial and a highly desirable
portfolio of venture capital investments. Alliance Venture Management is the arm of
Alliance Semiconductor that oversees the investments in technology companies here in
Silicon Valley, and that portfolio today, is both in demand and quite valuable. The next
step when we complete these initial transactions of the operating businesses would be to
liquefy the venture portfolio. We have not yet determined the manner, method or speed with
which it will be best accomplished, but that is what we are going to turn to next.
CEOCFO: Will there be a
company at the end or will all the pieces be gone and Alliance disappears?
Mr. Keating: We are not quite there in our analysis,
but the eventual outcome should be that there would no longer be an Alliance and one way
or another, proceeds of these exercises will be distributed to shareholders, and that
could be accomplished in a few different ways.
CEOCFO: Are people
looking at buying the stock; do people see the potential?
Mr. Keating: We are trying to communicate as much as
possible within the constraints of various regulations and obligations. We are trying to
communicate to existing shareholders and the public at large what we are doing, but we
have not and probably will never try to indicate what value we believe will be there when
the exercise is over.
CEOCFO: I sense that
there is quite a bit of value there, it is just a matter of unearthing, and that should
Mr. Keating: There are lots of moving pieces; there are
no guarantees of course. I am hopeful that we will be able to return value to the
shareholders and I am optimistic that we will be able to, but there is still a great deal
to be done and many loose ends to be resolved.
CEOCFO: What interested
you about taking this on?
Mr. Keating: It is a wonderful challenge to come into
an organization that had not been managed to the fullest extent. Returns were not
optimized and sometimes it takes a fresh face, someone who is not tied to the decisions of
the past to see the way out. That is what I think happened here. I saw Alliance as a great
opportunity to evaluate whether to sell or fix things; I like to be involved in
transactions and I have a history of cost savings, cost control, cost reductions and of
completing transactions. I was excited to start and I am still excited.
CEOCFO: What will you do with the cash from the two sales?
Mr. Keating: It is not going to be used to make any new
investments. We are not looking for new lines of business and we are not going to make any
investments in new portfolio companies.
CEOCFO: In closing, what
would you like potential investors to know about Alliance?
Mr. Keating: In the future, we hope to return to
current shareholders and, if appropriate, potential investors, more than what the stock is
trading for today, that is my goal.
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