Cypress
Semiconductor
Vision, Values, and Killer Software
Presented by:
Taiya Brandon
Vendall Dollarhide
DeMarqus James
Kiran Kumar
Puneeth Ramaiah

T.J.Rodgers and Cypress
DeMarqus James

Thurman John (T.J.) Rodgers
 T.J. Rodgers on being named one of America’s toughest bosses
by fortune magazine in 1993: “For 24 hours I was totally pissed off.
But I read it again, and I didn’t mind it. In fact, I have the cover mounted
on my office wall.” T.J. Rodgers
 President and CEO, founder of
company at age 35.
 Bachelor’s Dartmouth physics
and chemistry
 Master’s and PhD at Stanford
University in electrical engineering
 “labeled cocky, brilliant,
committed, brash, tough,
charismatic, outspoken, and an
egomaniac”

CEO cont’d
 Devoted Green Bay Packer Fan
 Began working at AMI in 1973
where the company was a relaxed
supportive, nurturing environment
were people weren’t held
accountable.
 A memory in Silicon Valley
 “It is the hypocrisy of warm and fuzzy
cultures that don’t deliver” Winning is
what matters. And if winning means
being tough, demanding, impatient, then
that’s what you have to be.” T.J. Rodgers

Background
 A Semiconductor design and
manufacturing company
 Established in 1982,
headquartered in San Jose,
CA (Silicon Valley)
 Cypress has manufacturing
plants and design facilities all
over the United States, the
Philippines, Belgium, India,
and Ireland.
 Cypress debuted its first
product, a CMOS memory chip,
by the beginning of 1984.

Products
 PSoC mixed-signal arrays
 High-Brightness LED solutions
 Clocks & Buffers
 USB Controllers
 RF/Wireless
 West Bridge
 Programmable Logic
 OvationONS Laser Navigation
Sensors
 Memory
 Image Sensors
 Physical Layer Devices
 Control Communications
 Professional Videos
 Software

Products
 General Purpose Clock generators
 Control Communications
 Image sensors
 Memory
 Optical Sensors
 PSoC Mixed-Signal Controllers
 Physical Layer Devices
 Programmable Logic Devices
 Solar Cells
 Universal Serial Bus
 West Bridge Peripheral Controllers
 Wireless

Cypress
 Public Company
Incorporated: 1982
Stock Exchanges: New York
Ticker Symbol: CY
NAIC: 334413 Semiconductor
334210 Telephone apparatus

CYPRESS CORE VALUES
 Cypress is about winning
 Cypress people are “only the best”
 We do what’s right for Cypress
 We make our numbers
 We invent and make state-of-the-art products
Are the vision, core values and systems congruent with
success?

The Cypress Model
Puneeth

The Cypress model
“Be realistic, Demand the Impossible”
-Former employee
 What do you think are the main aspects of the
Cypress business model?

The Cypress model
 A self-contained economy with a federation of small companies
“each small enough to maintain its intensity, together big
enough to matter – a system of perpetual
entrepreneurship” - T.J. Rodgers
 “Cypress: We eat nails”
 Created Subsidiaries
 Goal was to become a big company with the speed,
discipline, and energy as a start-up
 Following Rodgers original model the company operate solely
within niche markets, those with sales less than
$40 million

Subsidiaries of Cypress
 CYPRESS SYSTEMS
 Cypress Systems is a subsidiary of Cypress
Semiconductor – a leading producer of innovative
technologies such as Programmable Systems-on-a-
Chip mixed-signal arrays, CapSense solid state touch
 SILICON LIGHT MACHINES
 Silicon Light Machines (TM) delivers innovative
products for a variety of advanced applications -
from fiber-optic communications to high-
performance print systems and high-resolution
digital display
 SUNPOWER
 SunPower (TM) manufactures and markets high-
efficiency PV (Photovoltaic - solar electric) panels
that generate electricity from sunlight for residential,
commercial, and remote power applications.

The Cypress model
 Revenues shrunk to $272 million and the company
posted its first loss in its history as a public company
to the tune of $21 million
 Slashed some 700 jobs
 Cut product portfolio almost in half
 Sold its Ross subsidiary to Fujitsu for $23 million
“…was a good way to get from zero to $1 million,
but ran out of gas in 1992 ”
-Rodgers
 1992- The Big Crash

Reasons for downfall
 Rather than “niche-ing” its competitors,
Cypress was “niche-ing” itself
 Prices falling with increased supply
 Shrinking market facing a worldwide
recession
 Retaining the assembling and testing
facility in US costs $17 million more than
moving overseas
“Nothing at Cypress is Free”-
T.J.Rodgers

Restructuring the model
 What were the changes seen in the business
model after the downfall?

The Three Systems
 Rodgers “Success Mantra”
 People Management
 Performance Management
 The “Killer” Software

The People Systems
Vendall Dollarhide

The Art of Dealing with Employees:
A Military Exercise
“Great people don’t guarantee corporate success—
but no company can succeed without great people.”
T. J. Rodgers

The Art of Dealing with Employees:
A Military Exercise
Hiring:
SWAT
“… hiring is a process, not an event.”
T. J. Rodgers
Is this belief based on short-term or long-term vision?

The Responsibility:
Changing the Rules
 HR is viewed as merely a
database operated by “drones”
not officers
 Hiring managers “officers” are
the center of the hiring process
 “Hiring Book”
Is this a good policy?
Are there negatives and positives to this philosophy?

The Raiding Parties:
SWAT Team Precision
 Stage 1
 land in city
 Stage 2
 scout out the top few
hundred engineers and managers
 Stage 3
 leave with the top 10

The Raiding Parties
 Reconnaissance —RECON
 Loose and Informal
 Scout out few hundred engineers and managers
 Hire headhunter to pass advance notice of Cypress arrival
 Search for “fatal flaws” in resumes
“If someone was not ‘in the loop’ enough to know
we were coming to town, he or she was, by
definition, not our kind of person.”
T. J. Rodgers
How would this statement effect
those just entering the job market?

The Interviews:
Hand-to-Hand Combat
The Principles
 Use big guns
 Interview team (usually): Rodgers, 3 VPs, a couple of
technical people, a secretary
First Message for Candidate
“We’re Cypress, we work hard, and you’re not going
to get a raise to join up. Should we continue?”

The Interviews:
Hand-to-Hand Combat
The Principles
 Make interviews demanding
 No backslap interviews
 “pack of wolves” interviewing strategy

The Interviews:
Hand-to-Hand Combat
The Principles
 Probe for technical skills and work ethic
 Several technical interviews
 Knowledge?
 Dependable and dedicated?
Could you float or bluff your way
through these interviews?

The Interviews :
Hand-to-Hand Combat
The Principles
 Require detailed written assessments
 The “Cal Tech” effect
 All interviewers must submit
 Strengths and weaknesses
 Shared with candidate regardless of employment result
Would this be helpful?

The Interviews :
Hand-to-Hand Combat
The Principles
 Probe carefully for cultural misfit
 The career-path questionnaire
 Explores motivation, character, aspirations
 Hard-to-quantify issues
Does it matter why someone wants
the job?

The Interviews :
Hand-to-Hand Combat
The Principles
 Take references very seriously
 Not usual shallow checks
 Results reported back to candidate
 Intention: keep candidates anxious and interested

The Interviews :
Hand-to-Hand Combat
The Principles
 Speed
 Demanded
 Hire/no hire decision within 1-2 weeks
Would this be a good practice?

The Ceremony:
Preparing the Candidate
 2 Functions
 Create emotion in the candidate
 Create important psychological break
from old company
 Coach recruit on how to quit
Coaching how to quit?
 Review process for future
“We treat these matchups like judo:
We know our opponents,
we know how they are going to react, and
we turn their reaction to our advantage.”

Controlling Headcount :
Preparing for Future Battles
The Art of Dealing with Employees:
A Military Exercise
Reason for Controlling Headcount
“Because directly or indirectly,
people drive all costs in a company.”
T. J. Rodgers

 Benchmarking against competitors
 Quarterly presentations by all managers
 Make case for added headcount
 Request and justification
 Microperformance index
 Intent: reduce layoffs during downturns
Method of Controlling Headcount

Retaining People :
Fortifying the Stronghold
The Art of Dealing with Employees:
A Military Exercise
Erect Barriers
Win Reversals

Performance
Management
Kiran Kumar

Performance Management
 Designed to attract best people.
 Motivates and evaluates employees.
 No salary raise for 3% of employees.

Compensation
 Every group of peers in the company regardless of organization
level receives the same average percentage raise.
 Outstanding performers deserve outstanding raises.
 Merit and Equity must remain distinct.
 Precision matters.

Phase – 1
Performance Ranking
 Selection of Focal Groups.
 Rating on Merit (not on potential).
 Performance driven salaries.
 Mayonnaise Effect.
 Solid-citizen Raise.

Phase – 2
Merit Raises
 Monotonic Distribution.
 Minimum Range.
 The Forbidden Gap.
 Reasonable Raise Relative to Recommendations.
 Borders (not to cross 7% raise).
 Average Raise (not to exceed or save budget).

Phase – 3
Equity
 6 weeks for adjustments.
 guidelines for average, required & solid raises are made in late
January.
 Rodgers is paid no more than the highest paid VP or 25 times
pay of entry level worker.

Stock Operation Grants
 Stocks granted through focal-review process.
 Rewarded for future potentials.
 1 Million stock options annually.
 Focal Groups are allotted portion of stocks.
 Options vests for 4 years.

Result of Performance Management
 Top performers tend to stay in company.
 Opportunities for growth.
 Equal raise regardless of organizational level.
 Stocks reduces the turn over ratio.
 Low turn over ratio, less than half the industry average.

Debate
Does the goals and performance management
system produce the desired results, both in the
short term and the long term?
PRO – Team 1 and Team 2
CON – Team 3 and Team 4

“Killer” Software
Taiya

“Killer” Software
 System designed to monitor goal attainment
 Management by objective
 Basis is one of a goal system
 System focuses attention on bad performance,
doesn’t guarantee great performance
 Runs on the corporate network using basic
database and spreadsheet technology

“Killer” Software
“Your area has been shutdown by killer software”
What does that mean?
Mutually agreed upon goals (performance metrics)
have not been met. The target performance was
missed and corrective actions too late.

“Killer” Software
 Killer software in action…. What happens next?
Item is 5 wks
overdue

“Killer” Software
Dashboard
Way to gauge
performance metrics

Cypress – “Killer” Software
 Cypress success is tied to the commitment to three
main system:
 People Management
 Performance Management
 Killer Software
“Ultimately, the goal system is only as good as the people who
implement it” T.J. Rodgers

The Future of Cypress
Puneeth

The Early 90s
“tough and fast moving….not an environment for
everybody”- T.J.Rodgers
“like being in the Marines….”
“When something doesn’t work right and the job
can’t be done, it feels really bad....”
- Employee

Benefits at Cypress
 Medical Insurance
 Stock Option Plan
 Employee Stock Purchase Plan
 Vision Service Plan
 Personal Time Off (PTO)
 Employee Assistance Program
 Accidental Death &
Dismemberment
 Stanford Instructional Network
 Short-Term Disability Insurance
 Author Incentive Program
 Long-Term Disability Insurance
 Patent Award Program
 Payroll
 Prepaid Legal Plan
 Flexible Spending Reimbursement
Accounts
 Credit Union Membership
 Long-Term Care Plan
401(k) Employee Savings Plan
 New Product Bonus Program
 San Jose On-Site Services
 Business Travel Accident Insurance

Rodgers [“Matrix”] Offer

The Turn Around
1992: Cypress brought its subsidiaries back into the
company as divisions
1993: Revenues touched nearly $305 million and regaining
profitability, with net earnings of $8 million.
1996: Acquisitions and licensing deals bring Cypress into
leadership of booming USB chip market.
2000: The company's sales pass $1 billion.
2000: The new personal computer market presented a double
opportunity for Cypress, which began designing
chipsets for Pentium
2002: Cypress was developing components for the latest
generations of mobile phones

Awards and Recognition
 Financial World magazine named Rodgers CEO of the Year in
1996.
 In its October 2001 issue, Upside Magazine cited Rodgers as one
of the "100 People Who Changed Our World.“
 2002, "Top 100 Chief Executives" by Chief Executive
magazine.
 2005 inducted into the Silicon Valley Engineering Council Hall
of Fame.
 One of the "100 Best Corporate Citizens" for 2005 by Business
Ethics Magazine.
 Ranked 38th among the nation's 100 elite companies for its
achievement in serving the needs of its stakeholders

Principal Competitors:
 Advanced Micro Devices
 Integrated Device Technology
 Samsung Electronics
 STMicroelectronics
 Xilinx
 Motorola
 Micron Technology
 Toshiba
 Fujitsu
 Hitachi

Primary Cypress Customers
Alactel
Hewlett-Packard
Ericsson
Lucent
Nortel Compaq
3Com
IBM
Cisco
Sony

Cypress Today
 #2 American supplier for SRAMs
 #1 in USB and clock chip markets
 Principal Subsidiaries: Cypress MicroSystems; Cypress
Semiconductor (Minnesota) Inc.; Cypress Semiconductor (Texas)
Inc.; Cypress Semiconductor Technology, Ltd. (Cayman Islands);
Cypress Semiconductor Philippines Inc.; Silicon Light Machines
Corporation; Silicon Magnetic Systems.
 Principal Divisions: Memory Products; Data Communications;
Timing Technology; Personal Communications.
 Principal Operating Units: WAN (Wide Area Network); SAN
(Storage Area Network); WIT (Wireless Terminals); WIN
(Wireless Infrastructure).

Key financials for Cypress Semiconductor
Corporation - 2006
 Company Type - Public (NYSE: CY)
 Fiscal Year-End - December
 2006 Sales (mil.) - $1,091.6
 1-Year Sales Growth - 23.1%
 2006 Net Income (mil.) - $39.5
 2006 Employees - 5,800
 1-Year Employee Growth - 13.7%

Annual Income Statements (CY)
All amounts in millions of US Dollars

Interactive Chart (NYSE: CY)

Cypress
 Should Cypress modify any of their practices
and philosophy to stay a contender in the highly
competitive industry?

The GOOD The BAD & The UGLY