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National Semiconductor

The first time I heard the word “SEMICONDUCTOR” was in late December 1956.

I was home on vacation from Le Rosey, a school in Switzerland where I was enjoying my Senior year.

The previous summer I worked for the Berkshire Eagle in Pittsfield Mass as a Photographer. I wanted to be a photojournalist.

In late October the Hungarians revolted against the Russian occupation of their country. I had read about a similar revolt in Poland 2-3 years before. I somehow believed that this would be the last exciting story in my lifetime. I was wrong but curious. I packed up a small suitcase with my cameras and without permission, left school bound for Vienna. I spent the night sleeping on the floor in the office of United Press, hitchhiked to the border, crossed without using documents, and continued to Budapest on All Saints Eve.

After 6 days in Hungary, which I have written about elsewhere, I left Hungary, and sold my story to UPI and my photos to AP. I was on my way as a Journalist and perhaps on my way to be thrown out of Le Rosey. I was lucky and the School kept me around.

My parents were traveling in Spain. I called them from a pay phone in Vienna and fortunately reached them an hour before they received a call from United Press asking if they knew that I was being held by Russian troops in the Hungarian border town of Moshon Magyorovar. It was fortunate that they received the calls in the right sequence.

When I got home to Williamstown Mass for my vacation I found out that my father had arranged for me to visit BELL Labs in New Jersey to give a talk to about 300 people, many of whom were PhDs from Eastern Europe. It was my first Public speech.

My father was then President of Sprague Electric, a company based in North Adams Mass. that was a leader in capacitors and resistors. Sprague Electric was founded by my father Julian and his brother Robert with a $25,000 Loan from their father Frank Sprague. Frank Sprague is the inventor of record of the Elevator and the Trolley car.

We flew down to NJ in the company’s twin-engine Bonanza. I don’t remember much of anything about my speech except that I was happy that my father was proud of me. There was another passenger on the plane, Dr Kurt Lehovec who worked in R&D at Sprague Electric. I later learned that he had been one of a few hundred blue ribbon or “paperclip” scientists that the US snatched out of Germany in 1945, brought to the US, and gave them citizenship. That is how we acquired Dr. Werner van Braun.

Kurt, who was Czech, told my father and I about a new invention that was being developed at Bell Labs – the Transistor. It sounded interesting.

Kurt went on to receive an integrated circuit patent that added to the work of Jack Kilby, Robert Noyce, and Jean Horni. He died, age 94, the author of 6 books of poetry surrounded by loving acolytes in the redwoods of California.

Eight years later in 1964. I met a lawyer at a cocktail party – Bob Beshar. Bob recognized the name Sprague and said that he had a friend and client – Don Weeden, who was involved in a company in Danbury Conn. called National Semiconductor. He said that if I was related to Sprague Electric, I might be interested – I was. My father had died in September 1960. I had already started a family and I had a lot of energy and curiosity.

Bob arranged for me to visit National’s factory in Danbury where I met Don Weeden. A fateful meeting as it turned out. The factory was in a small industrial park. It had previously been a hat factory whose demise was hastened by John F. Kennedy’s refusal to wear a hat.

Don Lucas was working at Smith Barney. He heard about National Semiconductor from Midwest Capital in Minneapolis. Don had been a roommate of Don Weeden at Stamford. He called his roommate and Don and the family firm, Weeden and Co invested $30,000.

Don Lucas went on to a very successful VC career including a stint as Chairman of Oracle.

National Semiconductor was founded in late 1959 by 8 engineers who left Sperry Rand as a group led by Dr. Bernard Rothlein who had a PhD from Worcester Polytechnic.

I did learn that the company, while marginally profitable, was in Chapter 11 because they had hired 24 of their first 26 employees from Sperry Rand and Sherry had sued. I later learned that they had also sued Mohawk Data Science and Control Data on similar charges. If my memory serves, National was making about a million transistors and selling them for about $3 each primarily to the Military. I was intrigued but uninformed.

I still wanted to be a Journalist. I was in the Ph.D. program in Economics at Columbia and had decided that the family’s technological gene pool had run out when it got to me. I took Rocks for Jocks to satisfy Yale’s Science requirement.

Bob Beshar should have met my cousin John, Robert Sprague’s son and 10 years older than me. John was a Princeton undergraduate and had a Ph.D. in solid-state physics from Stamford in 1958. Ironically, John was interviewed by Bob Noyce and the Fairchild team but was turned down because his name was Sprague and he was likely to take whatever he learned back to the family Company.

With me they possibly got the wrong Sprague but I was at the right spot at the right time and I had the energy for the job.

The company negotiated a $250,000 settlement with Sperry Rand, the same deal as Control Data and Mohawk Data Sciences who had previously left Sperry. $250,000. Seemed to be the standard price of an exit. We agreed not to continue building their obsolete transistors.

I agreed to invest $75,000, one quarter of my inheritance, Weeden and Co invested $100,000 and I believe Don Lucas invested the rest. I got a seat on the Board and on we went.

To further complicate things while the company was still in Chapter 11 we were presented with the opportunity to invest in Molectro, a Santa Clara California company in the heart of what became Silicon Valley, complete with 35 acres of farmland. They were a new entry in the linear circuit business. They were even more bankrupt than we were and under the liquidation arrangements of Chapter 7. We got permission from our Judge and their Judge to merge the companies. Not a normal situation.

Dr. Bernie Rothlein saw National Semiconductor as a second source transistor company, primarily for the Military. We made glop top – junction alloy transistors that were perched on three wires. The integrated circuits being developed in California could include hundreds of transistors on a single planar chip and seemed to be the future and Molectro was a possible part of that future.

Dr. Rothlein did not see it that way. He resisted the acquisition of Molectro and the involvement in far away California. Don Weeden and I and the rest of the Board voted to move to the future. We were right.

There were other things going on. I was spending a lot of time in the Fifth Ave Office of Allen and Co. a wheeling and dealing small Investment bank. Charlie Allen let the kids (boy Kids) of his best clients hang around the office to see if they could do anything useful. My roommate from Yale Bill White was one of those kids. I hung around with Bill and nobody seemed to notice that I did not have the right pedigree. I was curious about how stocks were traded. I invested $25,000 and traded it every which way that was possible, straddles, shorts, puts, options etc. I ended with a few thousand dollars less than I started with but I was learning, I got to know the head trader, Alan Lopato.

I asked him how a company got in the Pink Sheets – the lowest form of listing. Usually the last gasp before delisting. His reply – “there have to be buyers and sellers and it has to be legal”. I went to White and Case, the company lawyers and asked what was legal. The answer was that we needed a minimum of 500 shareholders, at least 200 round lot holders – I think 100 shares, they had to have held the shares for at least 2 years and not be officers or directors. We just met the requirements by a narrow margin, I asked White and Case if they would file the right papers with the SEC and they did. A while later the SEC wrote that we qualified for the pink sheets.

I took the SEC letter to Alan Lopato, with a list of the significant shareholders who could sell, complete with their phone numbers, and asked if I got on my 250cc BMW motorcycle and found some buyers would he make a market? His response “Sure Kid – that is what I do for a living”. National Semiconductor was now a marginal public Company. It made our future possible. The stock started trading around $3.

Meanwhile back at the office in Danbury things were not very happy. Dr. Rothlein wasn’t happy, The BOD wasn’t happy and the company was beginning to get into financial trouble.

Enter the future. We were approached by three people working at Fairchild who were extraordinary. They were the world leaders in Linear Circuits – analog circuits that could act as amplifiers and voltage regulators.

Bob Widlar is universally regarded as the genius inventor/designer of the Linear Circuit. He deserves at least a book. Dave Talbert was the process engineer. Dave’s girlfriend was in production. Bob designed, Dave reduced it to circuit drawings and the girlfriend wearing hockey knee pads kneeling on a 4ftx4ft light table cut the pattern from red plastic rubylith with a single-edged razor blade

Where she cut holes, light could shine through to the chips on a wafer. Like a photograph, the light fell on a sensitive emulsion which was etched away to allow impurities to reach the underlying substrate.

Bob and Dave wanted to leave Fairchild and join National. They required $500,000 each tax-free in five years. We had our pink sheet stock and convinced them that the stock would go from $4 to $40 in five years = $800,000 – Taxes = $500,000. They joined and they got their $500,000+++

In a year and a half National was number 1 in the world in Linear Integrated Circuits.

I had numerous adventures with Bob. My wife Tjasa remembers Bob. “He visited us once at the Barn in Lenox. It was a 1960’s modern, thickly carpeted apartment built into the hayloft of the 1890’s carriage house. In the morning after his arrival he was leaning against one of the wooden barn pillars with big earphones on his head.

He had obviously never gone to bed and I could hear the loud rock music despite the ear phones. He removed the ear phones to say good morning. I asked if he was ok without sleep. He said he did not need much sleep.

Then I asked how he could stand music that was so loud. He explained that he needed it to drown out the constant stress on his brain. When he was working out his complex problems, there were so many simultaneous calculations that his brain threatened to burst. Only the intense acid rock could take over and calm the strain so his brain could rest.

It was an amazing revelation that struck me so that I have never forgotten those moments sitting on the floor next to this genius who drove himself to the limits of his human powers to develop the new ideas that eventually changed our world”.

Dr Rothlein did not believe in Integrated circuits and we began to not believe in Dr Rothlein. The Board began to be convinced that we needed a change in management. I was the leader of the opposition. There were 7-8 members of the BOD.

Dr. Rothlein was to be replaced with Jack Hegarty — who agreed to standby until the Board took action. I talked with every Board member and got agreement with one exception. A gentleman who had been a professor at the Advanced Studies program at the Harvard Business School and was now in the leadership of the Ford Foundation. He had been in a tent in Maine pre cell phones. The Board met in an office at a law firm in NYC with Dr. Rothlein and Jack Hegarty in attendance.

Don Lucas had agreed to be Chairman after the meeting. Dr. Rothlein knew something was amiss. The meeting dragged on through a flip chart slideshow etc. Don Lucas found it impossible to tell Dr Rothlein that we were going to change management and that he should resign.

After about an hour I stood up, loudly shut my briefcase and announced that if nothing was going to happen then the company had no future and I walked out, stopping at a group of armchairs outside the meeting room.

Dr Rothlein asked what was going on? Don Lucas explained and Dr, Rothlein joined me on a nearby armchair. The Board then decided to vote for Jack Hegarty as CEO.

SURPRISE !! The gentleman from the tent in Maine said he thought I should be CEO. A bad idea then and even worse looking back. Jack joined us on the armchairs. The armchairs were comfortable. We were not.

Finally it went according to Plan, Jack became CEO. Don was elected Chairman and we disbanded. That evening Don Lucas called me from the airport and said he was heading back to California and that I should be Chairman. Not part of the plan but I said yes. I drove up to Danbury the next morning, an unhappy Bernie was clearing his desk and said that things would fall apart on his departure. Later, his administrative assistant told me that she understood our difficult decision and would help in any way she could

I was now Chairman. I made an agreement with Jack that he would worry about the inside world and I would worry about the outside world and we would work as a team.

A few months later I was in Spain getting us out of a joint venture when I got a call from Don Lucas telling me that he had been contacted by a team of 7 people who wanted to leave Fairchild and join us as a group. He asked if I thought we should meet. Of course the answer was yes. I insisted that we include Jack Hegarty in the meeting even though we were interviewing his potential successor.

We met on Wednesday at Don Weeden’s club, the Racquet Club, where Don was an occasional part-time Squash pro. The group was led by Charlie Sporck and included Pierre Lamond, Don Valentine, Floyd Kvamme and other future glitterati of Silicon Valley. Charlie was the only one of the group who was at the meeting. Charlie was very convincing. We had the leader for the future.

Jack Hegarty after the meeting said “They will make us more money than I will”. Go for it. We did.

Ten days later on a Friday we announced the deal. The group got 9.6% of the company’s stock which immediately soared from $3-4 to $24.

That Friday I called my friend Tim Collins who was 20 years old, had a pilots license and had founded Collins Securities which may have been the only other market maker in National Semiconductor stock. I shared no details but told him “don’t be short”. He would not survive being short.

Jack stayed on in marketing but left to become a successful real estate investor in Conn,

Dr Rothlein called me up at some point to say that he didn’t much like me, and he did not like what I did, BUT I had just made him a million $ and he thought he should thank me for that.

Charlie Sporck and his team were the first major spin-off from Fairchild.

Two years later in 1968 Bob Noyce and Gordon Moore left Fairchild with startup capital from Arthur Rock to form Intel.

A year later in 1969 Jerry Sanders led another group out of Fairchild to start AMD “Advanced Micro Devices”.

The three companies became the core of Silicon Valley.


PS. Don Weeden, in his excellent autobiography AS LUCK WOULD HAVE IT quotes this:

“A story has been told that someone at Smith Barney called the venture capital firm and private equity firm American Research and Development Corporation (ARDC) to ask their opinion of the future prospects of the semiconductor industry. ARDC was run by Georges Doriot and had an excellent reputation for knowing about the new technologies. They were the first major investors in Digital Equipment Corp, when it was still operating out of a garage in New Hampshire. They knew nothing about National Semiconductor but thought the industry in general had “matured” this was five years before the first integrated circuit had been built“.

PPS. In 1977, Ken Olsen, president of Digital Computer was quoted as saying “There is no reason for any individual to have a computer in his home.”

The perils of predicting the future

PPPS. – Charlie Sporck in his book SPINOFF remembers when he, Peter Sprague, and Bob Widlar were in Paris where Widlar was to address 500 French engineers.

“When the seminar was about to reconvene, I spotted Widlar weaving back to the head table with a tall glass full of straight gin”, recounts Sporck, “I went over to Peter and told him to get rid of Widlar’s gin, and in one of the most heroic actions ever undertaken by a person in defense of a commercial enterprise, Sprague picked up the glass and drank all the gin.”