But when Jim Morgan became CEO 25 years ago, Applied Materials was a mess. An ill-advised diversification scheme had nearly bankrupted the Santa Clara, Calif., company. So Morgan overhauled Applied Materials, betting his company’s future on computer chips. The gamble paid off. Today, Applied Materials is a Fortune 500 company with annual sales topping $7.3 billion.
Once again, though, Morgan is weathering an economic storm, which forced him to lay off 1,700 workers in December after his company lost $127 million in the second half of 2001. Yet he continues to invest $1 billion a year in research and development in the belief that a company must continually reinvent itself. He even opened a “factory of the future” in March. In an interview with NEWSWEEK’s Patrick Crowley, Morgan talked about how he manages a tech company in tough times. Excerpts:
CROWLEY: You’re losing money and laying off workers, so why continue spending $1 billion on R&D? MORGAN: One of the problems with good times is everybody starts believing that the only way to go is up. We’ve never had that mentality here. We’re not caught like a deer in the headlights when there is a downturn. Our management team starts focusing on the next upturn by getting our processes in place, getting new technologies in place, developing new management systems. We’ve made progress working on the new technology that will make the next generation of chips. Really, a downturn is a good time to fix the various processes that need to be improved in an operation.
How do you keep your workers pulling in the same direction? Behind my desk is a sign that reads, PRESS ON. nothing in the world can take the place of persistence. That is something that every employee, every executive knows is the essence of this company.
How do they know that? We use Webcasts extensively. You have to continually communicate the vision, the values, the priorities, the initiatives and the long-term future of the company. When people have that, it gives them a framework of confidence.
So what’s the next big technology breakthrough you’re working on? Our customers want the ability to make chips that are more powerful, portable and affordable.
What will that mean for consumers? People really underestimate the potential of the Information Age. These new chips coming out in the next five years, chips made on our machines, will make possible new applications of voice translation, voice activation and wireless technologies. There will be new innovations in photography, in personal computers. By 2007 there will be another billion people connected to the Information Age.
So that’s why you’re focused on growth even in a downturn? The keys to bringing the next billion into the Information Age are a great global work force and management team, an unrelenting investment in research and development even when the economy is down and investing aggressively globally.
You played basketball growing up in Indiana. Any lessons from the game you still use? Court sense. You keep your eyes open for what is going on, because you never know when you might get an opportunity.
