SEMI Oral History Interview

Ted Gallagher

May 27, 2005 , San Jose , California

Interviewed by Craig Addison

 

Theodore J. (Ted) Gallagher began his working career in the early 1960s with Perkin Elmer, involved in the sale and marketing of analytical instruments. In 1966, he joined Tracer Labs, a division of LFE, and promoted plasma processing technology for the semiconductor industry. Gallagher founded Tegal Corporation in 1972 and founded Matrix Integrated Systems in 1985.

 

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TG: My career in Tracer Labs began in 1966. I was hired as a product salesperson to look at the various product lines that had been developed in various parts of the company with the idea being that there would be applications into the analytical instrument field or other industries where the technology would fill a need. So it was a somewhat reverse order of what most people learned in marketing school of find a need and fill it. We had various technologies and we were looking for markets and the major market that I got involved with, or major product technology I got involved with was what we know today as plasma technology and at that time the application was primarily into the analytical instrument field as a means of sample preparation, ashing of organic materials to provide the basis for trace metal analysis.

 

And we looked at various opportunities in industrial areas as well as looking at the ability of gas plasmas to cross-link polymers and provide better adhesion coupling of plastic materials to metals, connectors, Teflon wire printing, things like that.

 

It was in 1967 that a researcher from Signetics by the name of Steve Irving called the company to determine if he could come up and try to remove photo resist material from silicon wafers. At that time, I think the wafers he had were probably an inch in diameter and they conveniently fit into the small chambers that we used for ashing and he was successful in being able to remove resist. At that time, resist was relatively new to the process. Different resists were being developed for different reasons and the important thing was to be able to get the resist to stick to the wafer. As they developed technologies, they got the resist to stick on the wafer better [and] it became more and more difficult, in some cases, to get it off. So the first look was to remove resist from silicon wafers that had been baked on perhaps to the point where it was difficult to remove by conventional wet processes. That led to additional development at Signetics that was based on using fluorine-based chemistries to etch silicon dioxide, silicon nitride and so it also started the application for using plasma as an etchant, as a dry etching process.

 

My time in Tracer Lab relating to the semiconductor industry lasted from '67 through the early part of 1970. It involved moving myself and my family from Massachusetts where the home office was to California , to Richmond where the technology center was for this particular application. And [when] we got to California , we liked it. The division was moved back to the East Coast in early 1970 and I chose to leave the company at that time and go off on my own.

 

Once I was fully assigned to the West Coast division, Dick Bersin was the general manager of that division and he became my boss. In that period of time Dick's background was primarily a technical one and he was interested in trying to develop the technology for multiple applications. My job as sales and marketing was to visit various companies that had expressed interest and try to find a working home. The semiconductor industry was one that basically came to us with a need and it turned out that the technology had some ability to fill that need and it basically shifted the emphasis in our company from maybe a broad marketing base, a very focused marketing effort, and that got me to California . At the time that I came to California , which was in 1968, Dick had already left the company with the chief engineer, to form International Plasma Corporation (IPC). By the time I got out, I'd say maybe one year later by '69, they had a product and there was a competition between IPC and Tracer Lab for the business.

 

TG: So that takes us to the formation of Tegal Corporation. As it turned out, Tegal initially was a manufacturer's rep firm. I called it Tegal Scientific and I represented various companies basically outside the semiconductor industry back more into the area that I worked in for Perkin Elmer in the early 60s. But in 1972 I was approached by two people -- Jim Mitzel and John Hollahan -- who I had worked with at Tracer Lab. John was a Ph.D. chemist whose specialty was plasma physics and plasma chemistry and Jim worked for me directly in Tracer Lab as a service engineer. He was also a technician in the engineering department at that time and when the company moved the division back to the East Coast, Jim took a job on the West Coast in a sales and service capacity basically covering the West Coast plus Motorola in Phoenix and Texas Instruments in Dallas . They had the opportunity to start a division for a company and they wanted me to join them in that endeavor. I basically convinced them that we should start the business on our own and I set out to raise some money so we could get started and we raised essentially $48,000 from friends of mine -- one relative of mine, one relative of Jim's -- and some money that I had put in myself and we launched Tegal. At that time John Hollahan was working for NASA Ames. He was a National Academy of Science Fellow there and he continued to work there on a project [basis] about half time and we basically sold…we entered into a contract with NASA. We basically sold half of John's time and he was working on a plasma-related project but more on the deposition side than the stripping or etching side but also outside the semiconductor arena…it was a project for making membrane filters from plasma deposition.

 

So we developed the product. At that time it was called a Plasmod. It was our first product and it was initially developed just for stripping and cleaning applications and basically Jim Mitzel ended up making contacts in the Bay Area and we started selling the product and we eventually expanded to cover southern California and Arizona with a sales rep and Jim supported that person in terms of his technical needs. He lined up the interviews or the sales calls and Jim would travel with him and he, in turn…his name was Bob Dykehouse and his company was Metro Line West and he sold our products for a number of years into Arizona , into Motorola essentially in Arizona , and into the companies in southern California . He, in turn, led us to other reps in the Metro Line family -- one in New York and one in Florida and one in Dallas . We signed those people on so we had a network of reps in all of the states, or all of the geographical areas, where there was semiconductor activity and we basically started selling throughout the United States . That was probably in 1974.

 

By 1975 the company had developed an etching product as well. We developed a product that utilized metal aluminum chambers and it was effective for etching nitride. At that time the primary application was for silicon nitride etching. That, in turn, [led to] other companies started looking at Tegal as a potential acquisition because they saw the activity in the area of both stripping and etching growing and we were contacted by Thermco, which was at that time a fairly large supplier of systems in the diffusion areas. They had an international network of salespeople and agents and we decided that we would use the contract with Thermco to sell our products. So we entered into an agreement. We basically went away from the traditional sales rep concept and we became essentially a product company developing additional products in our area and Thermco became the sales arm for Tegal. That basically lasted for a few years until we looked at [other] opportunities…we needed more money because the company had grown and the operation that we had with Thermco worked out very well because we sold them the products, they resold them. They were still sold as Tegal products by Thermco but we sold it at a discount and they paid us the money for the products and that minimized the problems of cash flow for a growing company.

 

What the market size was in the mid-70s was probably about $5 million a year in sales of plasma equipment and that was probably spread, oh, I'd say maybe 40 percent on the etch side and 60 percent on the strip side. There were two competitors for Tegal, both larger than Tegal. One was at that time LFE which was the parent company of Tracer Lab. They were now selling the products as LFE. And then IPC which was Bersin's company, and they were each about a $2 million a year business and Tegal was about a $1 million a year business. At that time our products were selling for about $10,000 a piece, so we were selling about 100 units a year and we had products under development that we decided needed more money to develop and we looked at that time at the venture capital market a little bit and we looked at Thermco's parent company which was Sunbeam. They were looking for acquisitions and there was one other company [Tylan General]. Anyway, we actually looked at the potential of merging with IPC at that time as one of the opportunities that came up, talked a lot with Dick Bersin about that. Dick, his company had really been taken over by the financial partners at that time and they put in a manager by the name of Jim Beatty, to run the business. Dick was no longer in charge of IPC. We were rapidly gaining market share and our forecasts for the next two to three years was to achieve market superiority, or at least major market share, and we were developing technology at that time with Motorola on a joint basis by working with their R&D group and it's really that work and the progress that we made there that caused Motorola's interest in acquiring the company.

 

TG: In the timeframe then, we are up to 1976, 1977, we were looking at various opportunities to financially support the growth of the company and we ended up choosing the opportunity that was presented by Motorola for a number of reasons. We liked the opportunity of working with a company that, from a technical standpoint, we felt that gave us a major advantage versus our competition at that time. The make up of the financial opportunity was one that, I think, was a lot different than was offered in the case of Thermco or Tylan . It would have been an acquisition and we would have been more than likely merged into their facilities and it would have required either leaving the company, from my part, or moving, so that wasn't attractive. The IPC opportunity was not attractive because, in my opinion, I felt that one of the reasons that was holding back IPC from growth was the highly conservative management philosophy of the person who was in charge of the company and I didn't see that changing just because I was there. In fact, we would have all -- we being the major players in Tegal -- would have all been essentially demoted or dismissed as part of that type of merger.

 

The Motorola opportunity was one where they came in and they bought 80 percent of the company. That money was used to pay off the investors. We then entered into a program which was a 10 year program that allowed for them to, or us, to draw down additional money…there were limitations on the debt that was based on a multiple of our profit, our equity. For every dollar in equity we could borrow $5 from Motorola. The 20 percent ownership was shared at that time between three of us. George Gorin had joined the company as head of engineering. John Hollahan had left the company by that time and he was actually working at that time for Applied Materials, and Jim Mitzel , of course, was still there and myself, so we shared the 20 percent ownership and we had a 10-year contract. At the end of four years we had a put option. There was an evaluation formula established and once every six months between year five and year 10 we had the opportunity to put our shares to Motorola and they had the obligation to purchase them at the then price of the company. There also was a cap on how high the evaluation could get before Motorola had a call option on our shares and it turned out that that cap happened in about seven years and so the call option was made in 1983, beginning of '84 timeframe, and the company was then 100 percent owned by Motorola.

 

It was a time when the market was still extremely small. You know, the overall market of semiconductor equipment in the mid-70s was relatively small but the market for plasma processing was really small. It was certainly less than $10 million a year and, as you know, today the opportunity for growth within that market was probably 10 to 20 times in the next decade and it proved out to be that and it required an aggressive combination of, I think, marketing and product development to take advantage of the opportunities that were being presented. Probably from '77 to '84, the plasma etch market grew dramatically. In the case of Tegal we grew from about $1 million a year in annual sales to over $44 million in annual sales in 1984 and at the same time during that period, during the latter part of that period, Applied Materials entered the etch market with their hexode technology which they got from AT&T, from Bell Labs and hired two major scientists from that operation and they embarked on one of their first major expansions and became market leaders in the overall business and overnight almost.

 

At the same time, IPC and LFE pretty much stayed the same. When Tegal grew from 1 to 40 [million dollars], I think LFE probably went backwards in sales during that time. I don't think they ever got above $2 million or thereabouts. IPC grew a little bit during that time. They probably went from, I don't know, $2 to maybe $10 million, I'm not sure of their numbers. But they became a very strong supplier of the quartz-based cylinders and their expertise was in stripping. They stayed in batch processing and Tegal went to single wafer processing and single wafer processing got its start with Tegal and Motorola and it was the first major product that we developed with the joint R&D programs that we were entered into. The single wafer etcher for poly silicon was the first product that was developed and, actually, Motorola bought the first unit through a fund that they had that was managed by the head of the Motorola Semiconductor division, a fellow by the name of Bob Heikes and Bob gave us the money to supply a single, well actually, two systems to Motorola but one was our first formal system. I would say within the first three months of having that tool they proved its worth and when we had sold I think 17 of our systems, Motorola owned 16 of them, and they were distributed between Phoenix , or Mesa , actually, and in Austin . They had started the Austin facility by that time and we then started aggressively selling that product to our other customers. The first product was used for poly and for nitride. Then we developed one for oxide and we developed one for metal. The metal product never really made it and the oxide product didn't. Although we sold several, it was not a very successful product in the beginning and the competition for the oxide process, which has always been the major market…was the market that Applied went after and it was the market that Lam [Research] went after. Lam had a single wafer system that was load-locked. The Tegal system wasn't load-locked and so as you got into the chemistries that were required for etching of oxide, and especially metals, the load-locked system proved to be a far superior tool for doing that. Even though it was more complex and more expensive, it was still cost-effective. The Applied [system] being cost-effective on a basis of a batch process which they could operate very slowly, but in terms of the process itself, they could slow the process way down but by having 20 wafers in their hexode at one time, they were still able to process more wafers per hour and the precision of their process and the cost-effectiveness that the hexode system gave them worked out very well.

 

We chose at the time to continue to improve our product. We developed from the 700 series. We spent our money to develop an 800 series which got us into 6-inch wafers and got us into a far more reliable mechanical system, wafer transfer system, but still did not include a load-lock. But we had a very successful oxide process which we developed, again, with the working relationship with Motorola and actually a working relationship with IBM at the time where the process improvements that were made were a result of some proprietary reactor design changes and, in the case of IBM, they basically kept…essentially they had their own proprietary reactor that Tegal actually built for them and that was a secret essentially. We built a different one. It was different enough so it didn't infringe on their patent and they approved it so we actually had two different versions of…the model was called an 803. And that was, I'd say, probably the most successful product that Tegal ever sold and it was instrumental in increasing…I think the first year it was in full production, we probably sold 120 systems at close to almost $200,000 a piece. We probably sold $20 million worth of equipment which doubled the size of the company from the $20 million range to the $40 million range.

 

TG: The story ends for me at that time, in 1983/84. That was my last year. I did stay on and in part of '84 I was still working with Motorola. They had established a venture capital-type segment of their business and it was the part of the business that Tegal was in in terms of the structure of the business. It was called New Enterprises. It was managed by a fellow called Levy Katzir and Levy talked me into joining his staff and I stayed there for about eight months and my job was to try and help him develop additional technical resources to support a more aggressive semiconductor equipment arm to make Tegal more than just an etch and strip, and the areas that we identified that we wanted to look at were deposition and automation and inspection. The fundamental drive of Motorola's new enterprise was factory automation and so as you thought of mid-80s, factory automation in the semiconductor industry was one that needed all those components to essentially grow the business. We were very, I would say, unsuccessful in attracting companies. We talked to several companies at that time that were either for sale or that we identified as being companies that would be useful technologies to add into the family.

 

At the same time as that was happening, Tegal went backwards in sales and they lost an awful lot of money in 1985. By 1984 Tegal was twice the size of Lam. By 1985 Lam was twice the size of Tegal. It just flipped. I think they [Tegal] spent a lot of money developing a load-lock system. It didn't work well as a product, reliability wise. Tegal always was a very, very strong process technology company. I think probably without any question it was always the leading company in their understanding of the process. A lot of that came from the working relationship that we had with the Motorola people and the technical people and the R&D group at Motorola and a lot of it came from our understanding of the technology…the people that we had that understood the technology from the interrelationship between the reactor designs and the ability to do a specific process effectively. So a combination of those things worked to our benefit but the products that they developed…they built even an additional version of their 800 series which became the 900 series. It was a mechanical nightmare for a while and it got repaired and it's been really their only product that sells with any regularity, even today. But the 1500 product, which was the larger product that was designed to compete directly with Lam and Applied, never really made it to the market and still is only sold in very unique applications where the process is critical and their process expertise has made them a desired supplier for certain materials.

 

I think the growth in the industry just mushroomed from where it was in, say, the 1977/78 timeframe where at that time total sales of equipment was still in the $10 million range as opposed to the $100 million range and I'd say by 1982, which is like only four years, four years later, the market grew to probably $80 to $100 million. So by '84 it certainly was over $100 million. So when you looked at the market, we never competed…in that timeframe we never competed with Applied at all. If the customer needed the technology that was offered by Applied, they had to buy a hexode type of product and Applied had almost 100 percent of that market. LFE tried to compete in that market and never were able to. And a company called Plasma Therm, which was the company that had built a lot of the reactors for Western Electric and Bell Labs, so they had the technology even before…they had the technology of being able to build a hexode reactor before Applied did but they didn't have the marketing capability to go out with it. So although they sold some, Applied -- like they've done with a lot of products -- they just went from not even being in the business to being a giant in the business overnight. So what caused Tegal's growth was, I think…during the timeframe from going from less than $10 million…the growth from $10 million to $20 million, or from $5 million to $20 million…was really triggered by the first single wafer product and the expansion of our business into overseas markets, primarily Europe. A little bit in Japan , but primarily in Europe . And then in the timeframe [of] the $20 to $40 million growth, it was almost totally the result off being able to have an effective oxide…that allowed us to do certain steps in the oxide process. Oxide was the most etched film in the building of the device. It allowed us to do some of those processes so the customers that were buying the Tegal process for poly or for silicon nitride were then able to buy additional units for some of the oxide processes, even though they were buying Applied systems for the more complex oxide processes. And so I think the major expansion of the market was the solution to an effective dry process for etching oxides. I mean, that just took the market…it took the market times three or four immediately just because the process worked. So it was certainly a matter of being in the right place at the right time.

 

TG: The person who basically championed our cause into Motorola was Earl Gomersall …at that time the Semiconductor Division was divided between the discrete devices and the ICs…and [the] other was all the peripheral businesses that were support arms for the main two businesses. They had a wafer business in Europe . They had sizeable machine shops. They had a flat panel display, an LCD business. They had little things that were just outgrowths. They were trying to get into the solar panel business at that time. And then R&D was all managed by Earl…his goal ironically was no different than what ultimately became the goal of New Enterprise [which] was to create a automated dry system for wafer processing. And the idea at that time, when we put together our first strategic business plan within Motorola, was to develop a common transport system with the various processing heads to perform a completely dry process on the wafer. And when you think of that…in our case it was a pre-alignment and a post-alignment process. It never included buying an aligner company.

 

If you look at the history of Applied Materials, what have they done? They've built a pre-aligner and a post-aligner company. They bought an inspection company. They have that technology and they are a proven model in the industry and it was, I'd say, Earl Gomersall's vision in the mid-70s that caused Motorola to acquire Tegal. That was predicated on the same philosophy, same strategy. It was a very unique situation…if you looked at the growth of the Japanese semiconductor equipment market, it was all done with arms of the major players. In Japan it was the way they did things. They developed everything internally and they formed a company to build the product so all of the major suppliers of equipment in Japan were outgrowths of the Fujitsus and the Hitachis and NEC and so forth. TI had a major equipment arm. They built a lot of products themselves that offered what they considered to be unique opportunities to gain market share advantages. That was a major conflict within the management of Motorola for the same reason; why have an equipment company? The idea wasn't really to have a big, successful equipment business. It was to provide technology leadership to being able to get a leg up in the making of devices and they felt that 6 to 12 months was enough of a leg up. So by doing the development work…and look what happened in single wafer system. It worked perfectly. That was our first real product there. It worked perfectly because we worked with them in a unique program between our company and the R&D group. They [Motorola] had what they called APRDL which was the Applied Research and Development Lab, which was a step between R&D and the fabs and that's where the first system went into. They proved it there and once approved, it got assigned everywhere.

 

And that's the way Intel worked…we supplied every poly and nitride etcher to Intel, and strippers, from the beginning all the way through probably to 1982/83. They didn't buy our oxide etcher because it didn't…they tried it but it didn't work. When they went to 6-inch wafers, it was right in the process where I was leaving as president of Tegal. Somebody else was coming in. They hadn't been hired yet, or they didn't have someone to bring in. And for a period of time, for way too long a period of time, the acting head of Tegal was Levy Katzir. There was such a strong feeling on the part of the management in the semiconductor side of Motorola, the main one being Al Stein, that it didn't make sense…that having an equipment arm was really diametrically opposed to…it just didn't belong there. It also ultimately hindered us in Intel. We got called to Gordon Moore's office one day when they were making all their decisions on the 6-inch plant down in Arizona which was the 1983/84 timeframe and it was a major concern they had…that we were so closely tied to Motorola that it would ultimately be a disadvantage if our production capability was limited and we could only build X number of units and Motorola wanted them [and] they would get first dibs on the products. So I think it became a major factor and I think it became a real major factor when I left because at least…I really wasn't Motorola. We were always Tegal. We had a separate corporation. We had none of the internal structure that Motorola had…finance was a unit and personnel was a unit and each of the operating divisions had assigned people and those people had joint responsibility to a financial manager as well as a division manager. In our case, everything was internal to our company and I knew a lot of the key people. Ironically our major account was Motorola and it was our major account by far. Intel had years where they were our biggest account and we worked very well with them for a long time but ultimately the union [with Motorola] became a disadvantage for us.

 

Lam did very well and so they got into the oxide with Intel and it was very simple for them to do the poly and they even had a metal process that evolved early on. At the time that we had only poly and nitride, Lam had oxide, metal and poly nitride. They had three models and they built their system load-locked. They built it as a 6-inch capable system from the beginning. So we just weren't fast enough in bringing our product up to speed. We spent too much time during the '82 timeframe working on trying to make our oxide system work. When I left Motorola mid-'84, early '84 really, it was after having spent about eight months working with the concept of trying to build sort of a multi-product supplier company for the semiconductor market and in the contacts that I made and the things that I was doing, you constantly ran across the same combinations of people.

 

TG: I decided well, I am going to go out and try to position myself as a consultant between the people who need money and the people have money and it seemed that everywhere I went or everyone I spoke to on either side wanted me to become an employee or become captive. The financial people were saying, “We need people like you that we can put into run our troubled business or help develop the strategic plans and do the things that you are capable of doing,” and on the user's side they talked to the financial people and they were saying, “You need this type of person,” and then perhaps Ted Gallagher was the right type of person to add to your product people portfolio to be attractive to a venture arm to raise the money to do your project. As this was going on, I was approached by Hunt Chemical, a fellow by the name of Bob Zetena who was president of Hunt who we had worked very closely with over the years as a supplier of photo resist materials because of the technical interaction between resist and the need for the resist to hold up in the etching process and the need to get it off after the etching process was complete. I had known Bob for a long time. We actually gave Hunt the “Thinker Award” one time, which was an annual award that Tegal gave out, at least in those days, for major contributions to the plasma world. We gave one to Hunt because they were at the time the only resist company that was really sensitive to that interaction and that was willing to work with us.

 

So at that time, Hunt's goal, or Bob's interest was to develop an equipment arm for Hunt so they could more formalize this interaction and get the synergy between the equipment and the resist. They had a program going at the time which ironically we were part of because they were working with Motorola on it, we being Tegal…to create a plasma developable photo resist…and then, of course, etch and the removal, all those three things were part of it. They also ironically had a program to have plasma deposition of photosensitive materials so that they could get a dry process for putting resist on the wafer. And these were internal R&D programs at Hunt. So it was Bob's desire to create an arm of Hunt that would be an equipment arm that would be aligned along the same way that the R&D programs were aligned and he asked me if I would come onboard as a consultant and help his person who was the vice president of corporate development for Hunt…and help put together a strategic plan that could be presented to their board for funding. So I did that. I thought that would be an ideal type of thing. I would be able to work a little, make some money and when it was over maybe become a board member of that company but not have to act in a managerial capacity. So that seemed like a very workable situation for me and I started out on that program and that was probably in the mid-year of 1984.

 

Our goal was to have a plan put together within four to six months, by the end of the year really, but to have at least the initial plan put together by the end of the year and then critiqued and polished and finalized by the end of the year. So it was a six-month program for me and it involved going to Europe and interviewing. They had a division in Belgium that was very active and actually a person there who was very much involved in the process of coupling the technology of dry processing with resist and I talked to the R&D people [there]. I talked to the people in Yale University where they were doing R&D work on depositing photosensitive polymers. And at the same time looking at the automation needs, because of other contacts that I had, I was very close with the founders of Brooks Automation and they were two brothers that had founded the company and they were looking to sell out essentially. So I thought that owning Brooks would be an interesting part of the overall concept which would provide the automation component of the wafer tracks, etc.

 

Meanwhile, on the etch side, Jim Mitzel , who was my original partner through all of Tegal, was working with a fellow by the name of Randy Crockett to develop a single wafer stripper and he was also working with a fellow by the name of Lou Rigali who had purchased the original rep business that I started, Tegal Scientific. So it was a very aggressive program and it was one that supported the goals which Zetena had set out for Hunt. Well, it turned out that in this same six-month period Hunt was acquired by Olin Corporation and by the time that we had our program, our strategic plan put together and sort of approved at the Hunt director level, Hunt was no longer an independent entity. Their board of directors was essentially kaput and they became an operating division of Olin. This was now the beginning of '85, we took our plan to Olin and basically the same plan that we had presented to the Hunt board we presented to the Olin management team first. It turned out that as part of Olin's strategic plan they had specifically identified equipment as an arena that they did not want to participate in and that they wanted to focus strictly on specialty chemicals and then develop other chemicals that would provide a stronger product base for Hunt Chemical or what they thought was going to be Olin Electronics or Olin Electronic Chemical Company, or whatever they were going to call it. When we were exposed, then, to Olin, they said, “We can't take this.” They had just gone to their board and convinced them to buy Hunt Chemical and part of their statement was that their strategies specifically excluded equipment. They said, “We can't go back now two months later and say, ‘Oh, by the way, we want to change our mind. We want to add this equipment arm and we are going to have to buy this company over here and we are going to have to fund two start-ups over here and it's going to take us this many million dollars to launch this program.'”

 

TG: In the meanwhile we had started Matrix. And we started Matrix, which was just Mitzel and Crockett and myself, really, partly me but we hadn't really funded it to any great extent. Then Hunt came in and said, “Look, we will put up some money.” This was before we went to Olin even. So we had actually started something and they put in some money and we hired some people and we actually started…we had a building and we started doing the development work on the product. So what Olin said was, “We will fund an R&D project and we won't buy Brooks Automation for sure. We are not going to buy anything. We can't do that without board approval and we don't want to do two programs. We'll just do the one program.” And we were asked if we were willing to do that. So we then sat down with Hunt and we negotiated a plan that said OK. We totally changed the structure of what we were doing and it became [a case of] “we'll develop this piece of equipment and we'll sell it and we'll work with your people and we'll just do this little arm of the program but we won't address any of the deposition or any of the automation or any of the dry development or the deposition of photosensitive materials.” So that was a big, big letdown, so to speak…and part of the commitment for me was to run that business through the start-up phase of the business. But it was something I could do.

 

We had basically a three to five year plan that would launch the business. We had a commitment for financing that was enough to make the financial plan that we put down work and so we started down that path and that was '85, '86, '87 and by 1988 the management of Hunt had been fired. The person running Hunt was an Olin manager…Hunt was losing money so the acquisition looked bad on Olin's books and the biggest single source of money that was being lost was Matrix because we had a $2 million a year budget and in year one [year] we had no sales. That was on purpose. So year two we had some sales, about $3 million worth of sales, but on $3 million worth of sales we lost money on sales alone…plus we had another $2 million so there was like $5 million had been invested in Matrix at that time. Our goal was to break even at the end of year three. By then we would be able to support the sales part of it on our own. That's exactly what we did. Our year three sales forecast was $8 million. We went from zero to 3 to 8 and that's exactly what happened. But, in the meantime, we were put up for sale and, again, Olin went to their investment banking company in New York that had absolutely zero knowledge of the semiconductor business, let alone the semiconductor equipment business. There wasn't a prayer of them getting the company sold so in 1988 we went back to Olin and we said, “OK, we'll buy the company back from you,” and so it was really Jim and myself [saying] “We'll buy the company back from you,” but we settled on $1.5 million, “but you have to give us a $1.5 million loan.” So we basically bought the company with no investment for $1.5 million and by the end of one year we had enough history in the market that we were able to get a bank partner, a bank loan and we basically borrowed money on our assets and we were able to pay…Olin discounted the note to $1.4 million and we paid them $1.4 million. By the end of 1988 we really owned 100 percent of the company.

 

There was no way we could grow the company without some other partner so we looked at that time of different ways of forming partnerships and we had an opportunity in Europe to buy a company that was in Belgium that was owned by a combination of venture money -- a European venture firm and a Belgian government venture firm -- that owned this spin-off of IMEC. Are you familiar with IMEC? IMEC spun off this company, it was called Cobrain . Actually, IMEC had ownership in it. I think the Belgian government had an ownership in it and then they had a venture arm and we ended up merging Matrix with this company which involved an infusion of capital into Matrix but we were never majority owners of the company. The venture combination of companies always own the company and we had a minority position which, over the years from '89 until I left in '90, had shrunk from probably 40 percent in the beginning to 10 percent at the end as a result of taking on additional financing as we needed it and we were never able to grow the business effectively. We were able to grow the business…we got it up over $20 million in size but by that time $20 million was nowhere big enough to be a global supplier.

 

 

TG: So our trek through Matrix was certainly not as successful and certainly wasn't as much fun. The world had changed and the philosophies that worked well in the 70s and 80s needed to be changed and we were just not equipped with our financial partner to make that happen. It just wasn't working. The products that were developed in Cobrain , the major one, we had to put a stop to. It wasn't an effective tool at all. There just were a lot of hardships that turned into hard feelings and we were not able to develop the products fast enough that we needed. We were not able to gain from the advantage that we had in Cobrain and the communication with the Europeans was just very difficult. So we agreed to change what we were doing. I left. I was ready for retirement anyway so it worked out. I actually stayed on for an extra year after I stepped down as president and I worked part-time, had a couple of projects. We hired a fellow by the name of Jim Marshall who came in and he was the president and then he ultimately became the CEO as well and he hired his own technology director and his own sales director, so the company really changed dramatically. They built a totally new product line which has been somewhat successful.

 

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