Vinod Dham - Entrepreneurial Career

Entrepreneurial Career

NexGen

Dham could have hewed to a safe course and stayed at Intel for the rest of his career. But playing it safe has never been his style. According to him, Intel could have been a comfortable place. If he hadn't left then, he might never have. When he joined Intel, it was then a mere $663 million revenue company. By the time he left in 1995, Intel's revenues had soared to $16.2 billion. Dham says he was a keen observer of how Andy Grove built the strategy and the organisation for Intel’s success in the microprocessor business. Even at Intel, Dham took chances, such as his prescient decision to work on processors when he was done with being in R & D. By the time Dham quit Intel, he had already built a tremendous brand for himself. It was also the time when the entrepreneurial revolution in Silicon Valley was at its peak. He came across a company called NexGen, a boutique processor design company that was about eight years old. He joined the company as its chief operating officer. Nexgen was the only company that was developing Intel compatible microprocessors at the time. Having Dham on the board was coup for the small chip maker which has been looking to make a mark in the microprocessor world. Nexgen’s founders were predictably jubilant about their big catch. While Nexgen had been operating for several years, the company lacked strategic direction. The design team at NexGen was very good but the company did not have a chip that was bus compatible with the Pentium, an important functionality needed to fit in the PC industry dominated by Intel. Dham, with his wide-­ranging Intel experience, turned around NexGen’s strategy. He knew NexGen had to license the Intellectual property (IP) that would piggyback on the infrastructure that had already been created by the rest of the PC industry and needed access to manufacturing capabilities and advanced technology by partnering with established players for building its chips competitively with Intel’s.

While looking for the right partner for Nexgen, he discovered that AMD’s (Advance Micro Devices was Intel’s main competitor in the computer hardware industry) microprocessor product, called K5, had failed to deliver on its promise. (K5 was positioned to be AMD’s response to Intel’s Pentium Processor). Dham convinced the NexGen management to explore what appeared to be a perfect synergy for merging the two companies -­ NexGen had a product but no factories and process technology, AMD had a factory and advanced technology but no product. His insights proved right and AMD acquired NexGen’s product and process technology, AMD had a factory and advanced technology team for a tidy sum of U.S. $857 million. AMD’s next product, K6, was built using NexGen’s core. For a short while, it was the fastest microprocessor in the world. It was the first time ever anybody beat Intel at its own speed game. The success of K6 was critical from one more angle – microprocessors were pricey and that meant PCs had to be sold for over U.S. $1500. AMD under his leadership of the microprocessor business priced K6 to create a PC below $1000. This positioning forced Intel to respond initially with a truncated Pentium under the brand name Celeron. Of course, today desktop computers are priced at less than U.S. $300, but, AMD’s ability to give relevant competition to Intel and create a sub $1000 PC played a key role in creating a sub $1000 category for the first time. After spending a year at AMD post-acquisition, Dham joined another startup in April 1998 – Silicon Spice as its President and CEO.

Silicon Spice

Dham, who had made a career out of microprocessors, was no longer interested in just chips, which form the guts and brains of personal computers. Rather, he was preaching a new mantra: communications processors. "The microprocessor business had become less interesting business to me," said Dham. In his opinion, the Internet was the mother of all killer applications, which could utilise most computing power if there were no connectivity bottleneck. Anyone, who can help unclog this bottleneck, held the key to a multi-billion dollar bounty. "The personal computer was designed for computing, and not for communication. The microprocessor has gone beyond its use," he said. In other words, the hardware is far ahead of the current computing requirements" said Dham. With demand for communications-related chips then growing at 20% per annum, Dham and Silicon Spice's three MIT grad co-founders wanted a piece of the pie. Silicon Spice raised more than $34 million in venture capital from top-drawer firms such as New Enterprise Associates and Kleiner, Perkins, Caufield & Byers. Silicon Spice was initially experimenting using an innovative reconfigurable technology to design chips. It turned out that the chips designed in this fashion lacked the necessary performance and cost to be of much commercial use. Meanwhile, Dham learnt from dealing with several customers that there was an emerging need for developing chips that could effectively transfer voice over the Internet. Dham explains, “The Internet protocol was being used mainly for data and delivering voice over the Internet, which was designed primarily for data transfer and was a tricky problem in terms of technology.” Dham redirected the company to build this new chip to support VoIP (Voice over Internet Protocol), among the first in the world at the time. Silicon Spice's technology was promising. In a little over two years (in August, 2000), Dham sold Silicon Spice to Broadcom for a whopping U.S. $1.2 billion in an all stock deal. The deal was Broadcom’s largest ever (at the time of acquisition) and its seventh acquisition in the year 2000. Broadcom's former CEO Henry Nicholas had said Silicon Spice's architecture for communications processors, which enables banks of chips to be replaced with a single piece of silicon, is Broadcom's most strategic buy yet and opens a "multibillion-dollar" opportunity. "This is kind of the holy grail of carrier-class communication equipment," Nicholas said. "What Silicon Spice has created is a whole new computational element of the same significance of what the microprocessor was to the PC." “One of the biggest lessons I learnt was that it always helps to start defining your product with very early involvement with customers,” said Dham. (Ref: Smart CEO 15 Jan 2011)