SANTA CLARA, CALIF. -- Most days at lunchtime, Charlie Sporck pulls on his walking shoes and heads for the 14-acre park on the grounds of National Semiconductor's headquarters here. The long walks show on Sporck, still lean and fit at 60. Sporck prefers his business that way, too.
But Sporck knows he's got to put his company through some rigorous paces to get it back into shape. Last October, National Semi purchased Fairchild Semiconductor, adding bulk the company needs to compete effectively in the $32 billion worldwide chip market. But with Fairchild, Sporck also bought some weaknesses and extra layers of fat.
Fashioning the merged companies into one strong company is a test of Sporck's abilities. "If Charlie can't do it, nobody can," said Jack Beedle, president of In-Stat, a Scottsdale, Ariz., market research firm.
National Semi exists today only because of Charles E. Sporck, who took it in 20 years from a fledgling and failing company with $7 million in sales to almost $2 billion in sales. But an industry recession in 1984, coupled with the increasing pressure from Japanese competitors, left National Semi staggering from record losses and dropped it into 11th place among the world's chip sellers.
With Fairchild, National is back in the top 10 again. For $122 million, National Semi bought Fairchild's estimated $500 million in annual revenue, and leapfrogged into sixth place. The acquisition also moved National Semi to No. 1 in sales to the U.S. military and to the leading position in smaller markets for specialty chips.
But not all that National Semi got with Fairchild was welcomed. In coming months, Sporck will have to cope with the dilemmas of aging -- some say obsolete -- Fairchild technologies, the disposal of some product lines that don't mesh with National Semi's marketing strategies, conflicts of corporate cultures and, at least in the short term, the prospects of continuing financial losses.
For several years Fairchild had been a "money sump" for its former parent, Schlumberger. National Semi only returned to profitability itself in the quarter ended in June, after two years of red ink.
Already National Semi has begun to deal with the overlap in products and personnel. It sold one line of products, known as the "Clipper" chip, and in October, laid off 400 people in a consolidation of sales staffs.
Industry experts say there will have to be more cuts. Analysts believe that as many as 800 more of the combined 38,000 employes will be laid off before the consolidation is complete.
W.J. "Jerry" Sanders, chief executive of Advanced Micro Devices, who earlier this year bought another Silicon Valley chip company, predicted "there will be a lot of bodies on the streets."
"The only way Fairchild and National will work together is with violent disruptions in the organization and drastic personnel cuts," Sanders said. "I wouldn't want to preside over that bloodbath."
Sporck, described by his competitors as both a skilled and ruthless manager, may be the Silicon Valley executive best suited to make the merger work. In the stubborn semiconductor industry recession of the past two years, Sporck was one of the first to put pragmatic business responses ahead of traditional valley paternalism, laying off thousands of employes and ordering intermittent plant shutdowns.
Learning the lessons of the recession, Sporck moved his company into fields outside semiconductor manufacturing to shelter it from the cyclical swings endemic to the computer chip business.
He also recognized the vulnerability of the smaller companies that make up the American semiconductor industry, particularly in competition with Japan. National Semi's merger with Fairchild is only part of an industry trend that experts predict will continue until there are only 10 to 15 significant chip makers left in the world.
"I want to stay in this game ... I want to find ways to stop the bleeding," Sporck told an annual meeting of the Semiconductor Industry Association during the depths of the chip makers' recession. "And I am determined to do whatever it takes to succeed."
Today industry analysts are betting that he can, largely because of Fairchild. The fact that Sporck got Fairchild for what one analyst called "a ridiculously low price ... a $122 million joke" made the deal especially attractive. Many experts said they were stunned by the bargain price.
"They stole Fairchild," said In-Stat's Beedle.
Sporck's offer came late last summer after Fujitsu of Japan dropped its much higher bid in the face of political opposition in Washington. Fujitsu had offered $200 million for an 80 percent stake in Fairchild and seemed to have a clear field when no competing offers arose. In fact, there was widespread sentiment in the U.S. industry that Fairchild was a company past its prime.
Steven P. Jobs, one of the founders of Apple Computer, said bluntly that "Fairchild wasn't worth $200 million to anybody but Fujitsu," which needed a U.S. base of operations.
Sporck had criticized the Fujitsu-Fairchild deal, saying that Fairchild's purchase by a large Japanese competitor endangered an already weakened U.S. industry. He said at the time that he had no intention of bidding for Fairchild himself.
Sporck said he did not become interested in Fairchild until months after Fujitsu abandoned its attempted purchase under pressure from the Department of Commerce, the U.S. Trade Representative's Office and some Pentagon officials. The National Semi executive said his interest was piqued by a news article he read while traveling in Europe last summer -- a story speculating that a number of international chip companies were considering making offers for Fairchild.
"I figured we'd better look too," Sporck recalled, saying he didn't want to overlook an opportunity. As soon as he got home, Sporck asked his semiconductor people to examine the fit of the two companies.
It was a good time for bargain-hunters to approach Schlumberger. Investment bankers in New York and the Silicon Valley began shopping for competing offers, contacting most of the major U.S. companies. Many of the financially battered manufacturers couldn't afford Fairchild, even at bargain prices. Others didn't want it, in part because of an industry perception that Fairchild no longer had strong positions in leading-edge technology.
Sporck called that a misperception.
He said that after a close inspection of Fairchild's financial accounts and technology data "it looked even better than we originally thought."
In an interview shortly before the Fairchild takeover was formally completed, Sporck said: "We didn't know -- nor did the industry know -- how strong Fairchild was in certain important technologies. We didn't have any idea until last summer.''
Specifically, Sporck cited Fairchild's edge in three types of products. The plum, he said, could be the ''Fast'' bipolar logic chip used in high-performance computer systems. ''We see them as the strongest supplier,'' Sporck said. ''That product is winning over Texas Instruments. It gets us into the No. 1 position instantly.''
He also said that Fairchild technologies would make National Semi a top seller in growing markets for other types of logic chips. In one of those, the emitter-coupled logic chip used in supercomputers, for example, National Semi moves immediately to the No. 3 market position behind Motorola and Fujitsu, the unsuccessful Fairchild suitor.
Schlumberger accepted National Semi's $122 million bid at the end of August, and one month later the federal government said it would not oppose the deal on antitrust grounds. The sale closed Oct. 8.
Sporck and the transition team handling the merger must make some tough decisions about which operations to keep and which to shed. In addition to the $8 million it got for the Clipper line, Johnson said National Semi could reduce the total cost of the acquisition by another $25 million with the sale of other less attractive Fairchild divisions.
Sporck's acquisition of Fairchild may force National Semi to back away from some of its other ambitious programs. The company has entered into agreements to share technology and products with other chip companies, it owns a stake in two smaller companies and is exploring other possible joint ventures. Some question whether National Semi can manage them all at once.
The company's ''plate may be too full,'' said analyst George Haloulakos of Dain Bosworth Inc. in Seattle.
Sporck conceded that the merger is going to be ''a real bear.'' But he's confident that the new National Semi can still be the scrappy, fit company it was before the Fairchild purchase.
And challengers should beware: ''We intend to continue to be a successful company,'' he said. ''If somebody wants to acquire us, they'd better be ready for a fight.''