How CEO Rich Templeton is Reinventing Texas Instruments
He's betting big on a new direction for one of the world’s leading semiconductor companies. Indications are that the wager is paying off.
Rich Templeton isn’t much one to talk about himself. But unleash him in front of Congress on the topic of American innovation, or at the latest Goldman Sachs investor conference for a technology presentation, and he’s in his element.
Learning of my quest to find out more about the man who leads Texas Instruments Inc., he adjusts his sport coat at his Dallas headquarters and jokes that the Goldman talk in January was “easy stuff” compared to this.
It’s not that Templeton isn’t personable, or knowledgeable, or that he has anything to hide. In fact his dry wit and easygoing demeanor make him instantly likeable, and he can explain the significance of semiconductors so clearly that even a child could understand. The truth is that Templeton, 53, is a savvy businessman and engineer all in one unique package. But he’d rather roll up his sleeves and get to work than talk about it.
“He’s the real deal,” says Brian Toohey, president of the Washington, D.C.-based Semiconductor Industry Association, where Templeton serves on the board. “He’s an incredible executive, incredible communicator, and he has a terrific no-nonsense, straightforward way of explaining complicated technology issues to policymakers and to anyone. He’s just an extraordinary mix of leadership and knowledge, but a terrific, humble person.”
Thoughtful and carefully spoken, Templeton has spent his entire 32-year career at TI, the past eight as president and CEO. Since taking the helm he has been steadily reshaping the semiconductor manufacturer, moving it away from other technologies to focus on analog and embedded-processing growth, all while repositioning its wireless business in the smartphone market. Under Templeton, TI has bet the farm on analog chips, which process and convert “real world” signals—sound, temperature, electricity—into the 1’s and 0’s of the digital world.
The company has its work cut out for it. On average, 13 analog chips per person are sold each year for devices found in places like your car, kitchen appliances, air conditioner, notebook, and smartphone. The chips can make medical devices like ultrasounds portable. They’re being used in intelligent thermostats that adjust to user habits and patterns, and they have vast applications for cloud computing and energy efficiencies not seen before.
The possibilities, Templeton says, seem endless. “Literally every piece of electronic equipment you have at work or home has at least one, if not multiple, analog chips,” he says. “We have a chance to sell something to every customer in the world. The number of companies that can say that are pretty limited.”
The shift in focus represents a giant leap for a company that began selling tricked-out calculators 45 years ago. That segment, which remains important because of its impact on education, accounted for less than 4 percent of the company’s $13.7 billion in revenue last year. With the $6.5 billion acquisition of Santa Clara, Calif.-based National Semiconductor in September, nearly half of TI’s business now is in the analog space.
Some critics say TI paid too much for the struggling company—a whopping 78 percent premium per-share over the closing day’s stock price. But others say if the integration of 5,600 employees and 12,000 analog products goes smoothly, TI could come to dominate the $309 billion analog market. It currently ranks third, behind Intel Corp. and Samsung Electronics Co.
Templeton says that although the final chapter on the National Semiconductor deal has yet to be written, it was a “bold, correct move” given the economy, the opportunity, and his vision for the company.
“There’s some confidence behind that,” he says. “We’re not afraid to make aggressive moves in down economies, while everybody is kind of scared and waiting out the fear of, ‘Is the sun ever going to come up again?’ We learned the lesson over time: Don’t be afraid to make moves when they make sense.
“We saw an opportunity with National Semiconductor and it was absolutely in line with this vision of the world that we have, and we thought the numbers could work. As a result, so far, so good. We’re pleased with the way the customers have responded, and pleased with the team out in California. We’re going to be focused on converting that into great results.”
Templeton isn’t alone in his optimistic outlook. Betsy Van Hees, an analyst at Wedbush Securities, likes TI over all other big companies in the semiconductor sector. The Dallas firm is well-positioned to grow starting in the second quarter, she says, because of its market-share gains in analog and the increasing silicon content in mobile devices.
“We view the consolidation of the analog sector as a considerable positive for the industry,” Van Hees says. “We believe TI made the right decision in acquiring National Semiconductor, because it increases TI’s market share, manufacturing, and sales, as well as provides TI with a greater footprint across several end markets, particularly industrials, where National has been particularly strong.”
Under Templeton and his predecessor, TI has taken an aggressive approach to buying or selling companies that don’t fit in with its emphasis on analog and embedded processors. Since 1996, TI has acquired 33 companies and divested at least 18—from defense to liquid-crystal-display operations—that were not central to this razor focus. (See story on page 53.) Many of those sales and acquisitions were completed during Tom Engibous’ tenure, which ran from 1996 to 2004. But Templeton, who served first as semiconductor group president and later as COO, shared a similar mindset with his mentor and colleague.
“Tom and I worked together well, and we really had a common view and very broad strokes of, ‘Let’s get our company into better businesses, which are analog and embedded processing today,’ ” he says. “We benefited from a great market that discovered us back in the ‘90s in the wireless business, and from not being afraid to make tradeoffs to get into better businesses.”
MoneyGram CEO Pam Patsley, who has served on TI’s board since 2004, says Templeton is willing to take measured risks based on many different perspectives—and a lot of data.
“It has been rewarding to see how he has continued to lead TI through some really challenging economic times,” she says. “He’s not afraid to make some hard decisions, but his sense of balance and fairness is right where it should be.”
Although it might seem unusual that Templeton has spent three decades at TI, he says it’s common for TI’ers (as the employees are called) to stick around for awhile. “It really is a case of a unique culture where we keep challenging people with more,” he says. “The next thing you know it’s 32 years later and you’ve enjoyed what you’ve worked on and who you’ve been able to work with.”
It didn’t take Templeton long after finishing his schooling to join that “unique culture.” One week after graduating with an electrical engineering degree from Union College in Schenectady, N.Y., in 1980, he moved to Texas to take a sales job in the semiconductor business at TI.
Growing up in a city outside Poughkeepsie, N.Y., the athletically inclined son of an IBM engineer and schoolteacher says he declared his major on “the first day of showing up” at Union College. It was there that Templeton met his future wife, Mary, a computer-science major. They lived on the same floor, became friends, and he helped her with calculus, she remembers. After they married, the couple settled down in Parker, a sprawling Collin County suburb, where they raised two sons and a daughter.
The early 1980s were a challenging time under then-chairman Mark Shepherd Jr. and president J. Fred Bucy, who was called abrasive and autocratic. TI recorded its first-ever revenue loss of $145 million in 1983, due, in part, to the recession and an unforecasted slump in demand for its home computer. The company was deemed the de facto seller of home computers, even hitting the 1 million mark in sales, but competition was heating up and, eventually, TI exited the business.
Some analysts call those the darker days for TI. But things brightened up in 1985, when Jerry Junkins was named president and CEO. Junkins is credited with loosening up the corporate culture and encouraging innovation, while helping reposition the company to better compete in the 1990s.
“We’ve learned, without exception, that whatever the CEO is like, it drifts incredibly quickly through the whole company,” says KRLD business analyst David Johnson, who has followed TI for nearly three decades. “The personality of the CEO quickly permeates the company. Junkins did an overnight turnaround. This is the group that Templeton came from, the new wave. They had a laser-like focus on [digital signal processors]; that was going to be the great new thing, and they sold all of this great technology. That’s the mold that Templeton came from.”
Junkins died of a heart attack on a business trip in 1996, quickly thrusting Engibous, a 20-year TI veteran already serving in an executive role, into the spotlight as CEO. Another TI vet, Jim Adams, was tapped as chairman.
During “those transitions when faced with such emergencies, these guys did a terrific job,” Templeton says. “The board made some wise decisions about the direction of the company and the choice of leaders.”
For 15 years Templeton worked with Engibous, who’s credited with transforming the company from a broad-based conglomerate to a semiconductor company focused on making chips for the signal-processing markets that have fed the wireless and Internet revolutions.
After years of grooming, Templeton stepped into the president and CEO roles in 2004, and was named board chairman in 2008.
It seems fitting that Templeton’s name may someday adorn a Dallas building or two, much like TI founders Cecil H. Green, Patrick E. Haggerty, John Erik Jonsson, and Eugene McDermott. For now, however, his ambitions lie elsewhere.
“It all comes down to, how well is TI run?” Templeton says. “There is no greater assessment of how well you’ve done than, ‘Do you leave the place stronger?’ A lot of my time and energy and passion goes to that. The same philosophy carries into what you do in your personal life or organizations and groups that you’re affiliated with. If you’re going to invest the time and effort, do you leave it stronger than when you arrived?”
Setting the Tone
Clearly, Templeton practices what he preaches. It isn’t every day, for example, that a CEO leads an internal United Way campaign. But Templeton has quietly taken on that role at TI for the last 10 years, garnering employee support and helping raise millions of dollars for the nonprofit. “Investing in the community that you operate in doesn’t just make sense emotionally, but there’s some pretty sound logic to it,” he says.Every year, he and Mary visit for a few hours with at least one of the agencies supported by the United Way. Last year, at the Trinity River Mission, they met a 13-year-old girl who was ready to take on the world because of the mission’s edict that she would attend college.
“Her world is changed forever,” Templeton says. “That’s when you get it out of the concept and it jumps to life pretty quickly.”
Templeton is accelerating his involvement this year as the new chairman of the United Way of Metropolitan Dallas Campaign for 2012. In February he accepted the “silver spurs” from AT&T CEO Randall Stephenson, who was the first global CEO to take on the job. The companies raised more than $4 million apiece in the 2011-12 campaign.
“Chairing the United Way [campaign] was a simple decision,” Templeton says. “It’s an important cause, we care about it as a company, and it’s our turn.”
Jennifer Sampson, CEO of United Way of Metropolitan Dallas, says Templeton is the ideal person for the post because TI has a long history of UW involvement, and he understands what it means to give back.
“Rich sets the tone within his company, and he doesn’t ask his employees to do anything he isn’t willing to do himself,” Sampson says. “He’s an engineer with a really big heart. Rich has done an extremely good job at creating a culture at TI where giving back is a priority, and he’s very passionate about it. I guarantee he will knock it out the park this year.”
Another cause close to Templeton’s heart is the promotion of science, technology, engineering and mathematics (or STEM) education. The TI Foundation has donated millions of dollars to support STEM development, including a $5 million gift last year to the Plano Independent School District to advance STEM education and help launch and develop the district’s first academy in 2013.
“The word philanthropy gets used, but I look at it more as an investment,” Templeton says. “STEM is right at the heart of what we do. A high percentage of us [at TI] are enjoying this work and what we do because we love math and science. We had a great math and science teacher or multiple teachers. [We want to] make sure kids have that same opportunity today, in what turns out to be an even more technologically demanding society. Those used-to-be-nice-to-have skills are on their way to being a baseline of skills you need to have.”
The CEO, who calls himself “an adopted Catholic,” says he and his wife understand that education initiatives strengthen society. So they’ve been big supporters of local Catholic institutions such as St. Marks Catholic School, Ursuline Academy’s French Family Science, Math and Technology Center, and John Paul II High School, where they donated $2 million for an endowment fund.
Templeton has also encouraged research and innovation in his own backyard, which will help to keep the talent pool full for years to come.
University of Texas at Dallas President David Daniel says Templeton was a driving force behind creation of the Texas Analog Center of Excellence, the first and largest international, university-based analog technology center, in 2008. The center is a $16 million collaboration among the Semiconductor Research Corp., the State of Texas through its Texas Emerging Technology Fund, The University of Texas System, UT Dallas, and TI.
“TxACE came to be because Rich was on the board for the Semiconductor Research Corp., and they agreed that analog research was important,” Daniel says. “He convinced them to create the research center at UT Dallas. It enabled us to build a significant space, attract millions of dollars of resources, start the research, and hire people.”
Daniel says Templeton is a frequent UT Dallas visitor who not only visits him, but enjoys talking to and mentoring UTD students.
TI has also been successful in the realm of work/life-friendly culture, garnering a number of awards for that over the years. This truly seems like a place where diverse employees and working families are embraced and allowed to, well, have a life.
Templeton recalls negotiating deals from behind the backstop while coaching his kids’ baseball teams. He understands that children are only young for a short time, and he doesn’t want his employees to regret missing out on activities because of work.
“If your kids are younger, and I did it with mine, and you want to coach their teams, you schedule the practices like they’re a meeting and you get out there,” he says. “You can find a way to get your work done later at night and still do that. We’ve got a good set of people who are modeling that today. The best way is if a leader is standing up and leaving at 4:30; people know that a son or daughter has ballet, baseball or whatever it is. The behavior is now modeled. I don’t know if everybody feels balanced, but they’re encouraged you’ve got to feel good at both.”
These days, with his children grown, Templeton spends about half of his time away from the office, traveling across the globe to visit with some of the company’s 90,000 customers. He’s a big believer that if you want to know what’s going on inside a big company, then spend time outside of it. And, yes, customers are sometimes surprised when the big cheese shows up for a visit. But Templeton points out that he’s not the only one checking in with the customer.
“We’ve got a lot of guys doing that,” he says. “You go around at the senior and intermediate levels; their mail arrives in Dallas, but they spend a lot of time in the world with customers. If you can’t be in touch, it’s going to be tough.”
Inside TI, he schedules regular employee roundtables to learn more about what issues are on their minds. TI has about 35,000 employees in all, 9,100 of them in North Texas. At these roundtables, Templeton says, “you get to the heart of what’s not working, quickly.”
Not surprisingly, Templeton also takes a disciplined approach to his personal fitness regime. A triathlete for 15 years, he tries to work out daily and schedules his competitions to stay on track.
“I’m a big believer if something is on your calendar, it will force you to actually stay active and be in shape,” he says. “The best part of it is training and getting ready for it. In some ways, the parallels [to business] are high. For people willing to put in the investment and the preparation, the race is the easy event.”
He counts former Dallas Cowboys quarterback and commercial real estate mogul Roger Staubach among his friends—but the two don’t
work out together. “I work out a lot, too, but I know I couldn’t keep up with him,” Staubach says. “He’s in great shape.”
Every Thanksgiving morning, Staubach hosts a flag football game in different locations around Dallas, and the Templetons always join in the friendly competition. “They’re a great family and real active in the community,” Staubach says.
Several times a year, Templeton makes the trek to Washington, D.C., for Semiconductor Industry Association board meetings, where some of the country’s most influential industry CEOs preside. He also meets with policymakers to ensure they understand the issues facing his industry.
“Rich has an incredible ability to explain our innovations as an American innovation story that is unique and credible,” says the association’s Toohey. “He’s likeable, and his straightforward way is welcome in Washington.”
Templeton’s discussions often center around the idea that America can out-innovate and out-produce—if U.S. companies are given a fair playing field on trade issues, with competitive tax structures and R&D credits, Toohey says.
The U.S. has some of the finest research universities, but Templeton is frustrated that while the best minds come here to study, employers are limited by high-tech immigration policies.
“Using a sports analogy, these are the best athletes in world. You’ve brought them, you’ve trained them, and then we get wrapped up in a dysfunctional immigration debate as opposed to literally stapling a green card to every masters or Ph.D. in engineering,” he says. “We’ve
got to get that straightened out. It’s a dangerous policy long-term.”
By attracting and keeping the best minds and encouraging U.S. companies to be global leaders, Templeton says, good things will happen here.
Although most CEOs have been busy navigating choppy economic waters, natural disasters are obviously harder to forecast. The Japanese earthquake and tsunami last March created production setbacks for TI by damaging two of its factories, cutting into first-quarter 2011 income, and affecting second-quarter growth.
Templeton says he realized two things during that time. “The first is the culture,” he says. “In moments like that, you couldn’t be more proud of the way people reacted. We had a plane heading to Japan [to TI factories in Miho and Aizu] 15 hours later with volunteers with the right expertise to go and get involved. You just watched the energy of the organization rise up.”
Secondly, the TI team was prepared. It took food, water, and other emergency supplies to the Japanese employees and their families and set up assessment and recovery operations. Wafer production resumed in Aizu within two weeks; production at Miho, which suffered more damage, resumed within a few months.
Because TI owns the 1.1 million-square-foot plant called RFAB in Richardson—it’s the first in the world to churn out analog chips on 300 millimeter, instead of 200 mm, wafers—the company was positioned to respond quickly to the crisis, taking up the production slack.
“You can’t anticipate where those problems will be, but you can design your systems to be more resilient to absorb the impact when those things happen,” Templeton says.
That’s also one of the benefits of TI’s workplace longevity, he believes.
“This is a very experienced team, and we’ve seen the ups and down,” Templeton says. “The organization is not intimidated or distracted by ups and downs. Typically you find yourself able to make the best decisions when you look through those, as opposed to staring at what’s happening here and now. There’s a great benefit of the wisdom of people working here, and the experience of time.”