BusinessDallas The Mentor

VIN PROTHRO SHOULD BE A CONFLICTED MAN. HE HAS TWO PERSON-alities in his head. One is Prothro the structured engineer, the man who likes to deal in equations and certainties. Someone who is careful, coolly rational, and objective. Then there’s Prothro the entrepreneur, the man who is prone to bouts of creativity and risk-taking. Someone who is comfortable with uncertainty, who plunges into product launches, who sees opportunities and seizes them.

Apparently, over the years the two distinct sides of Vin Prothro’s brain have met, reconciled, and figured out how to accommodate one another. Together, they have managed to make Prothro into one of the most successful–and respected-business leaders in Dallas.

But this unique combination-cautious risk-taker-has turned Prothro into something more than a successful businessman and civic leader. According to nearunanimous reports from the Dallas technology community. Vin Prothro is one of the city’s great mentors and a major reason for Dallas’ recent surge into a leadership position in the new Internet-driven economy. In the course of a series of interviews with Dallas entrepreneurs in the electronics and telecommunications sectors, Prothro’s name popped up repeatedly. The comments, which came unbidden, were always the same: how he counseled the entrepreneur, gave time, warned of problems. From these interviews and the prophet-like status accorded him by his acolytes, it seems Vin Prothro is creating a legacy much richer than the boards he chairs, the civic committees he leads, and the foundations he funds.



VIN PROTHRO HAS BEEN DESCRIBED TO ME AS A MELLOW sort of guy. But on the 16th birthday of his brainchild. Dallas Semiconductor, when he came out to retrieve me from the reception room, he was slightly harried from what apparently had already been a hectic morning. As we sat down at the round table in his office, I couldn’t help but be attracted to the sight-over his right shoulder on an enormous monitor-of a screen saver proudly displaying his two dolled-up granddaughters. On his desk is a picture of his high school sweetheart. Caren, whom he married right out of college. In this relaxed atmosphere, 1 can easily see why so many would feet so comfortable using this office as a confessional, unloading their burdens, and asking-if not absolution-at least for a little direction.

As for the counsel he dispenses, Prothro softly preaches his own gospel of business, which he drives into the heads of the young disciples who come to hear it.

The First Commandment: Offer no product that is. or ever could become, a commodity.

The Second Commandment; Have a broad base of products. To prove that he practices what he preaches, Prothro is quick to point out that Dallas Semiconductor is a product-driven company, rather than a technology-driven one, and that it actively follows the leading edge, rather than pushing it, unlike most of its competitors. This enables him to concentrate on his strength. which is product diversity.

The Third Commandment: Have an even broader base of customers.

The Fourth Commandment: Manage your growth. Dallas Semiconductor has avoided the kind of explosive growth that balloons up one year, only to burst the next. Instead, he manages for steady product expansion and consistent profit growth. “I’m a big believer in getting the strategy right and making the company profitable. If you do that, you’ll be successful.” Since its inception in 1984, the company has only experienced one losing year, 1998. and even those losses were minor. The rebound in 1999 produced the best year yet: Net sales were up 15 percent to $392.4 million, and net income increased 23 percent to $68.3 million. In late January the company announced a two-for-one stock split and a 30 percent increase in its dividend on a pre-split basis. Ever on the lookout to make his shareholders money. Prothro explains in his sensible way, “I’m very much a cash-flow-and-profits person.”



VIN PROTHRO GOT HIS MANAGEMENT RELIGION FROM HIS experience at Mostek, the high-tech high-flyer that crashed and burned in the mid-1980s. He was president from 1977 to 1981 and stepped into the CEO’s slot for one year before following predecessor L.J. Sevin out the door. Founded in 1969 by a group of refugees from Texas Instruments, Mostek was an early pioneer in computer chips. By 1980 Mostek was unbelievably profitable with sales of $360 million, supplying 22 percent of the world’s market. Just one year later, sales plunged to $200 million, and in one quarter in 1981, Mostek lost more money than it had made in 13 years. Mostek was a one-horse company, and its horse had just died.

United Technologies swooped in on Mostek in 1980 and infused some S600 million into the company, but to no avail. When the Japanese entered the market overnight, chips changed from a leading-edge technology to a cheap and simple commodity. Mostek’s product went from selling 40 million at $6 each in 1980 to selling 44miIlionatalowpriceof$.75 and an averageof$l in 1981. Worse, Mostek’s lead product accounted for 70 percent of sales, and even worse than that, the business was split among only five customers. Mostek was the right company in the right place at the right time, but its business strategy took an Uzi and blew its own feet off. Prothro’s experience with Mostek was the business equivalent of being struck by lightning on the road to Damascus.



These lessons, once learned, are unlikely to be forgotten. Compare Mostek to Dallas Semiconducior today: Its largest product makes up only five-to-seven percent of revenues, and its largest customer produces only rive percent of revenues. Dallas Semiconductor’s top 25 customers only account for 28 percent of total revenues. Even a quiet and modest man like Prothro can become quite the evangelist when warning others of the snares into which an entrepreneur can fall. Add to the personality mix a slight pedagogical penchant, and a first-class mentor is born.

As for the scores of young people who have tripped through his office, Prothro says he understands youthful confusion because, when he went off to Stanford as a freshman, he hadn’t the vaguest idea what engineering was about.

“The only engineers we knew drove the trains through Wichita Falls. I knew I was interested in how things moved and how they worked, but that’s about it.” Prothro says. “I talk to people about where to go to school, what courses to take, and what to major in. It keeps me in touch with what younger people have on their minds.”

Take Lee Blaylock. for example, who last year launched Servicelane.com, an online connection for customers to service providers. A childhood friend of Prothro’s son, Blaylock felt a familial connection to Prothro and had no reservations turning to him for help. “When my dad died. I needed a compass, and I wrote Vin a letter-even though we had been out of touch for ten years-asking if he’d spend some time with me. We met in 199 Land his advice ranged from where I should go to grad school to what I should do in my personal life,” Blaylock said. “For the last several months, I’ve been looking to him much more often for advice like what institutional investors are looking for and how to position my company.”

Prothro takes the tough-love approach, saying he is more than willing to serve as a friend and advisor, but the student has to be willing to fly on his own. That’s just fine with Blaylock, who says he’s just in it for the free advice anyway. “Vin has been an entrepreneur, and he’s been successful at it. He knows other entrepreneurs are worth spending time with,” Blaylock said. “If I’m successful, I’d like to do the same thing for somebody else.”

Dan Routman was tired and unhappy when looking to get out of the law game in the early 1990s. Though he had a lucrative career at Baker & BottS, Routman wanted to switch gears. He says his father-in-law, Roger Horchow, told him to put Prothro on the top of his list of advisors. “I talked to dozens of people, including Mort Meyerson. Ross Perot, and Richard Rainwater,”Routman said, “and Vin gave me the best advice, which was to find a field that you love.” Routman got a job four years ago at a company known as AudioNet and rode the Broadcast.com wave into Yahoo!, where he now sits as the senior director of business development. He says he could not have had a better time in the past four years, a pleasure he attributes to Prothro. “I always tell Vin that I could never repay him for his time and advice, so I will do it by helping other people. I’ll always meet with people when they contact me and make calls for them to get them into other places if I can, just like Vin did for me,” Routman says.

Michael Malakoff was another young attorney yearning for a career change when Prothro nudged him into the MBA program at SMU. He went to work at Big Theory, an Internet solutions firm. Earlier this year. Big Theory was bought by New York-based Exceed Inc.. and Malakoff is king of the roost with the title of co-managing director. “He’s a great guy to talk to because just hearing his story is instructive, professionally and personally,” Malakoff says.

Gordon Hoffman was at Mostek when it all hit the fan in the early 1980s. He’s now semiretired in Portland, serving as director of technology commercialization at the Oregon Graduate Institute. He says he is connected to Vin everyday-when he runs.

“The 1970s were a time when nobody was running. Vin gave me a membership to the Cooper Clinic and started me running, and I never quit,” Hoffman says. But that’s not all he remembers of Prothro. “He invented the open-door style of management before Peters could write about it,” he said. “He gave chances to all kinds of people. He’d make a department manager out of a technician. And even when we didn’t see eye-to-eye. we shook hands, and that doesn’t happen often in this world.”



WHILE OTHERS WILL TALK ABOUT PROTHRO AT LENGTH and with sincere appreciation for what he’s done for them. Prothro is reluctant to talk about himself. Most CEOs tend to be wary that a visiting reporter may write something bad about them, but Prothro seems genuinely abashed that a magazine may be writing something good about him. He treats a question about his company’s prospects with customary prudence: “1 look only at the coming year. Wall Street is very unforgiving, and nobody cares who won last year’s Super Bowl. So this year, we should be approaching the $500 million revenue mark, which is a milestone for us-but mainly. I look to maintain the profitability.”

But he can’t help one moment of animation when describing the new postage product on the market. E-stamp. Dallas Semiconductor designs the chip that allows consumers to print their own postage from a personal printer. And that has Prothro excited, maybe because he can finally point to a product he manufactures that normal people can actually understand. Like a proud father bringing out the baby pictures, he shows off a software kit. “This stamp has the full faith and credit of the United States government behind it, just like the dollar bill.”

Only after he has explained E-stamp and pondered aloud whether we’ll soon be printing twenty-dollar bills from our computers does Prothro return to the subject of his role as a mentor. Ever concise, he boils down his message to three points.

One, never be afraid to fail. “I learned far more from 15 months of collapsing prices than I did from 13 years of rising sales.”

Two. have fun in anything you do. “One of the most humbling times for me is at our Christmas party, when 1 have to stop and think how many pairs of Nikes, how many car payments, how many house payments, how many day care and school tuitions I’m responsible for. If I’m not having fun, it would be too much.”

Three, don’t be afraid to move on. “People will periodically come in here and want to leave Dallas Semiconductor. What can I say? I left Texas Instruments and Mostek and look where I am now.”