Disclosure

"Austin?"

"I mean, the sale of the Austin facility."

"I see," Sanders said. So it was true.

"As you know, Meredith Johnson has taken an early and strong position in favor of the sale," Conley said. "It was one of the first recommendations she gave us, in the early stages of shaping this deal. Marden’s worried about cash flow after the acquisition; the deal’s going to add debt, and he’s worried about funding high-tech development. Johnson thought we could ease the debt load by selling off Austin. But

I don’t feel myself competent to judge the pros and cons on this. I was wondering what your view was."

"On a sale of the Austin plant?"

"Yes. Apparently there’s tentative interest from both Hitachi and Motorola. So it’s quite possible that it could be liquidated quickly. I think that’s what Meredith has in mind. Has she discussed it with you?"

"No," Sanders said.

"She probably has a lot of ground to cover, settling in to her new job," Conley said. He was watching Sanders carefully as he spoke. "What do you think about a sale?"

Sanders said, "I don’t see a compelling reason for it."

"Apart from cash-flow issues, I think her argument is that manufacturing cellular phones has become a mature business," Conley said. "As a technology, it’s gone through its exponential growth phase, and it’s now approaching a commodity. The high profits are gone. From now on, there will be only incremental sales increases, against increasing severe foreign competition. So, telephones aren’t likely to represent a major income source in the future. And of course there’s the question of whether we should be manufacturing in the States at all. A lot of DigiCom’s manufacturing is already offshore."

"That’s all true," Sanders said. "But it’s beside the point. First of all, cellular phones may be reaching market saturation, but the general field of wireless communications is still in its infancy. We’re going to see more and more wireless office nets and wireless field links in the future. So the market is still expanding, even if telephony is not. Second, I would argue that wireless is a major part of our company’s future interest, and one way to stay competitive is to continue to make products and sell them. That forces you to maintain contact with your customer base, to keep knowledgeable about their future interests. I wouldn’t opt out now. If Motorola and Hitachi see a business there, why don’t we? Third, I think that we have an obligationasocial obligation, if you will-to keep high-paying skilled jobs in the U.S. Other countries don’t export good jobs. Why should we? Each of our offshore manufacturing decisions has been made for a specific reason, and, personally, I hope we start to move them back here. Because there are many hidden costs in offshore fabrication. But most important of all, even though we are primarily a development unit here making new products-we need manufacturing. If there’s anything that the last twenty years has shown us, it’s that design and manufacturing are all one process. You start splitting off the design engineers from the manufacturing guys and you’ll end up with bad design. You’ll end up with General Motors."

He paused. There was a brief silence. Sanders hadn’t intended to speak so strongly; it just came out. But Conley just nodded thoughtfully. "So you believe selling Austin would hurt the development unit."

"No question about it. In the end, manufacturing is a discipline."

Conley shifted in his seat. "How do you think Meredith Johnson feels on these issues?"

"I don’t know."

"Because you see, all this raises a related question," Conley said. "Having to do with executive judgment. To be frank, I’ve heard some rumblings in the division about her appointment. In terms of whether she really has a good enough grasp of the issues to run a technical division."

Sanders spread his hands. "I don’t feel I can say anything."

"I’m not asking you to," Conley said. "I gather she has Garvin’s support."

"Yes, she does."

"And that’s fine with us. But you know what I’m driving at," Conley said. "The classic problem in acquisitions is that the acquiring company doesn’t really understand what they are buying, and they kill the goose that lays the golden egg. They don’t intend to; but they do. They destroy the very thing they want to acquire. I’m concerned that Conley-White not make a mistake like that."

"Uh-huh."

`Just between us. If this issue comes up in the meeting tomorrow, would you take the position you just took?"

"Against Johnson?" Sanders shrugged. "That could be difficult." He was thinking that he probably wouldn’t be at the meeting tomorrow. But he couldn’t say that to Conley.

"Well." Conley extended his hand. "Thanks for your candor. I appreciate it." He turned to go. "One last thing. It’d be very helpful if we had a handle on the Twinkle drive problem by tomorrow."

"I know it," Sanders said. "Believe me, we’re working on it."

Good."

Conley turned, and left. Cindy came in. "How are you today?"

Nervous."

"What do you need me to do?" "Pull the data on the Twinkle drives. I want copies of everything I took Meredith Monday night." "It’s on your desk." He scooped up a stack of folders. On top was a small DAT cartridge. "What’s this?" "That’s your video link with Arthur from Monday." He shrugged, and dropped it in his briefcase. Cindy said, "Anything else?" "No." He glanced at his watch. "I’m late." "Good luck, Tom," she said. He thanked her and left the office.