Q&A With Bruce Diamond, President And CEO Of WJ Communications

By Jim Pomager

When then-president and -CEO Mike Farese left WJ Communications earlier this year to pursue "other opportunities" (he ultimately ended up with Palm as senior VP of engineering), WJ's directors didn't have to look long or hard for a successor -- the ideal candidate was right under their noses. In fact, he was literally in their midst. So on June 29, they handed semiconductor industry veteran and WJ board member Bruce Diamond the strategic and operating reins of the company (see related story).

I recently had the chance to chat with the busy Diamond -- in between his jaunts around the globe to visit with WJ clients and investors. We discussed WJ's current standing in certain key markets, how Diamond plans to impact the company's standing in those markets, and how his industry experience will inform how WJ proceeds. We also talked about what he has identified as the most pressing needs of the RF industry and how WJ plans to help meet those needs.

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Please tell me a little bit about your career and, specifically, the experiences that brought you to this point -- running the show at WJ.

Well, I started out at National Semiconductor. I spent about 15 years in the analog division, and in my heart and soul I feel like I'm really an analog guy.

Then I left National to work for Anadigics. That was a tremendous opportunity for me, because it gave me the chance to get involved in the RF space. In a lot of ways, the analog and RF worlds are very similar. People often think of analog engineering as black magic, and many still have that perspective about RF. But I don't believe in magic -- it's good, solid engineering and a lot of hard work behind these products.

So I joined Anadigics as operations VP right before the boom of the late 1990s. I was only there for about two quarters before the wireless handset market really took off and the world changed. At the time, Anadigics was primarily focused on handset power amplifiers (PAs) and the cable broadband business, but it also did a little optical, too. It was a tremendous amount of fun to go through that kind of growth with a company.

One of the things we did while I was at Anadigics was open the world's first gallium arsenide (GaAs) fab. People said, "GaAs isn't silicon -- you can't run a GaAs operation like a silicon fab." Well, we changed their minds. I implemented a lot of what I had learned about running silicon wafer fabs into the Anadigics GaAs line. We saw yields go up and cycle times go down dramatically. For Ericsson, we ramped up from 10,000 pieces one week to 50,000 the next and 150,000 the week after that. I was with Anadigics for three and a half years. It was a tremendous, tremendous experience.

Then I came back to Silicon Valley. My last job prior to WJ was with ZiLOG, an 8-bit microcontroller company. Everybody has a core, in terms of the 8-bit microcontroller, but what really distinguishes a part is the peripherals that you put around it -- how you choose them, what you choose, and what applications you're going after. As it turned out, a lot of what the 8-bit guys are doing incorporates analog, a little bit of RF, and a little bit of communications. So that was a nice role for me to take on.

For the past two years, I have been on the board here at WJ. That came about through my relationship with Mike Farese, the previous CEO, whom I worked with during my days at Anadigics. Two years ago, Mike called me up and said, "How would you like to join WJ's board?" And I've been excited ever since.

What lesson learned during your diverse career will be most applicable to WJ?

The number one thing is to have a complete understanding of the systems into which your product will go. From my days doing PAs at Anadigics to my days doing motor control products at ZiLOG, I learned that if you don't understand the total system, there is no way that you will put out a very good part. Fifteen years ago, I didn't understand that. Today, I clearly understand that it's not just "how do we sell our part" but "how does our part help the overall system." It sounds pretty basic -- and it is pretty basic -- but I think a lot of people miss that.

So I want to make sure that we absolutely understand our customers' systems. Then we can identify the tradeoffs that we can help them make in terms of overall system performance or overall system cost. Once we understand that, we can decide how to make terrific parts to support those customer goals.

What would you say is the biggest milestone in WJ's history?

WJ has been in business for more than 45 years. The company grew up out of the defense industry, building primarily board-level products. About four years ago, WJ made the strategic decision to move away from board-level products and into integrated circuits. The company went through a lot of change, in terms of getting the right skill sets, the right mindset. It was trying to grow the new core competency -- in this case RFICs -- fast enough to offset what it was losing in the legacy business.

It was a difficult decision to make, but since that time, our core business has grown approximately 13% per year. I think that's a terrific start. But personally, I'd like to see more.

What would you say is WJ's greatest strength as a company?

The company has done an excellent job of identifying the product spaces and the markets in which it's going to play, especially in the wireless infrastructure area and, more recently, in the RFID area. The acquisition of Telenexus (see related story), for example, has been terrific, because that really took us up another step in terms of understanding the overall RFID system. So I give us high marks in terms of identifying the markets we want to play in and then figuring out what it is that we have to do -- or the skill sets we need -- to make sure we're successful in that market.

You've mentioned RFID and wireless infrastructure a number of times. Are these WJ's primary target markets?

First of all, I don't see RFID and wireless infrastructure as all that distinct. With both of them, what's needed is RF system understanding. If we have a core competency around RF, we can apply that competency in the wireless infrastructure market and the RFID market. Honestly, the problems we face in both of those businesses are very similar.

But to answer your original question, we have really chosen three segments: RFID, wireless infrastructure, and broadband.

How would you characterize WJ's position in those markets?

Let me go through the pieces.

In RFID, we are focusing on the readers, and I think we are absolutely well positioned for that market. What I continually hear from our customers is that our readers have a much higher hit rate -- number of tags read -- than other readers. We look at that and ask ourselves: Why is that? What is it that we are doing differently? Well, we understand the system, so we know how to put the board together, the shielding together, and the physical system together. We understand the digital signal processor (DSP) -- this is how you filter out signal-to-noise ratio, how you make sure that when you read a tag you know you're reading the right one. And we understand the antenna. I think a lot of folks are missing the importance of how the antenna interfaces with the rest of the reader.

In terms of the infrastructure, I think we are a very competent supplier with some very good products. However, I would like to see us get more products out there. Our customers are saying, "You have a great mixer here, but what we would really like is some more of your product along the signal path." So going forward -- not in the next three months, but when we look a year out -- one of the things I want to measure us on is the number of new products we have introduced in the infrastructure space. We have a tremendous number of ideas, but the issue is how to get our execution going.

On the broadband piece, I would probably describe it the same way I would the infrastructure piece. We have some successful products out there, but I would like more. I want us to have more opportunities.

Do you think that the market perceives you as stronger in one of these markets than the others?

Wall Street analysts clearly like the upside of RFID, but they are taking more of a wait-and-see attitude towards wireless infrastructure. At this point, they're not even sure what the overall growth potential for the RFID market is, but it is generally perceived to be very, very large. They don't see that same potential for wireless infrastructure. We see the wireless infrastructure market growing at probably 3% to 5% per year, and honestly, the RFID market is probably in the hundreds of percent per year as we start the ramp-up.

It seems as though new product development is a key component of your strategy for WJ. Where do you envision most of your R&D budget being spent?

The good news is that we're sitting on $37 million in cash. We have plenty of money to focus on our R&D efforts. Today, I feel very comfortable with our level of spending in RFID. So I may add a little bit more there, but it's not like I need to spend another $10 million per quarter. However, I think I will add more R&D expense on the semiconductor side to try and drive out some new products. And again, because our core competency is in RFICs, we can apply that R&D to all areas of the business.

Speaking of new products, I know only a handful have launched during your brief tenure as WJ president, but does any particular one have you excited?

We just announced the AP50X series (see related story), which is a 12-volt product. Our previous products were at 5 volts, so this new one really builds on the product line. And we are also working on a 28-volt product. These are additional steps in terms of our strategy around the RF space and, in this particular instance, the power space. So it is very nice to see the AP50X line solving some problems for folks.

What are your top three goals for WJ in the next year?

I'll repeat what I told the Street. First, I would like to introduce as many new products as possible. Second, I would like to improve the way the company operates internally, in terms of our cost structure and our cycle time and delivery time to customers. Third, I would like to continue to grow the RFID business.

On the subject of operations, you have made some significant changes to your executive team over the past few months. (See recent news about WJ appointing a new senior VP of sales and marketing, a new CFO, and a new VP of operations.) Is that part of your overall goal to improve operations?

I think it's important, as a company, to make sure you have the right talent. There are five keys to a successful business that I stole from General Electric about 20 years ago: talent, shared mindset, accountability, speed, and innovation. So for just about every problem I face, I go through that mental checklist in my head. Do we have the right talent to accomplish what we want to accomplish? Have we built a shared mindset across the company -- is everybody on the same page? Are we clear about who is accountable and who owns the problems? Are we always looking in terms of speed -- how can I do this faster, how can I get to market faster, how can I help my customers faster? And then there is innovation -- have we solved the problem in a way that gives us a leg up on the competition?

So when I looked at who we had on board here, I saw some terrific people. But some of the things we are trying to accomplish have changed, so I wanted to get in some people with slightly different skill sets to make those things happen.

When you look at the RF industry as a whole, where do you think we are, and where do we need to go?

I think we still have a long way to go in terms of wireless connectivity and in terms of mobile opportunities. So whether we're talking about Wi-Fi, WiMAX, 3G, or even 4G, there is still a tremendous amount to be done. I don't know about you, but I'm not even close to being satisfied with my mobile life, and I can't imagine how I got things done as recently as five years ago. So I think, as an industry, we have the potential for another 20 or 25 years of success, and there's probably even more after that.

So we talk about mobile connectivity, and that is going to be driven by the RF industry. There are tremendous numbers of bright, exciting people out there who are willing to try all sorts of things to drive this industry forward.

What is the biggest challenge for the industry?

Right now, I think we're in a performance-and-cost stage (not that you ever really move away from cost). In my early days at Anadigics, when we were just starting to ramp up the handset components, everything was centered on talk time. How do we get phone talk time up? So performance was way out in front of what we needed versus cost. And then, as we cleared that talk time hurdle, you saw more and more people interested in driving down the handset cost. It became a performance-and-cost perspective.

I guess if you asked me to predict the future, I would say that the pendulum will swing back toward the performance side over the next few years. Look at the 3G systems that are coming out. Look at Motorola's RAZR phone, or what's going on with the BlackBerry. Performance is becoming a key driver again.