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Bottoms Out Of Credence fremont, calif. -- In a surprising development, long-time Credence Systems Chairman/CEO Wilmer (Bill) Bottoms resigned last week from both positions at the automated test equipment (ATE) vendor. Bottoms' resignation occurred the day before Credence released its fourth quarter earnings, which showed a large loss. In his stead, the company named William Howard as chairman and formed a new office of the president until a new CEO is found. Howard's appointment is a permanent position, according to the company. To the office of the president, Credence appointed Dennis Wolf, its executive VP/CFO, and David Ranhoff, its executive VP. The company also launched a search to fill the vacated CEO post. "The board is looking both inside and outside," said Wolf. Neither Wolf nor Ranhoff would speculate further on his own potential candidacy. Bottoms leaves Credence after 15 years with the automated test equipment (ATE) company, mostly spent as a member of the company's board. He was elected to the ATE vendor's board in 1985 as an outside director from Patricof and Co., a venture capital firm. In 1991, following the plane crash death of Credence founder David Mees, Bottoms assumed the role of chairman. He left Patricof in July 1996 to become the full time CEO of the ATE vendor (EN, July 1, 1996). Jim Healy, who held the president/CEO post since 1995, remained president and kept a seat on the board. He would leave Credence that year to join Genus as its CEO. Healy now serves as VP of marketing and GM of Wafer Level Back End group at Livermore, Calif.-based FormFactor, Inc. Reasons as to why Bottoms departed were open to conjecture. With the market sapping everyone in the industry, it seemed unlikely to industry observers that Credence's fourth quarter caused the parting of ways. Chief executives are not usually punished by their boards when the market tanks, unless the CEO promised the board numbers he/she did not deliver. Attempts to reach Bottoms were unsuccessful. Burnout? Given Bottoms' intensity, burnout was considered a possibility. G. Dan Hutcheson, president of VLSI Research, has known Bottoms for years since the latter served as president of the semiconductor equipment group at Varian Associates in the early 1980s. Even prior to that, Hutcheson knew Bottoms at Extrion, a start-up of Peter Rose, which Varian later acquired. Hutcheson describes Bottoms as a detail-oriented manager who displays a great deal of technical brilliance. He recounted how a Sematech researcher once confided to Hutcheson that he/she never knew a manager (Bottoms) that understood technology at such a technical level. Hutcheson also recalled another example of Bottoms' character. He was attending a meeting with Credence executives in the company's boardroom. When the projector did not work, Bottoms left the room, returning shortly thereafter with a screwdriver and used it to fix the projector. "And that's Bill Bottoms," said Hutcheson. Upon taking the helm of Credence, Bottoms quickly came up to speed on the test equipment side. He displayed knowledge of basic theory to technical detail that masked his relative newness to the ATE industry. "And I think when you work like that it leads to burn out. I would not be a bit surprised if that has happened here," says Hutcheson. The New Team Day to day operations now fall on the shoulders of Ranhoff, who joined Credence in 1986, and Wolf who joined Credence in March. Both executives said they were not privy to what led to Bottoms' sudden departure. "He left for his own personal reasons," said Wolf who added that he exhibited a "tight relationship with the board," throughout his tenure and immediately prior to his departure. Regarding Howard, Credence's new chairman, Wolf and Ranhoff stress his background as a well-recognized technologist. Howard has served as a director of the company since February 1995. Prior to that, he held various management positions at Motorola between 1969 to 1987, most recently as senior VP and director of R&D. He serves on the boards of VLSI Technology, Inc., BEI Electronics, Ramtron International and Xilinx as well as several private companies. Several of these companies are Credence customers. As to the company's direction, Ranhoff said Credence would make "no change" in terms of where it is taking its products and technology. Credence was especially busy this past year unveiling two new platforms as well as a slew of new products. Credence provides a direct contrast to another ATE supplier, LTX Corp. While LTX has bet the company on a single platform brought to market this year, Credence chose to broaden its portfolio. The company will have to answer service and support questions to its varied market approach in the coming year. Ranhoff described the multiple products as "rolling out at a particularly good time," in concert with the expected return of semiconductor capital equipment purchases. The Best Of Times Credence experienced a bizarre fiscal 1998. The test gear provider "started the year with the best quarter in company's history," said Wolf. Credence supplies primarily to the subcontractor market, predominately located in Asia and in particular Taiwan. In the first half of the year the tester company benefited from a surge in capacity buys, according to Wolf. Credence recorded 88 percent growth year over year in the first half of fiscal 1998, however, the doom and gloom of the semiconductor downturn lay on the horizon. In the second half, capacity buys evaporated, "almost a complete shutdown in its business volumes" occurred, said Wolf. The industry witnessed "a reduction in capital expenditures by at least 30 percent," he added. The second half of 1998 tarnished Credence's first-half luster as the company recorded 40 percent the business it experienced in the first half. Credence "ended with what was probably the most difficult quarter of our history," observed Wolf. Credence Systems reported last week fourth quarter net sales of $22.4 million, a decrease of 68 percent from the net sales of $69.4 million in the fourth quarter of fiscal 1997. Sales for fiscal 1998 were $216.8 million, an increase of 6 percent over fiscal 1997. The net loss for the fourth quarter of fiscal 1998 was $10.7 million or 51 cents per diluted share compared to net income of $7.3 million or 32 cents per diluted share during the year-ago period. The net loss for fiscal 1998 was $26.3 million or $1.22 per diluted share compared to net income of $10.7 million or 47 per diluted share in fiscal 1997. Included in the loss in the company's recent fourth quarter are $9.4 million in special charges consisting of asset write-downs and reserves which the company recorded "due to the continued weakness in demand for the company's systems and services resulting from the slowdown in the semiconductor industry," it was said. |