Eric Benhamou & the Turnaround of 3Com (Part 9)

SM: One question about your managing the board during that difficult period. What did you learn from that process, and how did the board react positively, negatively, especially looking back today? EB: It was very gutsy on the part of the board to ask me to take the lead on this company. I had never done this before, I was a young punk who understood how networks worked. They basically bet on a technologist who would lead this company that was in trouble because of a business mistake.

SM: Who was the person on the board that made that decision? EB: It was Jim Barksdale. He was on my board at Bridge, and he carried over to 3Com. When the board came to the conclusion they should have a CEO change, he advocated that I should be selected. He has been a great friend for decades now, but at the time Jim had immense common sense, and realized that this industry for many years would be technology driven.

Jim knows how to build products. What the company needed was a new vision and someone who could deliver good products to the market. These were things I knew how to do. For the rest, I knew enough about managing teams and growing teams, and I would just surround myself and defer to my CFO on matters on which I did not yet understand.

Of course, the board had to play this out. I made a few mistakes between 1990 and 1992, for example, in my first earnings call I said that I was not sure what our earnings would be but if I were you I would be very cautious. With my first earning call we lost 20% market value. Nobody told me you should never say cautious when doing earning calls, which is a signal that we had absolutely no idea what we were doing. This was a public company.

My board did not really coach me; they figured it was best I learned on my own. I had not even prepared my script. I figured it was just a conference call with a bunch of investors. I did not realize exactly what this game was about until someone explained to me you are supposed to create shareholder value not destroy it. I had the general notion, but I did not realize how sensitive the market was.

SM: Your background was building things, Wall Street is about day trading, so it is a completely different phyche. There are people trying to drop the share price and pick up on the rise. EB: I did not realize how sensitive a stock price could be to the words a CEO says, and how he says them. I was much more positive on my second call.

I have now done over 70 and hope to never do them again. 1992 was really the true business restart of the company. We started growing revenues in 1992 on the strengths of new products. It became profitable again, and a fascinating ride since. The company grew about 15 fold in a decade, in terms of revenues.

[to be continued]

[Part 8]
[Part 7]
[Part 6]
[Part 5]
[Part 4]
[Part 3]
[Part 2]
[Part 1]

This segment is part 9 in the series : Eric Benhamou & the Turnaround of 3Com
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