Part 1: New Leadership for a Company in Denial

Marvell’s Humble Beginnings As A Family Business 

Marvell Technology Group was founded in 1995 by the dynamic husband and wife duo Sehat Sutardja and Weili Dai, and Sutardja’s brother Pantas Sutardja. Of Chinese Indonesian origin, Sehat Sutardja developed an interest in electronics from an early age, becoming a certified radio repair technician at 13. He studied electrical engineering at Iowa State University, and later completed his PhD at UC Berkeley, where he and Dai met in 1983. Born in Shanghai, Dai moved to San Francisco with her family as a teenager, and then studied computer science at UC Berkeley.

Sutardja and Dai teamed up with Sutardja’s brother, Pantas Sutardja, also a student at UC Berkeley. The three of them bootstrapped the company with a $350,000 investment from their families, which they used to hire four engineers, while not paying themselves for some time. In its early years, Marvell focused on supplying chips to the storage market, selling to customers like Samsung, Seagate, Hitachi, Fujitsu, and Toshiba. Later, the company applied its technology to the high-speed communications market. 

In 2000, the company went public with a market cap of $1.2 billion. In January 2014, Pantas Sutardja left the company. By 2016, the company had over 7,000 employees across 13 offices worldwide, ranging from Santa Clara, California, to Israel, China, and Singapore, generating yearly net revenues of $2.6 billion.

In a 2014 Forbes article, Dai attributed Marvell’s success to its invention and innovation capabilities, which allowed the company to stay one step ahead of the fast-moving semiconductor business. Indeed, Sutardja had 360 patents in his name, indicating how personally involved he was in the technology— a rare undertaking for a CEO of a public company of Marvell’s size. While Sutardja focused on the technology, Dai noted in the interview: 

A Company In Denial

From bootstrapped start-up to a 7,000-person public company, what Sutardja and Dai had achieved in twenty years was remarkable. In the period from 2014 to 2016, however, their leadership would fall into question as consecutive misjudgments revealed cracks in the company’s foundations. 

In late 2014, Marvell experienced a substantial decline in customer demand across its core product markets, resulting in the company missing its revenue guidance for 2015. In parallel, Marvell had been fighting a lawsuit for patent infringement with Carnegie Mellon University; which after losing a jury verdict in 2012, Marvell settled for $750 million. In September 2015, Marvell’s audit committee announced it would investigate the company’s revenue accounting practices; in October Marvell’s external auditor resigned. In December, Marvell disclosed it was under investigation by the SEC. 

News reports at the time detailed the findings. The two investigations revealed how Marvell’s senior management had orchestrated efforts that pulled in sales scheduled for future quarters to mask declining sales and avoid missing its public guidance targets. The SEC investigation described how management placed significant pressure on the sales teams to push customers to accept products earlier than scheduled, while also setting non-realistic sales targets that were developed without consideration for customers’ needs. 

The final straw, arguably, occurred when activist investor Peter Feld of Starboard Value disclosed a meaningful stake in the company in early 2016. Following the internal audit committee’s investigation, the board terminated Sutardja and Dai’s positions. Simultaneously, it reached an agreement with Starboard to add five new seats to the board, and search for a new CEO.

Behind the scenes, Feld had approached semiconductor veteran Rick Hill in late 2015. Feld had identified Marvell as an undervalued stock, and wanted Hill to get involved. Hill’s immediate response, having followed the company’s troubles closely was “No way.”

Upon further convincing from Feld, Hill requested the chance to interview the management and board of Marvell. He quickly found that the company was “in denial.”

In April 2016, Hill was appointed to the board as one of the five new seats. One month later he was appointed chairman of the board and interim CEO. 

Beginning in September 2015 as a result of the resignation of its auditor and the investigations, Marvell had missed a number of financial filings. With the company unable to report its financial results on time, Hill knew he had to solve this matter first if he was ever to hire a full-time CEO.

From Baseball To Football Team

Hill needed a team to help turn the company’s culture around, while instituting the processes and controls needed to run  a public company. 

Hill believed that until now Marvell had operated like a baseball team, but now it needed to operate like a football team. 

According to Hill, in a baseball team, every player knows their position, and only their position. In a football team, on the other hand, every player knows their position, but they also know all the other positions. An example of this was Hill’s belief that every person in a business needed to be fluent in finance, because ultimately every business decision would affect the company’s bottom line.

Hill thus looked to the outside for “football players.” Hill brought in a number of seasoned executives, including Chris Koopmans as EVP for sales and marketing, Andy Micallef to run operations, and Mitch Gaynor as chief administration and legal officer. Next, he needed to find a CEO who would be able to execute the needed turnaround—and convince them to join.

Having outlined his search criteria, Hill eventually met with Matt Murphy. Thirty minutes later, Hill reached out to Feld to say they’d found the right person. Murphy had some hesitation around joining at that point in time as he would have to sign off on the company’s financial fillings following the audit, despite having had little involvement in that period in the company’s timeline. Hill agreed to provide the sign-off instead, as it was important to him that Murphy felt comfortable. Murphy felt he could trust Hill, and came on board in June 2016.

Murphy’s first decisions were to bring in trusted executive Dan Christman and appoint Jean Hu as CFO, someone who had been shortlisted by Hill as a potential candidate. Together, the newly-formed executive team would pave the way for the company’s turnaround. Hill noted in 2020, “One of the things I’m most proud of is that the team I brought in at that time are all still there today.”