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This is Who We Were: In The 1990s

1995: Cell Phone Entrepreneur

Jerry D. Neal’s childhood interest in telephone communications had positioned him to be in the forefront of the cell phone revolution. Finding the capital to launch his company, RF Micro Devices, and keep it funded, was a challenge.

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Life at Home

  • Jerry D. Neal’s fascination with telephone and radio began in elementary school when he checked out of the school library a book on inventor Alexander Graham Bell.

  • The story of how the Scotsman, whose initial focus was on the deaf, transformed American communications inspired Jerry to build his own functioning telephone using coffee can lids.

  • By the time he was 11, Jerry reconstructed Guglielmo Marconi’s original experiments with the wireless telegraph and later built a primitive microphone transmitter that allowed him to create his own radio station in Greensboro, North Carolina, where he grew up.

  • With his father’s help, Jerry would load his high-stack 45 RPM record player with Conway Twitty, Brenda Lee, and the Everly Brothers, put a microphone beside the speaker and drive around the country roads to see how far the signal was reaching.

  • He also devoured a radio repair correspondence course his father had ordered, which deepened his technical understanding.

  • Bill Pratt was the general manager of Analog Devices, Jerry was a regional marketing manager reporting to Bill, and Powell Seymour was in charge of the team making the prototype parts.

  • In 1991, in the midst of a management change, Bill and Powell left Analog Devices to form their own company, RF Micro Devices, with Jerry following a short time later.

  • As part of the separation, Analog Devices agreed to give Bill the rights to the radio frequency chips he’d already developed, agreed to continue paying the rent on the lab until the lease expired, and offered to sell the equipment that Bill and Powell were using at the bargain price of $70,000, and then made Bill a loan for that amount with generous repayment provisions.

    Jerry D. Neal longed to be a vanguard in the emerging cell phone and wireless telephone communications market.

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  • The plan was for Bill and Powell to take care of design, testing, and manufacturing while Jerry took care of marketing.

  • But first, they had to raise money to launch the company.

  • Before the new company was formed, several friends and business associates had indicated they were interested in investing in the startup, but when it came time to write checks, Jerry quickly encountered a plethora of creative reasons why “now” was not the right time to invest.

  • The entire list of potential investors yielded not a single dollar, even though Analog Devices had spent $1.5 million developing the products RF Micro Devices planned to manufacture and sell.

  • Many people had recently lost money on tech stocks and were loath to consider diving into the deep end again.

  • Besides, few investors fully understood the potential commercial value of radio frequency integrated circuits.

  • Even though RF Micro Devices held the rights to chips unlike anything the market had seen, people were reluctant to invest in unexplored new technology.

  • Using his personal frequent flier points, in 1992 Jerry booked flights to California where he pitched the potential of the company, demonstrated the chips and talked numbers—potential revenues, rate of growth, size of the potential market and possible investor return.

  • Months later, still with no clear signs of success, RF Micro Devices turned to venture capital firms despite their reputations for demanding too much control, too much ownership and too little flexibility.

  • After numerous grueling sessions with venture capital firms nationwide, the three partners were told they lacked passion, needed to live in a more exciting place than Greensboro, North Carolina, to get funding, and must give up 60 percent of the company to receive $1.5 million—most of which was conditioned on hitting very aggressive benchmarks.

  • For Jerry, it was a bitter pill to swallow.

  • When a manufacturer made a better offer, Jerry turned down the venture capital offer, but then had to beg that the deal be put in place when the “white knight” financing literally disappeared into Mexico.

  • After more than a year of work, RF Micro Devices was just getting started.

  • The three partners had not taken a paycheck from RF Micro Devices in 12 months.

  • The new investors owned almost two-thirds of the company; Jerry and his two partners combined held 36 percent of the company they had conceived, built and grown.

Life at Work

  • With money in hand, a sales team was recruited and a catalog of products set.

  • Jerry Neal and RF Micro Devices had only one problem—making the chips work as promised.

  • Even though Jerry had been taught by his father to “run toward problems,” not away from them, the challenges at times appeared overwhelming.

  • RF Micro Devices had signed two customers interested in radio frequency technology—only neither wanted existing products.

  • The first, a Canadian company, wanted to manufacture wireless motion and smoke detectors and asked Jerry’s firm to provide transmitter and receiver chips.

  • They had been looking for a solution for two years and were willing to pay $185,000 in engineering fees to find a solution.

  • The second was a Japanese company based in California which needed a power amplifier for an upscale phone.

  • However, no power amplifier had ever been designed as an integrated circuit, and they were willing to pay $200,000 in engineering fees to make it happen.

  • Suddenly, company projections of $1 million in first-year revenues looked promising.

  • In reality, the path to making cell phones ubiquitous was littered with dozens of hard-fought failures alongside a handful of victories.

  • In 1978, AT&T set up the first cellular phone system in Chicago with 2,000 subscribers; three years later Motorola established a trial system in Washington and Baltimore.

  • By 1982, the Federal Communications Commission was ready to authorize commercial cellular service, mostly restricted to large cities where the huge, cumbersome “bag phones” could be serviced with towers.

  • Despite the inconveniences, by 1987 a million subscribers had signed up for the service, outstripping capacity and transmission technology.

    Two good-sized contracts helped Neal launch RF Micro Devices.

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  • Clearly, the future of wireless devices rested in digital technology in which the code of zeros and ones—which also operated computers—would convert and condense the voice signal to binary code, allowing a far greater number of calls to be transmitted over the same frequencies.

  • RF Micro Devices believed that the semiconductor gallium arsenide, which conducts electricity six times faster than silicon, represented the future of power amplifiers even though the technology had never been used in a mass-market product.

  • With one manufacturer, the price quotes were astronomically high; with another the chips failed to work.

  • Customers were becoming impatient with the little startup from North Carolina that couldn’t produce a workable prototype.

  • Meanwhile, the venture-capital firm providing $1.5 million was demanding that the company hire a chief executive officer of their choosing.

  • The staff had grown to 16—five times the size of the prior year—while revenues reached $212,000 in 1993, almost $800,000 short of the goal.

  • Two good-sized contracts helped Neal launch RF Micro Devices.

  • As Neal’s company expanded, investors wanted more say in the decision-making.

  • Just when RF Micro Devices needed new money, the company produced a working prototype that met all the criteria.

  • Success was in the air: the chip was a powerhouse with a great potential for success—a real breakthrough in technology.

  • It was Jerry’s job to tell the world through advertisements in trade magazines, speeches and hundreds of presentations.

  • Quickly it became clear that the industry didn’t believe that gallium arsenide heterojunction bipolar transistor (HBT) could be reliable or produced at a reasonable cost.

  • Most in the industry still saw it as flawed technology that only the government could afford to make work, and impractical for an integrated circuit power amplifier.

  • So Jerry began giving chip samples to everyone who inquired.

  • At the same time, the company had to return to its venture capital firm and ask for more money; the seed round of $1.5 million was spent.

  • They asked for an extra $1.75 million and got it.

  • The partners all gave up more equity in their creation, but they had little choice; they were dead in the water without new funding.

  • To tell their success story, Jerry designed an advertising campaign featuring a levitating football field around the slogan “Optimum Technology Matching,” with two-page advertisements that were headlined, “Unfortunately for Our Competition, We’ve Just Unleveled the Playing Field.”

    Neal’s creative marketing approach brought in the sales.

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  • The company then designed a second advertisement featuring a baseball that appeared to be coming straight at the reader, accompanied by the words, “The Last Thing Our Competition Sees Just Before Being Forced Out of the Box.”

  • Jerry then mailed hundreds of specially designed baseballs to prospective customers with a letter that described RF Micro Devices’ revolutionary new product.

  • And it worked.

  • AT&T signed on, ordered more than 150,000 chips, and even appeared at a press conference in Washington to promote the new technology.

  • The company was jubilant.

  • Then, just as Jerry was anticipating millions of dollars in new revenues, AT&T canceled the order, along with the phone they had planned to introduce.

  • Neal’s creative marketing approach brought in the sales.

  • Next up was Motorola, which was selling one million emergency two-way radios worldwide every year and eventually redesigned their phone around the little company’s microchip and saved $10 million a year.

  • Then came Qualcomm/Sony with its next-generation cell phone, which offered call waiting, caller identification, and call answering.

  • Qualcomm had a reputation for being tough; they proved tougher and signed a letter of intent.

  • At the same time, RF Micro Devices was running out of money—again.

  • The company’s capital needs had grown from $3 million to $5.75 million; more investors were brought in, while more equity in the company was forfeited.

  • Twelve-hour days had allowed Jerry to see his dreams coming into focus, while watching his ownership interest get smaller and smaller.

  • By October 1994, RF Micro Devices had grown to 36 employees, 45 standard products, extensive quality monitoring program boundaries, and a greatly expanded lab.

    RF Micro Devices continued to grow and to meet their own standards for quality products.

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  • As the year progressed, Motorola downsized its order, Nokia showed increased interest, Qualcomm/Sony was willing to be part of a joint advertisement, and the cell phone business was beginning to boom.

  • Business was growing at 40-50 percent a year.

  • Although few people had cell phones, most who knew about them were keen to have one.

  • System providers could not set up systems fast enough; the demand for phones, base stations and other equipment was overwhelming.

  • A maker of high-quality radar detectors, which had ordered 22,500 parts in the previous year, ordered 300,000 parts in 1995.

  • That’s when Jerry got a phone call from Motorola: the chips were failing in emergency radios that required a zero failure rate.

  • Then, another complaint: a small company in Maryland that made tiny transmitters for tracking migratory birds had also received faulty chips; trackers’ scientific studies, having lost contact with the birds, were ruined.

  • A solution had to be found immediately or the company’s entire reputation would be lost.

  • Working with Motorola, the company frantically searched for a way to troubleshoot faulty chips, only to discover that a-wire-bond was causing the problem.

  • Then, in conjunction with a Motorola vendor, RF Micro Devices began testing the chips, rejecting entire batches if a faulty wire was found.

  • In all, 40,000 chips—$184,000 worth, or 10 percent of the previous year’s sales—ended up in the dumpster.

  • As that dilemma abated, Qualcomm began increasing the pressure for delivery of its new product.

  • RF Micro Devices continued to grow and to meet their own standards for quality products.

  • Changing one aspect of a chip could increase one function while lowering another.

  • By midsummer, Qualcomm was ready to begin production, but habitually rejected RF Micro Devices’ chips as unacceptable.

  • Tension was enormously high; both companies had a great deal at stake.

    As Neal’s company expanded, investors wanted more say in the decision-making.

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  • Some meetings dissolved into screaming sessions.

  • Jerry considered working with Qualcomm “one of the most difficult challenges of my career.”

  • New pricing and new testing procedures were arranged, but frustration remained high when the foundry was unable to meet the production.

  • As production issues increased, the venture capitalists agreed to invest further, bringing their total commitment to $23.5 million.

  • As a result, the portion of the company owned by Jerry and his two partners was down from 12 percent each at the initial investment to 2.63 percent per partner.

  • The original plan, outlined by the venture capitalists, was to sell micro devices within five years and get a return on their money 10 times over.

  • But RF Micro Devices’ fantastic rate of growth had changed all that; as 1996 loomed, plans were underway to make the company publicly owned.

  • RF Micro Devices needed to meet the exploding demands of its customers without losing its reputation for quality.

Life in the Community: Greensboro, North Carolina

  • Greensboro, the third-largest city in North Carolina, was home to 223,891 residents one-third of the Piedmont Triad that embraced Greensboro–Winston-Salem–High Point, North Carolina, and counted $1 million residents.

  • In 1808, Greensboro was created around a central courthouse square in the geographical center of the county, a location more easily reached by the majority of the county’s citizens.

  • The city was named for Major General Nathanael Greene, commander of the American forces at the Battle of Guilford Court House on March 15, 1781.

  • Although the Americans lost the battle, Greene’s forces inflicted such heavy casualties on the British Army that Lord Cornwallis chose to pull his battered army out of North Carolina and into Virginia.

    White Oak Cotton Mill in Greensboro, N.C.

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  • This decision allowed a combined force of American and French troops to trap Cornwallis at Yorktown, Virginia, where the British were forced to surrender on October 19, 1781, thus ending the military phase of the American Revolution.

  • In the early 1840s, after Greensboro was linked to a new railroad line, the community grew substantially in size and soon became known as the “Gate City” due to its role as a transportation hub for the state.

  • The railroads transported goods to and from textile mills, which grew up with their own mill villages around the city.

  • In the 1890s, the city continued to attract attention from northern industrialists, including Moses and Ceasar Cone White Oak Cotton Mill in Greensboro, N.C.

  • The Cone brothers established large-scale textile plants, changing Greensboro from a village to a city within a decade.

  • By 1900, Greensboro was considered a center of the Southern textile industry, with large factories producing denim, flannel and overalls.

  • During the twentieth century, Greensboro continued to expand in wealth and population.

  • The city remained a major textile headquarters with the main offices of Cone, Burlington Industries, Galey & Lord, Unifi, and VF Corporation, which sold Wrangler, Lee, North Face and Nautica.

  • Other industries became established in the city, including Vicks Chemical Company, maker of over-the-counter cold remedies such as VapoRub and NyQuil; Carolina Steel Corporation; and Pomona Terra Cotta Works.

  • On February 1, 1960, four black college students from North Carolina Agricultural and Technical College sat down at an all-white Woolworth’s lunch counter and refused to leave after they were denied service.

  • Hundreds of others soon joined in this sit-in, which lasted several months.

  • Similar protests quickly spread across the South, ultimately leading to the desegregation of Woolworth’s and other chains.

    Wireless tower in Nome, Alaska, 1916.

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Citation Types

Type
Format
MLA 9th
"1995: Cell Phone Entrepreneur." This is Who We Were: In The 1990s, edited by Scott Derks, Salem Press, 2017. Salem Online, online.salempress.com/articleDetails.do?articleName=GH90_0015.
APA 7th
1995: Cell Phone Entrepreneur. This is Who We Were: In The 1990s, In S. Derks (Ed.), Salem Press, 2017. Salem Online, online.salempress.com/articleDetails.do?articleName=GH90_0015.
CMOS 17th
"1995: Cell Phone Entrepreneur." This is Who We Were: In The 1990s, Edited by Scott Derks. Salem Press, 2017. Salem Online, online.salempress.com/articleDetails.do?articleName=GH90_0015.