Location: Boardroom, Pacific Investment Bank, San Francisco, California
Date: November 1989
Point of view: Omniscient (Focus on Jerry Sanders)
The sticky fog of the San Francisco Bay Area crashed against the huge bay windows of the forty-second floor of the Pacific Investment Bank tower. Inside the conference room, the silence was as heavy and oppressive as the weather.
Jerry Sanders, the flamboyant founder and CEO of Advanced Micro Devices, didn't have his usual aura. The Italian silk suit fell perfectly on his shoulders, his gold watch shone on his wrist, but the Hollywood showman had given way to an exhausted fighter. His features were drawn, his eyes circled by weeks of sleepless nights and accounting anxieties.
Opposite him, on the other side of a long Ceylon mahogany table, sat a court of investment bankers in dark suits. In the center, Richard Sterling, a square-jawed man with a look devoid of empathy, was flipping through AMD's financial file with the tip of his silver pen.
"The numbers are bloody, Jerry," Sterling said, finally breaking the silence in a monotone voice. "Your gross margin is collapsing. The legal costs you incur to defend yourself against Intel in the 386 processor microcode case are siphoning off your entire cash flow. Your Austin foundries are running at sixty percent capacity. »
Sanders leaned forward, resting his forearms on the table. He had to master space, show no weakness.
"It's a war of attrition, Richard. Andy Grove is trying to kill me in court because he knows he can't meet global demand on his own. I have the legal right to make these chips. I will win this case. »
"Maybe in five years," retorted another banker to Sterling's right. "But you'll be bankrupt in ten months. Intel is strangling you. Andy Grove just launched the 486 processor, and you're still trying to clone the previous generation. You've lost the technology leadership, Jerry. Wall Street knows this, and your shareholders are starting to panic. »
Sanders took the blow without batting an eyelid. It was the strict truth. Intel was locking down the PC industry with the complicity of Microsoft.
"That's exactly why I'm here," Sanders replied in a gravelly voice, imbued with the anger that had made him survive in Chicago's squalid neighborhoods. "I need a line of credit of two hundred million dollars. In the long term. I have to modernize my engraving lines and keep my production tool afloat for the next eighteen months. Give me this loan, and I guarantee that next year I will have an architecture capable of razing Intel. »
Richard Sterling stopped playing with his pen. He looked at Sanders with a cold pity, that of an undertaker estimating the size of a coffin.
"Miracle architecture? Developed in-house by your engineers who are already struggling to copy the 386? Come on, Jerry. Don't serve me the claptrap you reserve for journalists. You don't have any rabbits in your hat. »
Sanders gritted his teeth. If there was one thing he hated more than Intel, it was having to lie by omission. He had a rabbit in his hat. A cold and terrifying European rabbit named Lazare Bonaparte. The Volta architecture was the only thing that still gave him hope of surviving.
But he couldn't talk about it. If he told these complacent bankers that he intended to save his multi-billion dollar industrial empire by secretly allying himself with a twenty-three-year-old Frenchman who was developing processors in a Paris suburb... They would call security to have him interned. Secrecy was the keystone of the Trojan Horse. He had to play the role of the magnificent loser who clung to life.
"Two hundred millions, Richard. AMD's industrial tool has an intrinsic value. »
Sterling stops the dossiers.
"That classic loan is denied, Jerry. The risk committee vetoed it this morning. »
The air suddenly seemed to leave Sanders' lungs. Refused. It was the third major bank to close the door in his face in a month. Bankruptcy was no longer a worst-case scenario; It was a short-term deadline.
"Let me explain why," the investment banker continued, lowering his voice. "Our analysts have detected extremely unusual capital movements on the Santa Clara side in recent weeks. Intel has just received colossal injections of funds. We are talking about hundreds of millions of dollars. »
Sanders frowned. "Intel is making huge profits, that's normal... »
"These are not commercial profits," Sterling cut him off. "These are subsidies. State-guaranteed lines of credit, obscure R&D contracts from DARPA and the Pentagon. Washington is showering Andy Grove with public money to finance a total overhaul of his research capabilities. Intel is preparing for a major technological leap with the blessing and money of the US government. You can't fight that, Jerry. You're finished. »
The Californian wolf froze. The information had just hit him hard. The government was secretly funding Intel? Why would DARPA inject black funds into a civilian company that already dominated its market? It made no economic sense.
Unless... Unless an external threat has terrified the Pentagon to the point of forcing them to intervene.
Lazarus.
Sanders made the connection instantly. The French builder had not lied about the power of his technology. America must have found out, somehow, and it was panicking. The vice was not only financial, it was geopolitical.
Sanders' survival instinct was ignited. He had to keep his factories open. He was to be ready when Bonaparte called.
"There's always an alternative, Richard," Sanders said slowly, his eyes fixed on the banker's. "You didn't bring me here to buy me a simple coffee."
A thin carnivorous smile stretched Sterling's lips.
"That's right. The Pacific Investment Bank will not lend you two hundred million from its own funds. But we can structure a high-risk bond issue. Junk bonds. The market is fond of this kind of adrenaline. We will find the two hundred millions. »
Sterling slid a single-page document onto the mahogany table.
"But the conditions are brutal. A usurious interest rate of fourteen percent. Early repayment clauses if your income falls by more than ten percent over a quarter. And above all, warrants for convertible shares. If you don't repay, we'll take control of your board. We'll break up AMD and sell your factories to your competitors. »
Sanders looked at the sheet of paper. It wasn't a loan. It was a pact with the devil. It was like placing a loaded gun to the head of one's own company. With rates at fourteen percent, if Lazare Bonaparte's miracle product did not arrive in time, AMD would default. Sanders would lose his life's work.
The engineer from Chicago's South Side closed his eyes for a second. He thought back to the cold anger of the young Frenchman in the bar of the Drake Hotel. Survive on your own. I'll call you.
Sanders pulled his gold fountain pen from the inside pocket of his jacket.
"It's a suicide pact, Richard," the AMD CEO whispered.
"That's the price of survival, Jerry. Sign up, and the money will be in your accounts before Friday. »
With a fluid and consequential gesture, Jerry Sanders put his signature at the bottom of the page. He had just mortgaged his soul and the future of his company to buy eighteen months of respite. He had just staked his entire empire on a European promise.
Sanders stood up, buttoned up his jacket, and left the conference room without a backward glance, sinking into the San Francisco fog. The wolf was injured, the financial pack was after him, but he was still breathing. All he had to do was wait for the Trojan Horse to ring at his door.
Location: Jerry Sanders' Office, AMD Headquarters (Sunnyvale, Silicon Valley)
Date: November 1989
Point of view: Omniscient (Focus on Jerry Sanders)
The limousine ride from San Francisco to Sunnyvale, in the heart of Silicon Valley, had seemed to last forever. The light rain and persistent fog gave Highway 101 the air of a greyish purgatory.
When he finally walked through the glass doors of Advanced Micro Devices' general management, it was almost eight o'clock. The huge concrete and glass campus had been emptied of the majority of its engineers. Only a few dim lights betrayed the presence of night shifts in the test laboratories.
Jerry Sanders walked through the deserted secretaries' open space and into his vast corner office. He threw his silk jacket over the leather sofa, loosened his tie with a weary hand, and walked straight to the burl walnut bar cabinet.
He grabbed a bottle of old Pappy Van Winkle bourbon and poured a generous dose into a heavy crystal glass. He took the first sip in one gulp, feeling the familiar burn of the alcohol radiate into his chest and chase away some of the numbness that had paralyzed him since the meeting at the Pacific Investment Bank.
The CEO approached the huge bay window, glass in hand. Below, the green neon letters of the AMD logo glistened in the Californian mist.
He had just signed the conditional death warrant for his company.
High-risk bonds. Fourteen per cent interest. If the year 1990 did not bring a miracle of profitability, Wall Street bankers would take control of its board of directors. They would fire him from his own office, dismantle his factories brick by brick, and sell his remaining patents to Andy Grove for a pittance. Intel would dance on his grave.
Doubt, cold and insidious, crept into the mind of the Hollywood showman.
He had linked his destiny, his fortune and his life's work to a twenty-three-year-old French kid he met in a hotel bar in Chicago. A guy as cold as death, who claimed to have an architecture capable of making all the research and development of Silicon Valley old-fashioned. And since that handshake at the Drake Hotel at the end of the summer, radio silence has been absolute.
Sanders leaned against the cold window. Had he gone mad? Had he staked his entire empire on a European mirage? Lazare Bonaparte may have been a genius, but he was alone, on the other side of the Atlantic, facing industrial monsters who were worth tens of billions of dollars.
Suddenly, the shrill ringing of the phone on his desk startled him.
This was not the standard line of the secretariat. It was the direct, secure line, whose number was possessed only by the members of its board of directors and a handful of intimate contacts.
Sanders put down his glass of bourbon, walked to the desk, and picked up the handset with a steady hand.
"Sanders."
"Good evening, Jerry. I assume you don't mind jet lag. »
The blood of AMD's CEO ran cold. The voice at the other end of the line was calm, baritone, with that metallic intonation and that very slight French accent undetectable to the uninitiated, but unforgettable to anyone who had ever heard it.
"Lazarus... Sanders whispered, sitting heavily in his executive chair. He ran a hand over her tired face, a nervous smile stretching his lips. "I was just wondering if I hadn't dreamed of our meeting in Chicago."
"I'm not a dream, Jerry. And I am absolutely punctual. I am calling you to give you an update on the situation. How are your foundries doing? »
Sanders' survival instinct, the veneer of the Silicon Valley salesman, instantly took over. He had to show that he was keeping his end of the contract.
"They are turning, Lazarus. I have just come from a meeting with the Pacific Investment Bank. The legal war against Intel is bleeding me white, but I got a line of funding. I secured two hundred million dollars in junk bonds. It's a suicide pact, but it ensures that my factories will remain independent and operational. I bought the eighteen months of survival that you asked me to finalize your technology. The production lines are waiting for you. »
There was silence at the other end of the line. A heavy, analytical silence. The transatlantic line crackled slightly.
"That's a great job, Jerry," Lazare finally replied, his voice devoid of the slightest warmth. "And it's a significant financial sacrifice. But I fear that your timetable is already obsolete. »
Sanders' smile faded suddenly. His fingers clenched on the telephone receiver.
"What do you mean, obsolete? What are you talking about, Lazarus? We had a plan! You told me that it would take you a year, or even eighteen months, to... »
"The plan has changed," Lazarus said in a tone that would not admit of any reply. "The window of opportunity has narrowed. We are not going to wait eighteen months. If we wait, Intel will have caught up, and the Volta architecture will no longer be a revolution, but a simple competition. »
"Intel catching up? It's impossible, their engineers are skating on the... »
« Intel a triché, Jerry. »
The sentence fell like an icy cleaver in Sunnyvale's office.
"What do you mean?" asked Sanders, suddenly on the alert, immediately thinking of the investment banker's remarks a few hours earlier.
"The U.S. government has entered the game," Lazare explained, weighing each word with surgical precision, choosing to reveal only part of the truth. "The Pentagon and DARPA have just realized the threat that my company poses. They decided to save their soldier. Massive funds, government research capacity, and hidden technology transfers are being pumped into Andy Grove as we speak. They will force Intel's evolution in an artificial way to crush any foreign threat. »
Sanders opened his eyes wide. So the Wall Street rumor was true. The federal government intervened directly in the free market to lock in the American monopoly. Richard Sterling was right.
"But if the Pentagon funds them... we're dead, Lazarus," Sanders whispered, panic starting to creep through his voice. "You can't fight the U.S. defense budget. If Intel releases a next-generation architecture next year, my two hundred million will be useless. My business is going to collapse. »
"That's exactly what I'm calling for, Jerry. Breathe," commanded the calm and domineering voice of Lazarus. The former secret agent managed the American's panic like one reframes a soldier under enemy fire. "The Pentagon underestimated our lead. They believe Intel will have time to devise a response. They are mistaken. »
The AMD CEO sat up in his chair. "You... Have you accelerated? »
"I've put my software development team under martial law," Lazare said. "As we talk, in my basement, five hundred prototypes of the V-1000 processor are running in a loop. The chip is stable. The engraving is validated. The VoltaOS operating system and the V-Office office suite are in the final stages of debugging. I don't need eighteen months anymore. »
Sanders held his breath, not daring to believe it.
"How long, Lazarus?"
"I want the Volta-AMD Alliance to hit the market before the beginning of next summer," the Frenchman announced, with the coldness of a general setting the time for the assault. "I will send you the lithograph masks of the processor under diplomatic seal within four months. Prepare your engineers in Austin. Adapt your assembly lines for encapsulation. You're going to print my chips, Jerry. And I want your lawyers to prepare the contracts: Every AMD processor shipped next year will be contractually tied to our operating system. It's non-negotiable. »
Sanders felt a rush of pure adrenaline radiate down his spine. Fatigue, threats from San Francisco bankers, the weight of usurious debt... everything disappeared in a second.
The kid wasn't bluffing. The Trojan Horse was armed, and the gates of the fortress were about to open much sooner than expected. If they hit the market in the spring with a processor ten times that of Intel and an operating system that would make Microsoft archaic, AMD would not only survive: it would become the absolute master of the global silicon market.
The debt of two hundred million dollars would be nothing more than an anecdote in the history books.
Jerry Sanders got up from his chair, grabbed his glass of bourbon, and approached Sunnyvale's bay window again. He looked at the fog, his jaw contracted, his eyes shining with a new ferocity. The wolf was no longer injured. He had just smelled the blood.
"My foundries will be ready, Lazarus. I am putting my Austin factories in confidential mode tomorrow morning. Andy Grove and DARPA will not see anything coming. »
"Perfect. I will contact you for the integration of the engraving masks. Hold on, Jerry. War broke out in the spring. »
The line cut short.
Sanders stood for long minutes with the handset in his hand, listening to the monotone tone. He hung up slowly, raised the crystal to his lips, and emptied the rest of his bourbon in one gulp.
The king of Silicon Valley, Andy Grove, thought he had won the game with the secret help of Washington. He was about to close his trap on AMD. But Grove still didn't know that thousands of miles away, in the gray suburbs of Paris, a ruthless Builder had just changed the rules of the game.
Sanders burst into a deep, gravelly laugh that echoed through the deserted office.
"See you in the spring, Andy," he whispered to the California fog. "And you're going to bleed."