Legerity CEO and GC's Goal: Independence Day

If you haven’t heard of Legerity Inc. — one of Austin, Texas’ largest privately held semiconductor companies, with approximately 300 employees and more than 600 silicon- and system-level patents — consider this: One-third of all voice or data calls worldwide pass through Legerity integrated circuits. The company — which marks its two-year anniversary this month — supplies chips for a wide array of communications applications, ranging from voiceover broadband to public telephony to integrated voice-data. Customers include Lucent Technologies, Cisco Systems Inc., Ericsson, Alcatel, Siemens, Nokia Corp., Fujitsu, Samsung Electronics Co. and NEC Corp. Legerity spun off from Advanced Micro Devices Inc. in a $375 million leveraged buyout led by Francisco Partners, a venture firm, in August 2000, and Legerity was formed as a private company. AMD still has a 10 percent stake in Legerity. In December 2000, former Dell Computer Corp. executive Ron Van Dell was appointed Legerity’s CEO. He was subsequently named president as well. Louis A. Riley was already in-house at Legerity as intellectual property counsel and head of licensing, as part of the AMD team that had sold the communications division, when Van Dell came on board. Van Dell subsequently tapped Riley to become Legerity’s general counsel. Van Dell and Riley recently shared their insights with Texas Lawyer reporter Erica Lehrer Goldman regarding the legal challenges before them and their working relationship. Their responses have been edited for length and style. Erica Lehrer Goldman, reporter, Texas Lawyer: What did you look for when hiring a general counsel? What characteristics were most important? Ron Van Dell, CEO and president, Legerity: I consider the following to be very important traits for a general counsel: versatility; very few blind spots; close attention to detail; ability to prioritize and follow-up while juggling many balls; composure under pressure; ability to clearly articulate complex matters. TL: How do you attract and motivate your legal staff? Van Dell: As a spin-off opportunity, Legerity offers the equity upside potential of a pre-IPO company, and that can be very motivating for all Legerity staff. As a startup, we also offer developmental opportunities to address a broad set of legal and operational challenges, which often must be handled in a hands-on manner with minimal staff. TL: How much autonomy does your GC have? For instance, what role does the GC play in key business decisions? Van Dell: Louis operates with considerable autonomy — literally as much as he cares to handle. At Legerity, we have a very flat organization that puts a premium on personal initiative, self-sufficiency and accountability. In Legerity’s business decisions, Louis plays a lead role in legal/contract discussions and negotiations, and he counsels the executive team on overall legal strategy. … Louis participates as a member of our executive staff, which meets weekly to review a wide range of business issues. TL: What kinds of issues have you had to handle? Louis Riley, general counsel, Legerity: It may be easier to list the kinds of issues that have not been faced. We began our existence when we separated from AMD via a leveraged buyout. Then we immediately set up international branches and subsidiaries in 12 different countries to maintain our sales and support presence for customers. This required close coordination between Legerity’s legal, human resources and sales departments. During the tech boom of 2000, we had begun working on our S1 [a registration statement under the Securities Act of 1933] only to halt that process when the market began to decline. During the economic downturn we faced the same legal downsizing issues that many companies have endured, and we completed an additional round of funding in late 2001. Most recently, we have reached the final steps of our separation from AMD and are establishing new agreements with foundry partners to manufacture our products. This has required us to put a logistics and distribution system in place for handling shipping to distributors and customers. Establishing this system has raised issues involving everything from international trade and import-export compliance to revenue recognition for sales. Additionally, we recently announced that we are in the process of acquiring Agere’s analog linecard business. Along with these business issues, we have continued to maintain and develop an extensive intellectual property portfolio both domestically and internationally. TL: Given all that you do, how much autonomy do you feel you have? Riley: With everything going on at Legerity right now, our executive team and board are directly involved at a strategic level in deciding what needs to be done, but it is left up to me to see that it gets done. For example, let’s say the board and executive team decide that we need to establish a new international sales office in a specific country. After this decision is made, it is left to me to go make sure these things happen. I retain outside counsel, if necessary, and get the job done. Unless I need additional input or issues arise, Ron and our board expect me to deliver the finished result. GOALS AND CHALLENGES TL: What is the best thing about your job? Riley: Every day presents a new challenge. Legerity has allowed me to greatly expand my abilities as an attorney. I am in charge of all legal issues and also am part of the management team that runs the company. This makes the job interesting and challenging. TL: What did you do prior to joining Legerity and how was this experience helpful? Riley: Before I joined Legerity, I worked at AMD for about four years, and that experience was very beneficial for me professionally. That job afforded me the ability to expand my practice area beyond just intellectual property, which was what I did in private practice. … While at AMD, I was part of the team that was selling the communications division. During the spin-out process, I was asked if I would like to go with the company and serve as its intellectual property counsel and head of licensing. We discussed the lack of a general counsel and agreed that Legerity’s future CEO, when hired, would name his own general counsel. Several months after Ron joined Legerity and we began working together, I was named GC and secretary. TL: How large a legal staff does Legerity have? Riley: My administrative assistant and I represent the entire legal department. Luckily, I have a fantastic assistant who is well versed in patent law, stock options and confidentiality agreements. TL: To what degree do you rely on outside counsel? Riley: Given the small size of our legal department, I rely heavily on outside counsel. The main difficulty over the past year has been trying to rely on outside counsel while still meeting some very strict budgetary restrictions during this economic downturn. TL: What has been the company’s greatest legal challenge in the past three years? Van Dell: When Legerity spun out of its parent company in August 2000, we began a complex process of separation, which was essential to becoming a fully independent company. In addition to establishing separate IT, accounting and HR systems, we had to set up and staff new remote offices on a global basis, as well as negotiate agreements with manufacturers’ representatives and distributors both in the U.S. and overseas. Legerity also had to plan for the eventual separation from the parent company’s manufacturing operations and transitioning our process technologies (some of which are proprietary, requiring protection of our intellectual property) and wafer manufacturing to foundry partners. All of these stages of separation involved challenging contract negotiations, which had to be acceptable to all parties. TL: What are your immediate goals for the company? Van Dell: Our foremost goal is to continue building momentum in our core businesses despite the telecom industry downturn and the overall semiconductor industry slump. At the same time, we plan to leverage our analog/mixed-signal design expertise, process technologies and considerable intellectual property (more than 600 silicon- and system-level patents) to develop new IC [integrated circuit] products for the communications industry, as well as for other similar vertical markets. We are also in the preliminary process of merging with the Voice Interface Solutions business of Agere, a major communications IC supplier. Announced in June, the Agere transaction has many financial and legal dimensions, and we plan to close on the deal this quarter and begin the process of integration. TL: What are your short-term and long-term goals with regard to Legerity’s legal department? Riley: When the market comes back, I plan to grow the department, but I do not know whether a market recovery will happen in the short term or not. The most pressing issues facing Legerity … are the acquisition of the Agere linecard business and finalizing our separation from AMD. After we close on these issues, we will begin looking again at the market and a timeline for an IPO.