Can Mcc Pay The Bills?

Twelve years ago, in what remains a remarkable attempt at collaboration, 10 U.S. companies agreed to combat Japan's growing challenge in high technology by forming a privately-funded research consortium. Called Microelectronics & Computer Technology Corp.--MCC for short--the consortium promised to leverage America's lead in basic computing technologies.

Some $500 million later, Austin-based MCC has yet to live up to that expectation. Its mandate to share the fruit of risky long-term research has been diluted amid short-term commercial investments. Boeing Co. has dropped out, citing lackluster returns on its investment. Honeywell and Bellcorp have reduced funding. Others among the 92 members have criticized much of MCC's research as inconsequential. The group, whose budget has shrunk to $40 million from $65 million a few years ago, has a book value of just $5.3 million.

"DEATH BLOW?" Now, MCC faces its most severe test ever. On June 22, an Austin jury awarded $26.8 million to Carmen Burns, 55, an inventor who claimed the consortium and a company it partly owns stole trade secrets. MCC hasn't decided if it will appeal the judgment and is still negotiating with its insurance carrier over reimbursement. Burns's attorney says the insurer's liability may total $17 million. Even so, it's not clear that MCC can survive the financial hit. "This [verdict] clearly could be a killer. It could be a death blow to MCC," says retired Navy Admiral and former CIA honcho Bobby Ray Inman, MCC's founding CEO, who left in 1986.

Some investors and outsiders blame MCC's decline on Craig I. Fields, who resigned abruptly as CEO this spring. During four years in the job, he de-emphasized software research in favor of easily commercialized projects. In 1992, for instance, he launched MCC Ventures Inc., which tries to speed MCC's innovations to market by backing startups with financial, technical, and administrative support.

Although some of MCC Ventures' efforts paid off, they've left the consortium in a muddle. Some investors, frustrated by poor research results in computer architecture, software, and packaging technology, have withdrawn their funding. "It has been very difficult to transfer much of that technology to the [member] companies," says David V. Gibson, a senior research fellow at the IC2 Institute at the University of Texas who co-authored a book about MCC. Insiders say that board members finally decided that too many resources were being siphoned off by the venture and pressed for Fields's resignation. Fields didn't return calls, and MCC officials wouldn't comment.

In the meantime, though, inventor Burns sued RTB Technology Inc., a company 40%-owned by MCC Ventures. In the October, 1993, suit, he claimed that Emory Garth, his former partner and RTB's founder, had kept drawings of Burns's cube-like memory device and then teamed with MCC to market the same idea. He also claimed that MCC and RTB libeled him by suggesting he had improperly used trade secrets. The jury sided with Burns, who now says: "I feel vindicated. It's a difficult situation to have people call you a thief." Neither Garth nor his attorney could be reached for comment.

SHALLOW POCKETS. Some MCC members say they are concerned about the impact the judgment could have on the consortium. But that doesn't mean they are about to pay the bill. "I don't think that we are obligated [to help MCC]," says Terry Krinke, manager of quality and technology in manu- facturing for Computing Devices International. "We're just shareholders." Says another member: "Our only obligation to MCC is research funding, not legal."

That means MCC may be hard pressed to come up with even part of the jury award. And it will make John W. McRary's job all the tougher. McRary, formerly vice-chairman and executive vice-president of Science Applications International Corp., becomes MCC's CEO on July 18. One big challenge: restoring the morale of his research staff, which some say suffered because of Fields's abrasive management style and his reduction of funding.

That won't happen if McRary can't find cash. In the end, the consortium's future may rest on his ability to repair relations with investors--a prickly task. "I wouldn't be moving to Austin if I thought MCC had any problems that were insurmountable," he says. He may find a few, though, once he arrives.

                 MCC'S SAGA
      1982    Microelectronics & Computer Technology Corp.
              is founded in Austin with retired Navy Admiral
              Bobby Ray Inman as CEO.
      1987    Annual budget peaks at $65 million.
      1990    Craig I. Fields, former director of the Pentagon's
              Defense Advanced Research Projects Agency,
              becomes MCC's president--and CEO a year later.
      1992    Fields forms MCC Ventures Inc. to assist fledgling
              companies with financial and technical support.
      1993    Boeing drops out of the consortium, citing lacklust-
              er return on investment. Other members, among
              them Bellcorp and Honeywell, curtail MCC
      1994    Annual budget shrinks to $40 million, and re-
              search staff is down 15% from its 1988 peak. Fields
              resigns this spring. Three weeks later, a Texas jury
              finds an MCC subsidiary guilty of stealing trade
              secrets. The award: $26.8 million.
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