Casey Cowell's Modem Operandi
In 1984, Casey G. Cowell was fighting to save his fledgling modem company, U.S. Robotics Corp. He needed more semiconductors to meet orders but was stymied by an industrywide shortage. Hoping to score points, he invited an executive from Oki Semiconductor to visit USR's offices, then housed in a dingy loft on Chicago's West Side. During Cowell's presentation, a lump of plaster fell from the ceiling, bounced off the exec's head, and landed in his coffee. Cowell barely paused. After making sure his guest was O.K., he finished laying out USR's strategy--and got the needed components. Recalls John McCartney, now USR's chief operating officer: "He wouldn't let anything distract him."
With that single-mindedness, Cowell has built U.S. Robotics into one of America's hottest companies. Twenty years ago, he dropped out of grad school at the University of Rochester, where he was studying economics, to found a business with some buddies from his undergrad days at the University of Chicago. They took the name from the Isaac Asimov classic I, Robot, then tried to figure out what to manufacture. Making modems was more fluke than foresight. "I also thought biotech would be a good field, but I didn't know anything about biotech," says Cowell. "I knew something about computers."
The group set out to make a keyboard with an acoustic coupler--the forerunner of the modem--to turn a TV into a makeshift computer. The coupler was finished first, so they began selling it alone. USR's big break came when red-hot Apple Computer Inc. tapped it to make modems in the early 1980s. But in 1985, when the PC market slowed, USR edged toward bankruptcy. Then Cowell raised new money to push into the retail market. And then the Internet got hot.
Fast-forward to 1996. U.S. Robotics has nearly 6,000 employees, worldwide operations, and sales that should approach $2 billion when the fiscal year's results are announced on Nov. 4, compared with. revenues of $889.3 million in 1995 and $499.1 million in 1994. During 1995, USR's stock more than quadrupled, to a split-adjusted 43 7/8. It climbed to 100 1/2 this year before falling as low as 46 7/8 and has since recovered to the mid-60s. According to Dataquest Inc., USR had 26.2% of the $2.5 billion North American modem market in 1995, while onetime leader Hayes Microcomputer Products Inc. was No. 2 with 8.4%. USR began pushing aggressively abroad in 1989, and overseas sales are now 26% of revenues. And since 1992, it has diversified into a host of products including conference phones and electronic organizers.
AUTONOMY. Despite its market leadership, these are challenging days for USR. Cowell recently warned that core modem sales are slowing and growth is unlikely to maintain its torrid pace. Fourth-quarter earnings could well fall short of the 71 cents a share analysts expect. Rivals are coming up with new technologies, such as modems for cable-TV lines that will transmit data much more quickly than USR's phone modems. For all his success, Chairman and Chief Executive Cowell must still show that he can manage a company that's nearly doubling in size every 12 months, as new generations of modems are required almost as quickly.
Don't bet against him. So far, Cowell, 43, has proven to be the rare businessperson able to move from entrepreneur to CEO of a multibillion-dollar corporation. At the start, he used to solder parts onto base plates and lay out factory floors. Now, he focuses on long-term strategy. "It used to be that I did everything," he says. "In a sense, now I do almost nothing--nothing directly."
That may be the essence of Cowell's--and USR's--success. He has ceded responsibility to talented executives. And though he has shown himself willing to dismiss longtime executives who aren't pulling their weight, overall, his hires have thrived on autonomy.
Among them is engineer Dale Walsh, whom Cowell hired from General Datacomm Industries Inc. in 1983 to head research and development. Walsh says he took a chance on then-tiny USR mainly because Cowell promised he could run his own show. Thanks to his expertise, USR has regularly been first to market with the latest technology, despite a product cycle that lasts just 18 months. In January, when USR introduces 56-kilobit-per-second modems, which will transmit nearly twice as much data as today's 28.8-kbps modems, it will have a six-month lead on most competitors.
BIKE AND BREW. A former hockey goalie who as a teen helped his Detroit amateur team to two national championships, Cowell has always insisted on teamwork at USR. "Prima donnas," he says, "need not apply." Underscoring this attitude is a compensation system in which groups of salespeople are given "pool" goals for certain regions. All receive essentially equal bonuses based mainly on whether they hit the goal. In the same way, top managers' bonuses are based not only on their divisions' performance but also on the performance of USR as a whole.
This emphasis on pulling together inspires many, but others find it wearing. One former sales executive says supervisors would tell staffers, only half-jokingly: "If you don't come in on Saturday, don't bother coming in on Sunday."
Cowell encourages the manic pace by setting aggressive goals. In 1990, when annual sales were $56 million, he began exhorting salespeople to reach "5 by 5," meaning $500 million by 1995. Now he's aiming for "5 by 2"--$5 billion by 2000. But he has a savingly light personal touch. In the early days, he would ride a bike through USR's Skokie (Ill.) facilities, hand out beer, and chat with employees at the end of the day.
In fact, Cowell is an engaging blend of corporate titan and free spirit. He collects Harley-Davidson motorcycles and classical guitars, which he sometimes plays in his office. He's a dedicated outdoorsman who fly-fishes in Michigan and Colorado and says, "If I could do anything, I'd ride horses." His current means of transportation, a Range Rover, fits his personality perfectly, says departed Vice-President for Strategic Planning G. Christopher Coffin: "He can drive over anything in it."
Cowell's 1.59 million USR shares are currently worth about $102 million. Last January, as part of a divorce settlement, he transferred 15% of his stake, then $36 million worth, to his former wife of 14 years and sold about $44 million worth.
Despite his ability to delegate, Cowell is notoriously obsessive about details. He has been known to track down employees whose cars are straddling two spaces in the company lot and make them move them. Similarly, say insiders, he tends to focus on one piece of the business at a time and make sure things there are running well.
In 1990, to gain a scale advantage over rivals, Cowell began pushing abroad. "If there are major markets your competitors participate in and you don't, they'll grow faster and they'll attract more capital," he says. At last count, USR has approval to sell products in 27 countries. International sales have been growing more rapidly--110% in 1995--than domestic sales.
Not content, Cowell has started diversifying. In 1992, USR began selling network communications systems, used by companies such as online services to process huge numbers of calls from desktop modems. In 1995, it bought Megahertz Holding Inc., a portable-modem maker, and Palm Computing, which recently introduced the highly praised Pilot electronic organizer. In late 1995, USR started making conference phones. The goal, says Cowell, is to "leverage our investment in the underlying core technology."
Cowell offers several lessons to entrepreneurs struggling to move to the next level: Build teams and let them run the business, go global as soon as you can afford it, develop diverse product lines from key competitive strengths, and know what it means to be in charge. "You want to have veto power," he says. And for really big problems, you can always buy a Range Rover.