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GOLDSEA 100
No. 7: John Tu & David Sun
Kingston Technology Inc
f anyone can be said to deserve spectacular business success, it would be John Tu. In August of 1996 when he and partner David Sun sold an 80% stake in Kingston Technology to Masayoshi Son's Softbank for $1.5 billion, they spent $100 million of it on lavish bonuses for their employees, with the average bonus exceeding $100,000.
That generosity may owe to Tu's belief that success in Kingston's business of designing and selling memory modules and other PC add-ons depended more on the positive attitude of its employees than on engineering. "We are a service company," he insisted during Kingston's heyday in early 1996. "There's no technology involved."
That philosphy served Kingston remarkably after its 1987 startup. During a magical decade, sales skyrocketed from zero to over $2 billion in annual sales for 1996, 6% of the global market for memory chips. Then, less than six months after the sale to Softbank, the bottom dropped out. For 1997 Kingston managed barely half of prior year sales as unit prices halved, then quartered in the space of about a year and a half. A 32-megabyte memory module that sold at retail for $1,200 in late 1995 was selling for $260 by mid-1997. The advantage Kingston had once enjoyed of being able to secure a ready supply of chips has completely disappeared. A global glut put a premium on price-cutting and several competitors beat Kingston to the punch
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Kingston suffered another brutal year in 1998, losing more revenues to competition and plummeting unit prices -- along with much of the rest of the PC industry. Precise figures aren't available, but revenues are estimated to be $640 million, with $10 million net income thanks to drastic cost-cutting measures. Also suffering cuts is Kingston's workforce which peaked in early1997 at about 660.
John Tu was born in 1941 in Chungking, China. His father was the Nationalist government's Minister of Culture and his mother was a stage actress. The family fled to Taiwan in 1949. John was a troubled student who rebelled against the perceived hypocrisy of his high school teachers. By way of giving their son another chance to make good, his parents sent him to Germany to live with an uncle who owned a Chinese restaurant. After a brief stay Tu fled. With the help of a kindly priest, he enrolled in a church-sponsored school where he learned enough German to start an engineering apprenticeship.
He and his first wife, a former flight attendant, immigrated to the U.S. and opened a gift shop in Scottsdale, Arizona. Several years later he sold it at a tidy profit and moved out to Los Angeles in the late 1970s where he met David Sun. Together they started a computer component maker called Camminton and sold it before founding Kingston Technology. Tu and Sun jointly retain a 20% stake in Kingston.
| "We are a service company. There's no technology involved." |