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JULY 21, 2000 VOL. 26 NO. 28 | SEARCH ASIAWEEK Making Good in Silicon Valley A Filipino computer whiz links up with iAyala By PENNY CRISP and ANTONIO LOPEZ Manila While training to be a pilot with Phil-ippine Airlines, Diosdado "Dado" Banatao had to take a psychological test. The verdict: obsessive-compulsive. This goes some way toward explaining why the 54-year-old is now ac-knowledged as one of Silicon Valley's best-known and most successful entrepreneurs, and a visionary in the PC industry. "Hard work," snaps Banatao when queried about the recipe for his rise. "I believe, like Edison, that genius is 95% perspiration and 5% genius." It's a simple equation, but few would doubt that Banatao knows what he is talking about. As a kid in the Philippine town of Iguig, at the northern tip of Luzon, he walked threadbare to school along dirt roads. But as an engineer-businessman-cum-inventor, Banatao travels by a personal jet for business and a Porsche or two for pleasure. "He is richer than Ayala [Manila's oldest business family]," reckons Francisco Nemenzo, president of the University of the Philippines, which is harnessing Banatao's talents and connections to develop its own cyberpark. That's a big call, given that the president of seven-generation-old Ayala Corp. is rated the country's richest man after Lucio Tan, with a family fortune estimated at $1 billion. Bank balances aside, "Dado has a tremendous mind," says Ayala chief Jaime Augusto Zobel de Ayala, who has recruited Banatao as a venture partner for iAyala. In this role, Banatao will help oversee the group's foray into information technology and various Internet businesses. "He has a voice out there in Silicon Valley where a lot of things are happening," adds Zobel. "We thought a mix of the two of us together is a good combination." In fact, Banatao has proven to be a good mix all by himself. As a scientist, he has a strong grasp of the three major technologies necessary for the cyber age: the design and manufacture of chips, which are the brains of computing, cellphones, data servers and the Internet; the transmission of vast amounts of data reliably and cheaply at high speed; and global positioning systems. His latest market move involved one of the 18 companies in which he owns a stake, Bermuda-based Marvell Technology. Marvell made its Nasdaq debut on June 27 at $15 a share -- and closed more than 300% higher on the first day of trading. By July 11 the maker of integrated circuits for broadband networks was trading at $48, bringing its market value to $3.8 billion. Marvell is one of just 18 Nasdaq IPOs in the past year to pop to more than 300% on the first day, and 11 of those stocks have now at least halved. As well, almost all of those listings were made before the abrupt Nasdaq sell-off in late March. Says Banatao: "Most of what I do now is incubating and funding companies." Of course, it also helps that Marvell -- already profitable -- owns the Ethernet controller chip, which Banatao invented. After graduating cum laude in electrical engineering at Manila's Mapua Institute of Technology, he decided to go out on a limb and begin training as a pilot. That was interrupted when Boeing recruited him as a design engineer and took him to the U.S. While there, Banatao "discovered how inadequate my training was" and pursued his master's in electrical engineering at Stanford University, plus computer science. Various jobs followed at National Semiconductor, Commodore International -- where he designed his first chip, for a calculator -- and Intersil, all combining Banatao's software-designing ability and his technical expertise. Then in 1981 he was working at Seeq Technology when the inventor of the Ethernet system asked the company to look for a more efficient way of linking computers. As the engineer assigned to collaborate, Banatao made the breakthrough discovery of doing away with big boards and putting the Ethernet controller on a single chip. Soon, PCs had his undivided attention, and the idea of unfettered control over his work had captured his imagination. With $500,000, mostly from friends, he founded Mostron in 1985 and began devising chip sets. Even then, Banatao could not afford to buy reference manuals and he confesses to having debugged chips by using equipment from another company otherwise vacated on the weekends. The next step was another start-up the same year, Chips and Technologies -- and then there was no looking back. Minus any venture-capital funding, C&T went public after 22 months, one of the fastest IPO listings on record. After just one quarter with Banatao's new graphic chips set in the marketplace, C&T had chalked up sales of $12 million."When I was designing, I hardly had a social life," he recalls. "It is not enough that you come up with solutions. It must be a unique solution." Eventually, chip giant Intel bought out C&T in 1996. But Banatao already had set up a third vehicle, S3 Inc. S3 has a return on equity of 46.1% and is estimated to be the world's third most profitable technology company. Wearing his tech hat, Banatao also serves as chairman of Cyras Systems, Marvell Semiconductor, New Moon Software and Stream Machine, all private companies. As an entrepreneur, his Tallwood Venture Capital is a partner of Mayfield Fund, a venture-capital firm that has invested $2 billion in various companies and has another $1 billion awaiting targets. Overall, Banatao has markedly lowered the cost of PCs while at the same time improving performance. He recalls that when the world's most powerful mainframe computer was the IBM 360, his new chip-set design produced 10 times more power at a thousandth the cost. As well, nine out of 10 graphics accelerators still incorporate his design. "I've done tremendous things for the industry from the technical point of view," says Banatao. "But what drove me first was the business side. For every success there are 100 or 200 failures. A main component of that is, the technical guys didn't take care of business." Currently, Banatao is involved in developing the vertical cavity surface emitting laser, or Versel, which speeds the transmission of data along optical lines, and the chip for a global positioning system (GPS), which utilizes satellites to locate objects. Ayala has invested $1 million in Versel developer Cielo Communications and pumped another $1.6 million into GPS chip developer SiRF Technology. Banatao is the controlling shareholder in both companies. Ayala's Bank of the Philippine Islands needs superspeed data transmission, while GPS will come in handy for its Globe Telecom wireless services. Another Ayala company, Integrated Microelectronics (where Banatao is a director), hopes to win manufacturing contracts for Cielo and SiRF. "The two most important technologies that enable the creation of products and services in information technology are computing and communications," Banatao explains. "A year from now, the ubiquitous wireless phone will become the platform for communications and computing infrastructure." And Banatao himself? He has more than three homes in the U.S., three children and a single-engine plane that he flies each week. "It's intense, but fun," he says, with an obsessive-compulsive grin. Write to Asiaweek at mail@web.asiaweek.com
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