Debra Schifrin, Derek Dicker, Yossi Feinberg
Stanford Graduate School of Business (SM272B-PDF-ENG)
March 21, 2019
Case (B) begins with PMCSierra’s decision to purchase a $ 100 million solid state drive controller business that included a prototype and a team of 50 people. The company also acquired the intellectual property necessary to build PCIe switches, a related family of products that were newer and more advanced, but riskier to develop. Following the acquisition, PMCSierra formed a new isolated company, NonVolatile Memory Solutions Group (NSG), which protects NSG’s resources. To encourage quick decision making, PMCSierra has bundled marketing, research and development, and technical support under the leadership of NSG. NSG was able to produce a new product quickly. At the same time, outsourcing this dedicated business meant that PMCSierra lost some company-wide efficiency gains. The acquisition and formation of NSG also weighed on other parts of PMCSierra, as NSG required dedicated attention and resources during its initial phase. A few months after the acquisition, PMCSierra leadership closed the existing internal group working on the solid state drive controller, as the company had two teams and two product groups. This turned out to be one of the company’s biggest commitments and an unpopular decision. Along with that decision, the company decided to develop the newest and riskiest product for which it had intellectual property rights, PCIe switches.
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