Chapter 1108: Nothing a Bow Can't Fix
June 1997
No Gulfstream could cross the Pacific in one go, and the court wouldn't have let this one try anyway, so the whole party took the commercial flight: 3dfx executives, Dr. Chen, the Preston Gates lawyers, medical staff, bodyguards, the bail supervisor, Sloane, and Old Mike pushing the chair at the back of the first-class line.
"Mr. APLUS, you can come through here. We'll board the chair first, the aisle chair's already at the door, and your party can follow right after."
"Hey! APLUS! Good luck! America ain't worth being homesick over!"
It was a man waiting for his own flight to Detroit, who seemed to think the singer was leaving the country for good. Alex smiled at him. Four rows of the gate area turned round to look, and the man spent the rest of the morning telling people about it.
"Thirteen hours to Narita, then an hour into the city if the road's clear," Old Mike said, getting him settled. "The nurse sits across the aisle and the doctor's four rows back with the oxygen. You're not going to die over the Pacific on me, are you, kid?"
"I hope not. Time to sleep. I'm very good at sleeping these days."
Mullen, the retired marshal, sat two rows back with a paperback and asked the stewardess twice whether the man in 2A was really allowed a second pillow, because the court order hadn't said anything about pillows.
"Doctor says you have to be turned every two hours, both sides, ten minutes each, or you come off this plane with sores and a clot in your leg," Old Mike said.
"Then turn me every two hours. Gently. Like an omelette."
"I'll turn you like a pork chop if you keep talking," Old Mike said, and Alex closed his eyes, grinning.
Ishihara met the plane himself.
He'd led the Black Belt team, the American design built around 3dfx's Voodoo chip. Black Belt had lost the horse race in March to Katana, the Japanese team's design built around NEC and VideoLogic's PowerVR chip, the whole department had been folded into somebody else's, and Ishihara had been given a title with the word coordination in it and a desk by a window. He kept apologizing for the traffic all the way from the terminal to the car. It was pretty obvious the traffic wasn't what he was sorry about.
"So how's Saturn doing?" Alex asked.
The Saturn was Sega's current console. It had come out in Japan at the end of 1994 and in America in May of ninety-five, rushed onto shelves early at three hundred and ninety-nine dollars. Four months later Sony put the PlayStation out at two ninety-nine, and in America it had been a rout ever since. Japan was the one place the Saturn had held its own.
Ishihara looked out the window for a while.
"In April the consumption tax went from three percent to five. So everybody in this country bought everything they meant to buy this year in March. Televisions, cars, refrigerators, our machine. There were lines outside the stores." He straightened his cuff. "Since April — nothing. Not a slow month. Nothing at all."
It made sense. Prime Minister Hashimoto's government had raised the tax on the first of April to get the budget deficit down, and the government had announced the tax a year ahead, so people didn't buy less, they just bought early. Everything that would have sold in the summer sold in the spring at the old rate, and then the summer came, the shelves were full and the factories were still running.
"How bad was May?"
"March was the best month the hardware division ever had. May... may as well not exist. The retailers are sending stock back, and the distributors are refusing new allocations until the floor clears. Sofmap returned forty thousand units last week on their own, and nobody at head office even argued with them."
Sofmap was one of the big computer and game chains in Akihabara, Tokyo's electronics district, where a new console lived or died on launch weekend.
"Returned? New machines?"
"Some of them, yes. Shrink wrap still on, straight back into the container, with the March invoices still attached."
"And Tokyo's calling it a temporary adjustment, I bet."
"Irimajiri-san has stopped using the word. It was in the April statement. It was in the May statement. Not anymore."
Alex looked out at the expressway. "Then he needs a win. By tomorrow morning, if he can get one."
"If you can give him one, Mr. APLUS, I think he will forgive a great deal," Ishihara said. "Maybe even me."
"We are sorry! Mr. APLUS!"
Shoichiro Irimajiri had been one of Honda's star engineers, a racing-engine man who'd gone on to run Honda's car plant in Ohio, before Sega hired him. Now the next console was his, and so was the decision about whose graphics chip went in it.
The meeting was at Sega's head office in Haneda. Somebody slid the door open and the men inside all got to their feet at once, and then everybody moved to the Western-style room, because a wheelchair and a tatami floor don't get along. Hideki Sato, who ran Sega's hardware research and had built Katana, sat in the corner and said nothing. Irimajiri was very polite.
"About the prospectus—" Alex began.
"On that matter you are unforgivable!"
Ishihara translated it with sweat on his forehead and softened it by maybe four percent, which was all his conscience would let him get away with.
"But you're stealing our technology," Ballard said, sneering. "Katana runs our tile ordering with the register names changed. We've got them side by side on paper, and two of your own engineers will tell you exactly where it came from. We caught you dead to rights."
A young man on the Sega side was on his feet before the translation finished. "Then bring the lawsuit here and try it, you bastard!"
Laughter on one side of the table, and a couple of seconds later on the other, once the translation caught up. One of the Preston Gates lawyers leaned over to the other and whispered, "We flew thirteen hours for this?"
"Ah — could we talk alone?" Alex said.
Four of them. Irimajiri, Alex, Sloane, Ishihara.
"I'm willing to apologize to you privately, Mr. Irimajiri. 3dfx really shouldn't have put the details of our cooperation with you in that prospectus. That was our mistake."
"Let us not speak of it."
"Then I want to hear the truth from you. Does 3dfx still have a chance?"
Irimajiri talked for a while about trust. A Japanese company kept a partner's secrets for thirty years, he said. An American company put them in a prospectus for anybody to read, because it helped the stock price. Ishihara translated all of it while looking at the carpet.
"Sega's under a certain amount of pressure from your government's industrial policy, isn't it?" Sloane said. "But the logic doesn't hold up. What NEC is actually using over there is American technology. They're working with VideoLogic."
Irimajiri's eyelids came up, slowly.
"We can hand the customized Voodoo 2 to NEC to manufacture," Alex said, "and match VideoLogic's bid. And if it goes well, every new 3dfx chip after that, we negotiate with NEC."
"Your government will not permit it," Irimajiri said. "They are supporting Taiwan and Korea. There is a trade review open on semiconductors, and every American company that has tried to put a leading part into a Japanese manufacturer this year has been questioned about it in Washington within a month."
The chip fight between Washington and Tokyo went back to the eighties, when the Japanese memory makers had nearly wiped out the American ones. The Reagan administration had answered with tariffs and the 1986 semiconductor agreement, which pushed Japan to buy more American chips, and neither side had forgotten any of it.
"I'll handle the American politicians. The Democrats owe me at the moment." He gestured at the wheelchair.
Irimajiri laughed that off.
"Irimajiri-san," Alex said.
Elbows on the armrests. Upper body forward, shaking with the effort. "Please help me! I don't want to lose. I don't want to lose to Sony! Please help me..."
There was nobody else in the room. His eyes were red.
"I've got six bullet holes in me. My neck, my back, my legs, my ass. They needed seven hours on the table, and the one in my ass came out last. The one in my neck came within an inch of the artery. Five months I was out. Please."
Irimajiri's smile went slowly away. Ishihara had to stop twice while he translated it.
"Microsoft's already made its position clear to you, hasn't it? And EA," Alex went on. "They and our alliance want Sega's next console to beat Sony's next PlayStation. And right now the only thing that gets you there is Voodoo."
"Everyone in this industry knows VideoLogic can't even see 3dfx's taillights," Sloane said, "and your own engineers have been saying so in writing since February. That's exactly why the Black Belt material went across to the Katana team in March, a week after the horse race was decided, and why two of the register names went with it. Isn't it?"
"We have not—"
"It doesn't matter now," Alex said. "If you give me one more chance, I'll apologize tomorrow, in public, in front of your press. 3dfx's chairman, bowing to Sega. That has to help your standing with Tokyo, too."
Irimajiri sat back and looked at him for a long moment: at the chair, at the wrist, at the collar of a suit that had been cut for somebody else. "You are a very strange young man," he said, in English.
"So — nine o'clock tomorrow? I'll be there at half past eight," Alex said.
The long table. His wheelchair at the end of one side, with Sloane, the bodyguard, the nurse and the men in suits standing behind it. Ballard at the far end of the other side, dragged there by his own chairman.
"President of 3dfx, Mr. Ballard. Chairman, Mr. APLUS—"
He inclined himself at his name. The hostess crouched with the microphone. He had the sunglasses on and his elbows on the armrests, and he smiled.
Flashes.
Sloane took the microphone. "Give me that. Following two days of discussions with Mr. Irimajiri and his colleagues, we have agreed that the cooperation between our companies will continue, that the existing development schedule stands, and that neither party will pursue litigation arising out of the matters discussed. Before that, our company, 3dfx, wishes to sincerely apologize to Sega for the errors and the offense we previously committed in disclosing the terms of a confidential agreement—"
Before she'd finished he gathered up everything he had and shouted it. "Moushiwake arimasen! Gomen nasai!" There is no excuse. I'm sorry.
And he lowered his upper body onto the table and wept.
He'd worn the old clothes on purpose. He was very thin in them, and he let himself shake.
The Japanese reporters' cameras all went off at once. Every person in that room could read a bow at a glance: fifteen degrees to say hello, thirty for respect, forty-five for an apology. A man putting his head down on the table was a full surrender, the kind a company president made on television after a scandal.
He tilted his head and saw the people behind him bowing however they saw fit. Forty-five degrees. Thirty. His eyes met Sloane's, and Sloane folded herself nearly to ninety with her mouth shut tight, and the rest of them had no choice but to follow her down. Ballard, at the far end, dipped his head about an inch and looked at the wall.
"Now! Go! Buy me every share of 3dfx there is, and move! MOVE! MOVE!"
At Northern Trust, O'Grady slammed the phone down, rolled up his sleeves and drove the traders at the top of his lungs. "Buy! Buy! Doesn't matter! Keep buying! We go long! Add leverage! Keep adding it! Until the shorts are wiped off the board!"
"I hear the other side's Carl Icahn? His funds have lent out most of the borrow in this name, there's hardly any stock left to find."
"Boss, are you sure about this?"
"Don't ask! Go! Go go go!"
This was how a short squeeze worked. A man who sold a stock short had borrowed it from somebody, and sooner or later he had to hand it back. If the price went up, he had to buy it back higher, and if there wasn't any stock around to buy, he paid whatever the guy holding it wanted. The less stock there was, the faster the price went, and the faster it went, the more of the short sellers had to buy, and every one of them buying pushed it up further for the next.
3dfx had opened at nine dollars a share, down from twenty-two in the spring. O'Grady put forty-two million dollars of Alex's money into it that session, on Northern Trust's margin line, at an average of about nineteen dollars, a little over two point two million shares, and the price got hauled up fast, then sat there shaking. The room got hot and smelled of coffee. Fifteen minutes later the Bloomberg put up an alert: 3dfx and Sega reach settlement in Tokyo; both sides agree to continue their existing strategic partnership.
The price went straight up. The shorts had to buy, and there was almost nothing left to buy.
By the close it was thirty-six dollars. The whole company had been worth a hundred and forty million dollars on the stock market that morning, and it was worth five hundred and sixty million at four o'clock. Two point two million shares at thirty-six was about seventy-nine million dollars. Alex was up roughly thirty-seven million on the day, on paper, before Northern Trust's margin interest.
O'Grady, with his shirt stuck to his back, picked up the phone to Tokyo. "Ha! Thirty-six! APLUS, you should've seen this room—"
"Don't stop," his client said.
"What? Ha — what? You're up thirty-seven million dollars in one afternoon and you want more?"
"Don't sell a share. Buy the dips." The voice down the line was hoarse and very pleased with itself, coming out of a hotel room at five in the morning. "Ha. I cried on a table for that, O'Grady, I'm not cashing out at thirty-six. We've got a new card in the lab. Voodoo2."
"Nobody's told the market that yet. And you can't sell before December anyway, the lawyers will have my head. Short-swing."
"Then I'll sell in December. What's the problem?"
"APLUS, the fundamentals don't support thirty-six dollars. They lost money last quarter and they're losing money this one too, and if this thing falls back to twenty you're eating margin calls from a hotel bed in Tokyo—"
"O'Grady. Whose money is it?"
"Ha — it's yours, it's yours. Fine. But when this works I want my desk's fee on the whole forty-two, not just the—"
"You get your quarter point like always, and if you whine about it again I'll move the account to Goldman on Monday and let them buy the dips. Don't stop."
"Motherfucker," O'Grady said to the dead line, admiringly. Then he rolled his sleeves back up and yelled for the desk.
By the next morning Icahn Capital's people were calling the SEC.
They had something to call about. A chairman buying his own company's stock on margin the day it jumped could expect a letter from the enforcement division whatever the timing. The Preston Gates lawyers had O'Grady's order tickets by breakfast. The first buy had gone in after the press conference was on the Kyodo wire, which made the settlement public, if only just. The Voodoo2 was a different problem, because the market hadn't heard of it, so the lawyers stopped Alex's own account from buying another share until 3dfx put the card out in a press release, and they filed his Form 4 the same week. And the profit on anything he sold before December went straight back to 3dfx under Section 16(b), the short-swing rule for directors and ten-percent holders.