Failure Is an Option

On Monday, May 8, when Gonzalez walked into work, a receptionist told her that the administrative assistants were being laid off. "She said, 'That means you and me,' " Gonzalez recalls. "Rick wasn't around. No one approached me. But I was really upset. I started cleaning out my desk. After lunch, Rick came in, and I remember him saying, 'Is there something you want to talk about?' "

Shriner and Gonzalez had been together for four years. "I had vowed to Rick that I would never allow him to be blindsided. And now I was being blindsided. I hated it," Gonzalez says. "He became emotional and broke down. He said that the hardest thing he had to do was tell me, and he just couldn't do it. I asked, 'Is Victor being laid off too?' Rick said he was.''

Shriner looks pained when he recounts Exponential's last days: "Isabel was so angry with me. We both sat down and cried. I was responsible not just for the company, but for all the people who had been part of it. People were hanging onto every promise.''

Epilogue

"I've given you three years of my life."

On that fateful Monday in May, 25 members of the Exponential team -- nearly 40% of the staff -- lost their jobs. But of those who did not lose their jobs, few decided to leave. Why did these people stay?

"We were in a state of delusion,'' says Dorris, after recounting the schemes that Exponential's management concocted during all-night or weekend meetings. Ivonne Valdes, now a sales-account manager for Sun Microsystems, walked into Shriner's office one morning during the second week of May and shut the door. "I said, 'I'm not a quitter, but this has gone as far as it can go.' Rick got very emotional and said something like 'I can't believe you're throwing in the towel.' I said, 'Rick, I've given you three years of my life.' ''

What good is tragedy without a little irony? On May 15, the day that Shriner planned to call a final meeting to announce that he was laying everyone off -- even himself -- some engineers burst into his office. "We just want you to know that we got it done,'' one of them said. They'd worked all night, and they were sure that they had made the final breakthrough: a 500-MHz chip. Shriner felt only sadness and resignation as his team broke out the champagne. They were completely out of money -- and out of customers. Adding to the irony, members of a development team from Hitachi arrived for a meeting that had been scheduled weeks in advance.

"I can remember the shock on their faces when I told them that we'd be shutting our doors,'' Shriner says. Afterward, he drove home to Half Moon Bay. The next morning, he went to work in his garden, and that's where he spent his days for the next couple of weeks.

More than a thousand miles away, Paul Nixon called his staff together. Many of his people had been listening to conference calls between Nixon and the team in San Jose. They had been working without paychecks too. Few were surprised when Nixon told them that Exponential was dead. Even so, no one decided to leave. Those who stayed accepted short-term contracts while Nixon worked on a business plan. It didn't take long. On May 23, Nixon gathered his team and said, "Congratulations. We lost a company. Now we own one.'' After some negotiations with top local companies -- and after deciding to work without pay and to max out their credit cards -- Nixon and his team launched their own startup. The company, called EVSX Inc., designs high-performance chips.

Stephanie Dorris and Fran Costa, 56, who was the purchasing manager at Exponential, were among those who stayed behind to conduct a corporate fire sale. "It was just awful,'' Costa remembers. "People were picking over the furniture like we were a carcass.'' Dorris sold Exponential's patents for $12 million. Creditors got paid, and the Exponential team received back wages.

For one brief, cruel moment, Exponential even enjoyed the promise of life after death. An unnamed angel investor came onto the scene, reportedly ready to put $15 million into play. At Shriner's urging, Jim Stair, 44, Exponential's COO, called the company's recently laid-off engineers, most of whom had already found new jobs, and asked a question: If Exponential were resuscitated, would they return to work? Most said that they would -- but with conditions. They wanted to see a new board of directors. And they wanted to see new management at the top.

"It was like a palace coup, and I really couldn't blame them,'' Shriner says ruefully. "Only there was no palace.'' It turned out that there was no angel either. Jeff Thomas thinks that was a good thing. "In the long run, what we were doing didn't matter anymore," he says. "Apple wasn't going to let the clones break away.''