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Kingston Plans a New Round of Big Bonuses

Technology: The generous Fountain Valley maker of memory products will reward workers with payouts averaging $20,000.


Kingston Technology Corp., the Fountain Valley company that has given $58 million in bonuses to its employees over the past three years, plans to enrich its workers again this summer by handing out $20 million more.

The payout--expected to be delivered by July to its 1,000-person staff--is the third round of corporate largess that Kingston founders David Sun and John Tu have bestowed since selling 80% of the computer memory-products maker to Softbank Corp. of Japan for $1.5 billion in 1996.

The upcoming payout, which averages $20,000 per employee, comes despite an industrywide slump in the demand and price of the memory products that Kingston makes. Although privately held Kingston doesn't disclose sales and profit figures, industry analysts said the company has been hurt by the slump but is still profitable.

After the sale to Softbank, the two executives set up a $100-million fund for workers to share in the company's sale proceeds. Because the company is privately held, it does not have publicly traded stock to use as an incentive and reward for employee performance.

Other U.S. companies--from Microsoft Corp. and Broadcom Corp. to the scores of Internet firms that have launched hot public offerings in the past couple of years--have helped their employees become wealthy using their highly valued stock instead of cash bonuses. These cases deal with stock-option programs that allow employees to buy their company's stock at a discounted price and sell it later for a profit.

"Kingston is a unique story because what you're talking about here is cash," said Dan Wetzel, a senior consultant who specializes in executive compensation for Watson Wyatt Worldwide. "But from a return standpoint, their bonuses are small for the technology world."

Wetzel noted that Irvine chipmaker Broadcom granted its employees about 22 million shares--at $15 a share. The company's stock price closed at $99.47 per share Wednesday, making those shares worth $2.2 billion.

"Basically, Broadcom employees are getting about $85 a share as a bonus, or about $2 billion total," Wetzel said. "However, the stock price can change tomorrow. With Kingston, the bonus may be smaller, but it's guaranteed."

In early 1997, Sun and Tu handed out $38 million, with checks ranging from $2,000 for recent hires to six digits for people with more seniority. Last summer, the duo dipped into the fund again and handed out $20 million in cash.

As with the previous bonuses, the amount each person receives is based on seniority, pay and performance.

Kingston executives declined to break out details on the categories but said the bonuses will be lower than last year's because there are more employees and prices for the company's chip modules have declined.

"For the people here, this isn't about the money," said Gary MacDonald, executive vice president at Kingston. "This is about enabling people to do things for their family and sharing time together."

The company's workers tried to keep news of the upcoming round of bonuses secret because of the media frenzy that followed the first two rounds of bonuses. Many Kingston workers found themselves fielding calls from car salespeople, investment brokers and distant family members seeking financial help.

Donald Beauchamp, who joined the company in 1992, has used his past bonuses to "be responsible": pay off a chunk of his mortgage, buy his stepsister a car, help a geologist friend start a business.

Beauchamp, who declined to say how much he has received, said he plans to remain prudent.

"I have a 1993 Toyota that works just fine; I don't need a new car," said Beauchamp, a supervisor in Kingston's engineering group. "The money gave me a taste of what it's like to be John or David, to have the kind of cash to help people. And it also made me incredibly loyal to Kingston."

Employees said this could be the last time Kingston hands out cash bonuses of this magnitude. As with previous bonuses, Sun and Tu said the remaining bonus pool--at least $22 million--may go to pay for other employee benefits.

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