Page 202

making institutional visits; and only one-third of their time doing research. He feels this gives his analysts an edge since they spend 100 percent of their time on research. They are not encouraged to write 30 to 40 pages of pretty reports, but rather one page that lists the issues.

Eight of the 10 Galleon analysts are engineers by training, have worked in the technology industry, and therefore understand the trends and know the right questions to ask. "They don't get blindsided by the marketing hype," says Rajaratnam.

The analysts are encouraged to travel as much as they want and to visit as many companies as they can. They are not limited by a travel budget. The one rule, however, is that at the end of each day, they must e-mail or fax an explanation of what they learned that day that they didn't know before. If they do not do this, they don't get travel expenses reimbursed.

Unlike many of the other hedge fund managers, the analysts are neither penalized for losing money nor rewarded for making money in their sector. No one points fingers at each other. Rather, they are rewarded for increasing their expertise or edge. Every analyst follows 35 companies. At the start of the year, Rajaratnam asks each analyst how many he or she has an edge on. This includes contacts in senior management, suppliers, customers, and competitors. It is that number, at the end of the year, that determines the analyst's reward. The goal is to have it increase significantly. For example, if it increases from five to ten, that is good. If it increases from five to six, that is not so good. Rajaratnam points out that the main factor that could hinder the firm's growth is the ability to hire excellent people.

Integrity is also key at Galleon. No personal trading accounts are permitted. Employees are asked to sign a statement attesting to this. In one instance it was violated, and the person was terminated.

Rajaratnam says many of the staff have known each other for 10 to 15 years and have close ties. They are personal friends as well as business acquaintances. As a result, there is no tension from within the firm. Most are in their early forties. This atmosphere helps reinforce the team approach culture.

AGE OF SPECIALIZATION.

While Galleon is very narrow, it is also very deep. There are 35 people within the firm—ten technology analysts, five health-care analysts, six