July 21, 1997, Issue: 963
Section: Business
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Loughborough, Spectrum eye each other's territory -- Rivalry rattles DSP partnership
By Peter Clarke
Loughborough, England - They've been partners for the past 10 years, but signs are that two players in the digital-signal-processing arena are at odds, vying to outdo and possibly even acquire one another.
Closely held Loughborough Sound Images and Nasdaq-listed Spectrum Signal Processing Inc. (Vancouver, B.C.) are the world's two largest suppliers of general-purpose boards designed around DSP chips. Each nurses ambitions to expand into the other's domestic market. In a sector where consolidation is the watchword, the rivalry could result in a race between the companies to acquire smaller board makers, or in one company's taking over the other.
The Loughborough/Spectrum partnership has been based on a 10-year reselling and licensed manufacturing agreement, signed in 1987, that allowed Spectrum to manufacture Loughborough-designed boards and sell them under the Spectrum name. That helped Loughborough gain revenue from North America without the expense of selling and supporting the products, while it concentrated on building sales in Europe. For Spectrum, the deal helped the company build a broader product portfolio quickly to better address the large North American market.
Ten years later, the European intentions of Barry Jinks, president and chief executive officer of Spectrum, were revealed last month when Spectrum bought 3L Ltd. (Edinburgh, Scotland), a vendor of real-time operating systems and multiprocessor DSP software tools. At the time, Jinks said that "Spectrum's aggressive growth plans naturally include the acquisition of complementary companies. Acquiring the right companies will allow us to accelerate our growth plans.
"We are the largest and most profitable DSP [board] company. Our strategy includes acquisition and merger and will include growth in new markets." Jinks refused to comment on whether talks about a takeover of Loughborough were under way.
A takeover of Loughborough would be an almost perfect geographic complement to Spectrum's North American emphasis. The acquisition of 3L was in a complementary software area-an area that both Spectrum and Loughborough say will account for an increasing proportion of their respective businesses over time. But Jinks said the 3L move is also important as a first venture into Europe.
Simon Yates, managing director of Loughborough Sound Images, dismissed the idea of a takeover of his company, saying: "Spectrum has been our distributor in North America for 10 years and that agreement was about to lapse at the end of July. We've extended it on a non-exclusive basis but we're now aggressively pursuing our own direct sales strategy in North America."
Yates said a Delaware company had been incorporated and Loughborough Sound Images would be opening its first office in Boston at the end of July with a west coast office due to open in San Jose, Calif., in November.
To fund the expansion, Loughborough Sound Images had received about $9.25 million from BancBoston Capital (Boston). Yates said he was particularly happy with BancBoston's involvement because, unlike the London Stock Exchange, U.S. institutions understood technology-based business. In addition, "BancBoston is prepared to fund our acquisition plans in North America," Yates said. "There's no doubt the DSP market is consolidating."
Yates saiD:"We're the worldwide leader in board-based DSP systems. We're really proud we've achieved that without any direct presence in North America," adding, "I can't talk about any special acquisition targets we may have."
Strong financials
So both Spectrum and Loughborough claim to be market leaders.
For the year ended Dec. 31, Spectrum achieved revenue of $36.9 million and reported profits after tax of $2.15 million. Coming off the back of loss-making 1995, the evidence is that Spectrum is in for a good 1997. "We're generating cash," said Jinks, adding: "We have good currency in our NASDAQ-listed stock. We're in a position to do either [a cash deal or a shares deal]."
Loughborough Sound Images ended its most recent financial year in September with revenue of about $24 million. Yates said Loughborough is moving strongly this year. "We've averaged 35 percent growth a year for the last five years. We expect to continue doing that in a market with 20 percent to 25 percent growth."
Will Strauss, president of Forward Concepts Inc. (Tempe, Ariz.), a market research organization which follows DSP markets at the chip and board level, saiD:"These two have dominated the board market for some time. Earlier on, Loughborough was the bigger of the two, but now Spectrum has branched out into some new areas."
Shrinking vendor base
Strauss also agreed that the board market is in a stage of consolidation. "Bigger companies are absorbing smaller companies," he said, citing the takeover of Ixthos Inc. (Leesburg, Va.) by DY4 (Nepean, Ontario) and the takeover of Sonitech International (Wellesley, Mass.) by Radisys Corp. (Hillsboro, Ore.)
Strauss saiD:"There's certainly an impetus for Spectrum and Loughborough to do something about the situation. Their competition is getting bigger." However, Strauss was not sure whether either company was sufficiently strong enough to force an unwanted takeover on the other. "It would produce a natural market leader roughly twice as large as anyone else," he said.
Copyright r 1997 CMP Media Inc.July 21, 1997, Issue: 963
Section: Business
------------------------------------------------------------------------
Loughborough, Spectrum eye each other's territory -- Rivalry rattles DSP partnership
By Peter Clarke
Loughborough, England - They've been partners for the past 10 years, but signs are that two players in the digital-signal-processing arena are at odds, vying to outdo and possibly even acquire one another.
Closely held Loughborough Sound Images and Nasdaq-listed Spectrum Signal Processing Inc. (Vancouver, B.C.) are the world's two largest suppliers of general-purpose boards designed around DSP chips. Each nurses ambitions to expand into the other's domestic market. In a sector where consolidation is the watchword, the rivalry could result in a race between the companies to acquire smaller board makers, or in one company's taking over the other.
The Loughborough/Spectrum partnership has been based on a 10-year reselling and licensed manufacturing agreement, signed in 1987, that allowed Spectrum to manufacture Loughborough-designed boards and sell them under the Spectrum name. That helped Loughborough gain revenue from North America without the expense of selling and supporting the products, while it concentrated on building sales in Europe. For Spectrum, the deal helped the company build a broader product portfolio quickly to better address the large North American market.
Ten years later, the European intentions of Barry Jinks, president and chief executive officer of Spectrum, were revealed last month when Spectrum bought 3L Ltd. (Edinburgh, Scotland), a vendor of real-time operating systems and multiprocessor DSP software tools. At the time, Jinks said that "Spectrum's aggressive growth plans naturally include the acquisition of complementary companies. Acquiring the right companies will allow us to accelerate our growth plans.
"We are the largest and most profitable DSP [board] company. Our strategy includes acquisition and merger and will include growth in new markets." Jinks refused to comment on whether talks about a takeover of Loughborough were under way.
A takeover of Loughborough would be an almost perfect geographic complement to Spectrum's North American emphasis. The acquisition of 3L was in a complementary software area-an area that both Spectrum and Loughborough say will account for an increasing proportion of their respective businesses over time. But Jinks said the 3L move is also important as a first venture into Europe.
Simon Yates, managing director of Loughborough Sound Images, dismissed the idea of a takeover of his company, saying: "Spectrum has been our distributor in North America for 10 years and that agreement was about to lapse at the end of July. We've extended it on a non-exclusive basis but we're now aggressively pursuing our own direct sales strategy in North America."
Yates said a Delaware company had been incorporated and Loughborough Sound Images would be opening its first office in Boston at the end of July with a west coast office due to open in San Jose, Calif., in November.
To fund the expansion, Loughborough Sound Images had received about $9.25 million from BancBoston Capital (Boston). Yates said he was particularly happy with BancBoston's involvement because, unlike the London Stock Exchange, U.S. institutions understood technology-based business. In addition, "BancBoston is prepared to fund our acquisition plans in North America," Yates said. "There's no doubt the DSP market is consolidating."
Yates saiD:"We're the worldwide leader in board-based DSP systems. We're really proud we've achieved that without any direct presence in North America," adding, "I can't talk about any special acquisition targets we may have."
Strong financials
So both Spectrum and Loughborough claim to be market leaders.
For the year ended Dec. 31, Spectrum achieved revenue of $36.9 million and reported profits after tax of $2.15 million. Coming off the back of loss-making 1995, the evidence is that Spectrum is in for a good 1997. "We're generating cash," said Jinks, adding: "We have good currency in our NASDAQ-listed stock. We're in a position to do either [a cash deal or a shares deal]."
Loughborough Sound Images ended its most recent financial year in September with revenue of about $24 million. Yates said Loughborough is moving strongly this year. "We've averaged 35 percent growth a year for the last five years. We expect to continue doing that in a market with 20 percent to 25 percent growth."
Will Strauss, president of Forward Concepts Inc. (Tempe, Ariz.), a market research organization which follows DSP markets at the chip and board level, saiD:"These two have dominated the board market for some time. Earlier on, Loughborough was the bigger of the two, but now Spectrum has branched out into some new areas."
Shrinking vendor base
Strauss also agreed that the board market is in a stage of consolidation. "Bigger companies are absorbing smaller companies," he said, citing the takeover of Ixthos Inc. (Leesburg, Va.) by DY4 (Nepean, Ontario) and the takeover of Sonitech International (Wellesley, Mass.) by Radisys Corp. (Hillsboro, Ore.)
Strauss saiD:"There's certainly an impetus for Spectrum and Loughborough to do something about the situation. Their competition is getting bigger." However, Strauss was not sure whether either company was sufficiently strong enough to force an unwanted takeover on the other. "It would produce a natural market leader roughly twice as large as anyone else," he said.
Copyright r 1997 CMP Media Inc. |
