Sonki.. I thought this will interest you..
TI is turning its focus to DSPs, a technology that runs digital phones, modems, and related software and chips.
TI is hoping
to grow big
by thinking small
Texas Instruments shifts focus
to DSP business
By Evan Ramstad
THE WALL STREET JOURNAL
DALLAS, June 25 — A strange thing is happening at Texas Instruments Inc.: The old-line technology company is getting bigger again by thinking small. For years, the staid chip maker and defense company focused mainly on projects that could produce huge sales. But growth slowed and losses piled up as the government slashed spending and core memory chips became an inexpensive commodity.
Briefing Book on Texas Instruments
Briefing Book on Lucent Technologies
Briefing Book on Minolta
TI's CEO Thomas Engibous comments on DSPs and the company's expectations for quarterly earnings, from the Dow Jones CEO Summit earlier this week.
NOW, UNDER THOMAS ENGIBOUS, the company's intense 46-year-old chief executive, TI has sold the missile and memory businesses. Today, it mainly makes digital signal processors, or DSPs, an increasingly useful semiconductor that runs digital phones, modems and numerous gizmos, while also making related software and chips.
Determined to dominate the $4.5 billion DSP business, which is growing about 30% a year, TI has decided that no project is too little to ignore. Small teams of engineers and marketers look for ways to put DSPs in untapped markets and even seemingly mature products such as the telephone. Evidence: Gary Johnson, 30, runs a team of 18 trying to develop chips for next-generation digital music players — even though record companies have yet to decide how to they will send music over the Internet.
“Singles and doubles are much more valuable than home runs because there aren't very many home runs,” Mr. Engibous, a former Little League baseball coach, says of the strategy. In fact, he says, “We just heard one about using arrays of DSPs to search for life on distant planets. That's not a high-volume application, but we want to win those” too.
Though asset sales shrank revenue 14% to $8.4 billion last year, TI captured 47% of the DSP market, up from 40.5% five years ago. Profit climbed 35% to $407 million, or $1.02 a diluted share, and analysts are looking for a record $3.12 a share this year. TI's shares are Internet-hot, tripling since last October. Thursday, amid a broad market sell-off, TI's shares closed at $132.625, down $6.1875, in composite New York Stock Exchange trading.
BEHIND THE STRATEGY CHANGE
The strategy shift at the company that invented the semiconductor underscores the digital explosion that is taking place in the U.S. and other markets. Chips that once handled one or two functions now are taking over multiple duties. Meanwhile, semiconductor companies accustomed to producing large volumes for relatively few products must respond to thousands of possibilities.
TI CEO Thomas Engibous
Worried about missing this huge opportunity, TI now tries to cover all the bases. A telephone-information center now also telemarkets, calling those who attend TI seminars to see if they need help. A $100 million venture-capital fund supports promising related technology. In addition, TI recently agreed to acquire Telogy Networks Inc., a phone-equipment software maker, and Libit Signal Processing Ltd., a maker of chips for cable modems, to ensure its role in Internet connections.
Within TI, some employees have seen a new flexibility. TI was about to cancel engineer Rohit Bhuva's project in 1997. He and co-workers had been looking at using digital signal processors to speed up laser printers.
After hearing of the impending cancellation — which would have meant layoffs for the whole group — Mr. Bhuva e-mailed John Scarisbrick, TI's top DSP executive, to warn, “This is your last chance.” Mr. Scarisbrick got the team of 30 a reprieve and gave them 30 days to prove that their idea would work.
“We stayed 15 and 16 hours a day to put all the data together,” Mr. Bhuva says. Their conclusion: A DSP could cut in half the time it takes for laser printers to produce a normal page.
After that, Mr. Scarisbrick says, “It didn't take a lot of hand-wringing over whether we should give it a go.” TI has since invested several million dollars in the project and won Minolta Corp.'s U.S. printer division as its first customer. Says Mr. Engibous, “We dream someday of a DSP in every printer.”
Worried about missing this huge opportunity, TI now tries to cover all the bases.
Some markets are much harder to crack. TI recently scaled back work for digital televisions and cable set-top boxes because the markets aren't growing fast enough. Lucent Technologies Inc. dominates the market for standard telephone DSPs. To broaden its business, TI is trying to sell more software and related analog, or nondigital, chips along with its DSPs, which take real-world information like sound or temperature and translate it into digital information.
A WILLINGNESS TO TAKE RISKS
TI is also willing to take a chance on markets that barely exist, like digitally compressed music. Mr. Johnson, who is working on the music project, had spent a couple of years looking unsuccessfully for an audio use for DSPs when he started to hear about music compression in the spring of 1998. (Music compression refers to compressing the time needed to transmit music from one computer to another.)
He delved in. Early on, Mr. Johnson and his boss, Gene Frantz, one of the company's first DSP developers, were so worried about their effort that they color-coded TI's executive ranks. Audio supporters were green, opponents were red and those on the fence were yellow. “We just didn't talk to the reds and focused on how to make the yellows turn green,” Mr. Frantz says.
By fall, TI was willing to bring in specialists to study the market. Internally, the project got a boost in December, when the children of Mr. Scarisbrick and others began to use players that employ compression technology. After that, Mr. Johnson says, “There was support all the way to the top.”
By getting in on the ground floor of music compression, TI hopes to be exert more influence on a new market. By contrast, when cellular phones first came out, “we were in missiles, radar, memories and so forth,” says Mr. Engibous, and the company missed an opportunity to provide more than a chip. Now, he says, “when we get up in the morning, all we think about is DSP and analog.. |
