Chip designers go for broke
Dallas Business Journal - by Jeff Bounds Staff Writer
PLANO -- Backed by $22 million from a high-powered investor group, several former executives of Cirrus Logic and Pixel Semiconductor are building a new computer-chip company in Plano.
Part of their financial backing comes from the management team of billionaire George Soros.
Microtune Inc. is designing high-speed chips used in applications like wireless phones, computers and cars. The company makes some of the most intricate and hard-to-design chips around: Those that handle analog and radio-frequency signals.
Executives of the 2-year-old firm are currently tight-lipped about details of their forthcoming products, which they say will help link digital devices with those using analog. Sales will probably start by the middle of this year.
"We've identified a $2 billion market for our products," says Jim Fontaine, Microtune's executive vice president.
Fontaine and two other company executives, Chairman and Chief Executive Douglas J. Bartek and Chief Technology Officer John Norsworthy, came together via Cirrus Logic, a large California chip maker.
Norsworthy and Fontaine were the founders of Pixel Semiconductor, a Plano firm that made chips used to bring video to personal computers. Cirrus purchased Pixel in 1994, and Fontaine took an executive post in Cirrus. Earlier, in 1992, Cirrus had purchased a firm that Bartek owned, Acumos Inc., which made chips for the personal-computer graphics industry.
Bartek became a Cirrus exec, too -- and under his direction, Cirrus took the technologies of Pixel and Acumos and built the first graphics chip that integrated video functions into it.
A form of that chip is found in all new PCs today.
Young company
Norsworthy launched Microtune in 1996 with three other men: Ken Clayton, formerly of Motorola; Jon Mellor, who came from Pixel Semiconductor; and Eric Mumper, a former employee of Dallas Semiconductor.
The four joined a growing number of people who are leaving the safety of large, established firms for the freedom -- and potential wealth -- of young companies.
"Once you have a startup under your belt, you always have a little start-up fever," says Bartek.
Because it specializes in analog and radio-frequency chips, Microtune is a bit of a rarity.
Analog chips convert sound, light and heat into digital signals and are used to control things like power supply, voltage, light and temperature. They are found in everything from cars and computers to telephones.
Radio-frequency chips send large amounts of data very quickly.
While everything from garage-door openers to radar systems use analog, the world is going digital. So most engineering students study how to make digital chips. In addition, designing analog and RF chips entails using complex mathematical models.
"So those who go for analog are more math-focused. There's a relative shortage of those who can design analog chips," says Tim Smith, chairman and CEO of Infinite Technology Corp. of Richardson.
Microtune has assembled a 27-person company with expertise in analog and RF, including former employees of Texas Instruments, Zenith, Motorola and Dallas Semiconductor. Executives say they plan to hire as many qualified analog and RF engineers as they can, and they are starting to ramp up their sales and marketing force, as well. The company's work force will probably double in the next 12 months.
Microtune's business plan has won over a number of investors, who have contributed a total of $22 million since the company's 1996 founding. Among Microtune's financial backers is the management team of George Soros, one of the most powerful financiers in the world. He is blamed in some quarters for triggering the Asian financial crisis by selling large amounts of Thailand's currency.
Other backers of Microtune include two California venture-capital firms, Institutional Venture Partners and Telos Venture Partners. Those two companies contributed the majority of some $8.7 million that Microtune raised last fall. Fontaine says there will probably be another round of financing prior to an initial public offering.
Much of Microtune's financing is going toward salaries and building up the company's infrastructure. The company will leave manufacturing of the silicon wafers, which form the base of the chips, to larger firms with which it has forged alliances. The reason: Wafer fabrication factories can cost $1 billion or more.
After the wafers are constructed, they will be shipped to Microtune's Plano headquarters, where the company will test which parts of the wafer are usable. The good parts of the wafer will be shipped to another Microtune partner, Anam, which will package them. Microtune will do a final test on the chips and then ship them to customers, who will integrate Microtune's products with other types of chips in various electronics devices.
Despite its efforts to keep costs under control, Microtune faces jaw-dropping expenses. Officials say they must purchase about $100,000 worth of hardware and software design tools for each engineer they hire.
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