Cirrus Logic returns to core and profit

Electronic News, Oct 27, 1997 by Peter Brown

Santa Clara, Calif.--After many years of being the poster child for fabless semiconductor companies as well as the Fabless Semiconductor Alliance (FSA), Cirrus Logic last April was forced to restructure itself to stop quarterly losses the company had been experiencing. In the restructuring, it divested itself of non-core businesses (EN, April 18) and separated the company into four product divisions to focus its efforts on its core competencies.

Now, six months later the company is profitable again, according to Michael Hackworth, Cirrus' president and CEO. The company is pursuing its strategic thrust into the multimedia accelerator market, communications ICs, modems and a single-chip DVD offering not yet introduced.

"From a management standpoint, whenever you do a massive structural change there's going to be confusion and a need for role clarification and to sort things out at the top," Mr. Hackworth said. "We did this restructuring quite quickly, so we are working through those management issues now, and I think it's going well. If we look at 60 percent of the company, which is the non-PC products, it is very profitable, and it is in a strong, solid growth mode."

In a recent breakfast interview with the Electronic News West Coast editorial staff, Mr. Hackworth discussed the reorganization effort of Cirrus Logic, and how it has affected the operations of the company.

"What we really need to do--which we have done on the modem and audio (business)--is to get our products positioned in the market correctly," said Mr. Hackworth. "Now we hope in the second half of this year to do this with our graphics market and when that happens the margins will rise, the revenues will rise, and that business unit will become profitable in this fiscal year."

As part of the reorganization, Cirrus made its Crystal Semiconductor subsidiary a division within the company to enable easier integration between divisions.

Value Not There

"As a wholly owned subsidiary it had its own independent manufacturing organization and its own independent accounting and so forth, and the value we were getting from that duplicate overhead really wasn't there," said Mr. Hackworth. "So in some ways, this is the free enterprise system at its finest hour, and in a different sort of way forcing ourselves to be competitive and not have any expense that is not necessary.

"But what we did do was actually elevate them. When the mixed signal team was in the Crystal subsidiary they were there with the PC, audio and with networking and a number of other activities. Now they are the way they were before we acquired them. They have the same product charter, the same technology, and they are going to have more visibility as that team. So I think it's a benefit for them."

Another aspect of the company still being researched is the use of the Talisman architecture from Microsoft. Cirrus Logic was one of the first companies to sign onto the Talisman consortium which eroded over the past year. Mr. Hackworth said the success of Talisman may lay in utilizing a conventional programming interface and integrate as many features of the architecture onto a 3-D engine as possible.

"Our plans are to incorporate many of the Talisman features onto successive generations of our graphics chips," he said. "It may be feasible economically to incorporate all of the Talisman in stuff that will be unique to Talisman programming interface, further products that might show up in the 1999 time frame. Depending on whether the software development industry adopts that interface would determine whether we would incorporate those final features. But most of it does not require unique programming interface, and we plan to incorporate most of that."

As far as the Talisman council itself, the effort has not totally fallen apart, he added. But most of the companies are now working with Microsoft alone instead of trying to formulate some sort of joint 3-D engine with Talisman architectural features. The first company to reveal plans for this individual effort was Fujitsu which announced some of its Talisman plans during this year's Siggraph '97 conference (EN, Aug. 4).

"The program that Fujitsu is working on was coming up almost in the same time frame as that discreet solution and it just appeared to be something that was not going to have much economic benefit to Cirrus Logic or any of the partners," he said. "We won't be participating via a similar solution as Fujitsu. We will have graphics chips that will incorporate most of the Talisman features, and then as the industry starts really adopting that interface then we will be able to, with subsequent architectures, incorporate the total Talisman capability."

Focus On Systems On Silicon

EN: How would you describe the major thrust of Cirrus Logic today?

Mike Hackworth: "We have been a systems-on-silicon guy from day one. We're now at the point where the technology at 0.35, 0.25-micron really does allow you to put the whole system-on-a-chip in a number of these very interesting areas. We are established in the mass storage area, both in the magnetic and the optical arena; multimedia heavily focused on the PC area, though we apply it in a number of other areas; communication, in the wire line area.