After years of living as the "ignored child" under the roof of parent Advanced Micro Devices Inc., Legerity Inc.'s place at the intersection of voice and data convergence could finally earn it the recognition that it craves.
The former AMD voice communications unit, which was sold last July for $375 million to investment firm Francisco Partners LLP, is looking to add to its legacy offerings by integrating VoIP and ADSL broadband applications into a new chipset. When mounted on a DSL access card, the device's main selling point is its ability to allow OEMs to convert telecom central-office switches into DSL terminals without the need for costly DSLAMs (DSL access multiplexers).
Legerity, a roughly $300 million company, expects the chipset to rope in as much as $60 million in new annual revenue by the end of next year, said chief executive Ron Van Dell.
According to one DSL equipment vendor, Legerity's voice and data device, which is slated to sample early in 2001, could strike a true sweet spot in central-office applications.
"Their solution is certainly an attractive proposition. Analog splitters are big, bulky things that take up enormous amounts of space on cards when data and voice are combined the old way," said John Reister, vice president of advanced technology and strategy at Copper Mountain, Palo Alto, Calif.
"By being able to integrate voice and data, you get a much more cost-effective analog service out to the premise in digital packets."
Combining voice and data routing into one device, however, requires an ability to support high-voltage applications. "The challenge when splitting voice from DSL is to make this device operate at 100V, and there are very few chips that can survive that," said Will Strauss, an analyst at Forward Concepts Co., Tempe, Ariz.
Long overshadowed by AMD's pursuits in the microprocessor and flash memory markets, the voice communications unit was never a top priority for the Sunnyvale, Calif., chip maker, "which helps explain why Legerity before the spinoff was so quiet," Van Dell said. "When I came aboard, I was pleasantly surprised by the number of technologies the business had to offer that neither I nor anybody else knew about."
While Legerity expects its voice/data card to offer a potent third leg to its product portfolio, its mainstay business is still derived from traditional voice and central-office DSL applications, according to Van Dell, who joined the Austin, Texas, spinoff in December from Dell Computer Corp., where he was general manager of Dell's Dimension line.
Van Dell broke Legerity into three groups: POTS (plain old telephone service), voice over broadband, and emerging DSL applications.
"In February we reorganized around our three core businesses, which are either fundamental to today's businesses in terms of sales or future growth," he said, noting that POTS applications will represent about 80% of the company's revenue this year, with voice over broadband accounting for the rest.
"Our traditional voice SLIC [subscriber line interface circuit] chip-sets, which include codecs and line drivers, might look like a dog business, but there will still be considerable demand over the long term, particularly in emerging markets such as South America and Asia. There are 30 million to 40 million lines going in per year in China alone," Van Dell said. "At the same time, we will use new technologies for these mature applications, such as offering two SLICs on one chip to lower the cost per line."
In voice over broadband, Legerity expects sales of its devices for home gateways to grow along with the increasing demand for subscriber applications.
The company is weathering the communications IC storm better than many and, according to Van Dell, saw less than a 10% decline in sequential sales in the first quarter, compared with the fourth quarter of 2000. Visibility, however, remains low.
"Who knows what the rest of the year is going to be like," he said. "Profits, however, are fine. While they didn't increase, they went down only very modestly."
To strengthen its top-line growth, Legerity is looking to acquire a small operation of about 50 people who could offer key technologies in applications such as line drivers, although most of the company's investments will be in the area of R&D.
Legerity will also continue to rely on its existing manufacturing partners by farming out its high-end production to AMD and employing Taiwan Semiconductor Manufacturing Co. Ltd. and other established foundries, Van Dell said.