Zilog Inc. said it is increasing sales through distribution and has extended its relationship with Future Electronics Inc. as part of a strategy to emerge from the financial restructuring it completed in May.
During the 14-month proc- ess, the company converted nearly $300 million in long-term debt and interest into equity. In addition, Zilog geared its focus toward new product lines and began searching for a distributor that could provide engineering, logistics, and programming support.
The new roadmap steered Zilog from high-end communications ICs to embedded controllers, where it now spends 90% of its R&D dollars. Among the supplier's new product offerings is a high-performance Z8 family of general-purpose microcontrollers scheduled for release next month.
"The new product families require more support from distribution," said Mike Burger, president of Zilog, San Jose. "I expect sales through distribution to increase to 50%, up from 40%, in the short term."
Burger said Zilog signed a distribution agreement in North America with Future Electronics as a "proactive attempt to get the channel focused and prepared for the 8-bit microcontroller product launch." The agreement with Future, which takes effect Oct. 23, extends the companies' existing European relationship.
"Our exclusive North American relationship with Zilog is an exciting development for Future Electronics and is consistent with our strategy to provide customers with leading-edge technology, superior service, and a design-in focus through our Technical Solutions Management team," said Steven Segal, executive vice president, office of the chief executive, at Future, Montreal.
In addition to Future, Zilog will continue to be represented in North America by catalog distributor Digi-Key Corp., Thief River Falls, Minn. However, Zilog said it is dropping broadline distributor Pioneer-Standard Electronics Inc., Cleveland, which has represented the company in North America the past two and a half years.
Historically, Zilog's North American sales contribute 45% to its overall revenue, vs. 18% from Europe, 2% from Japan, and 35% from Asia. Since the product shift, Zilog has increased its gross margins from the mid-teens in early 2001 to 44% for the quarter ended June 30, 2002. The company posted $38 million in revenue and pro forma net income of $3.4 million in its latest quarter.