Fresh from a merger that pairs a long DSP licensing history with platform-level design expertise, the newly combined ParthusCeva is eager to exploit what it believes will be the next evolution in system-on-chip signal processing.
That evolution, triggered by a maturing semiconductor IP (SIP) market and the migration of DSP technology into virtually every communications-related application, will enable the company to sit alongside SIP powerhouses ARM and MIPS Technologies, ParthusCeva's executives claim.
But before it can achieve that status, the company must confront a host of challenges in an industry in which licensable-DSP alternatives are increasingly abundant, customers are struggling to roll out new products, and Parthus-Ceva's own core market--cellular handsets--is experiencing slower growth.
"We believe we have the architectural franchise, the overall technology portfolio, and the customer relationships for a very strong upside potential as industry demand recovers," said president and chief executive Kevin Fielding.
"DSP cores are the semiconductor engine for several high-growth market applications, including such areas as wireless communications, mobile computing, consumer and multimedia, and computer networking. ParthusCeva is perfectly positioned to deliver these solutions," Fielding said.
ParthusCeva's official headquarters is in San Jose, where the company maintains a sales and marketing presence, but the bulk of the design and research and development work is being carried out in Tel Aviv, Israel, and Dublin, Ireland. The company was formed earlier this month through the merger of Ceva, formerly the licensing division of DSP Group, Santa Clara, Calif., and Parthus Technologies plc, a Dublin-based provider of platform-level IP.
Together the companies have more than 90 licensees, although only 15 bear royalties. ParthusCeva will not disclose specific revenue projections for the combined company until next month, but executives believe it is now the third-largest IP house, trailing ARM and Rambus but larger than MIPS.
Elaine Coughlan, ParthusCeva's chief financial officer, said the company had combined revenue of $44.6 million through the first three quarters of 2002, and a pro forma net income of $274,000 excluding special charges for amortization and restructuring. An annual revenue run rate of around $60 million is anticipated, according to analysts.
In addition to its DSP cores--Teak, TeakLite, Palm, and the Cedar core, which will be introduced in 2003--ParthusCeva will offer a suite of subsystem solutions and application-specific platforms targeting areas like wireless LAN, Bluetooth, MP3, GPS, and voice-over-Internet Protocol, in addition to the company's signature market, cellular handsets.
ParthusCeva's core technology is the second most prevalent DSP architecture used in cell phone handsets, trailing only Texas Instruments Inc.'s TMS320C5x, according to Forward Concepts Co., Tempe, Ariz. ParthusCeva has seen its share in the market drop, however, from 20% in 2000 to 15% in 2001, and faces the potential defection of at least two key customers, said Forward Concepts analyst Will Strauss.
"Their two biggest licensees, Infineon and Philips, have both announced plans to use other chipsets for handset designs," Strauss said. "I think [ParthusCeva] will be hard pressed to stay even until they can get a head of steam up on some new licensees."
ParthusCeva is also facing increased competition from such DSP licensing houses as Adelante, Improv, and 3DSP, as well as from ARC, ARM, MIPS, and Tensilica, all of which are now providing processor cores with DSP capabilities.
The SIP market has grown from $300 million in 1998 to more than $1 billion this year, according to Gartner Dataquest Inc., San Jose, and IP as a percentage of semiconductor R&D budgets has grown from 2% to 8% in the same period. Some of the growth can be attributed to an increase in IP offerings, although royalties have slowed in the past year as the electronics market has softened.
"It remains a very tough business," ParthusCeva's Fielding said. "It's not necessarily that we're running into more competition; if anything, there's less competition. And it's not an issue that we're running into enormous price pressure. We are having difficulty in actually getting deals closed because of cost and budgetary pressure within our customer base."
Gideon Wertheizer, the company's executive vice president and chief technology officer, said that as markets begin to grow again, ParthusCeva will be among the first to benefit because of its legacy business.
"People lock into a processor architecture and don't want to switch from one processor vendor to another," Wertheizer said. "We were the first with the idea of a licensable DSP core, and people have now asked why we need [to offer] design services, and why we don't just stick to IP.
"But our approach is to have a one-stop shop. There aren't many companies in the world that can afford all the disciplines--DSP, CPU, mixed-signal, software--which are all competencies that we can leverage."