on a LinkedIn networking group for former Chipidea employees, several agreed to talk to EE Times on the condition of anonymity.
Integration was a key issue from the start, they said.
MIPS licenses its digital processing cores. Chipidea licenses analog and mixed-signal IP. Said one former Chipidea engineer: "There was no overlap whatsoever in our businesses."
He offered the following analogy: "If you are an aircraft manufacturer, you design a plane, manufacture it and you're used to the lifestyle of selling one or two aircraft a year to guys with money." Then, "you acquire another company . . . but in order to make revenue, you suddenly realize that you'd have to sell 10,000 airplanes a year."
Following the acquisition, MIPS executives still believed they were in the same semiconductor market segment, the former Chipidea employee said. "They never understood that the daily demand and daily grind of meeting so many different customers' needs in the analog business required another sales team."
Contrary to the claims of MIPS executives that "Chipidea, even after the acquisition, was operating as a stand-alone business with its own marketing, finance, R&D and engineering organization," another former Chipidea employee said MIPS early on insisted on the integration of the companies' sales forces, "which turn[ed] out to be a disaster."
As early as the fourth quarter of 2007, MIPS executives already noted in conference calls with financial analysts "that the integration of the two sales organizations was not working," the source added. "Quarter after quarter, they kept talking about how difficult it was, but they absolutely did nothing about it."
It's not that Chipidea executives didn't understand the importance of integration, but in their view the best solution was first "to preserve what you have," then to assimilate.
Former Chipidea employees expected to retain a semblance of their former corporate identity while working to expand the merged company's business. They also hoped to become an integral part of "a virtual system semiconductor company," operating on the assumption that more analog IP blocks would be required in future systems-on-chip.
MIPS, recognizing the growing importance of analog technology to the semiconductor market, expected Chipidea to quickly contribute to its revenues. Indeed, many U.S. companies understand that acquisitions are a tactic for boosting next quarter's financial results.
Lisbon-based Chipidea generated more than $25 million in revenues in 2006, including an annual compound growth rate of 50 percent. The analog and mixed-signal IP market grew 34 percent in 2006, accounting for 16 percent of the overall design IP market, according to Christian Heidarson, a senior research analyst at Gartner.
In 2007, MIPS wasn't alone in pursuing Chipidea. Synopsys and others were also in the running to acquire Chipidea. The result was a bidding war, according to industry sources. Even though MIPS wasn't the highest bidder, Chipidea's CEO at the time reportedly pushed for the MIPS deal as a way to keep the company intact. MIPS paid $147 million in cash.
Earlier this month, MIPS sold Chipidea to Synopsys in an all-cash transaction totaling $22 million.
Some industry watchers are critical of MIPS for buying Chipidea.
"Chipidea turned out to be a bad idea," said Linley Gwennap, president and principal analyst at The Linley Group. "MIPS picked the wrong company to buy and quickly discovered that what they thought was a profitable business was actually a sinkhole.
"Worse, dealing with these problems caused MIPS to take its eye off the ball in the CPU segment." According to Linley, "For MIPS, the sale of its analog business is a classic case of addition by subtraction--now the slimmer company can focus on its core business."