TUCSON, Ariz. Texas Instruments Inc. officials are optimistic that their $6.1 billion investment in Burr-Brown Corp. will pay off, insisting they acquired more than op amps and data converters.
An overarching strategy has begun to surface for the combined analog operations of the two companies. It emphasizes Burr-Brown's role in capturing high-end "early adopters" in emerging markets and TI's role in supplying standardized building blocks for these markets as they ramp up and mature. That role would extend even to helping end-equipment builders with customizations.
The mood was exuberant at an event here this week that included key TI, Burr-Brown and Arizona figures. Burr-Brown officials discussed the company's history, its 25,000-user customer base, its contribution to south Arizona's economy and cultural setting, and especially its future under TI. Stockholders formally approved the deal 1.3 shares of TI stock for every Burr-Brown share outstanding on Aug. 24.
Burr-Brown president Syrus Madavi was credited with steering the company in the early '90s from a heavy reliance on military, industrial and test instrument customers to a broader focus on communications, PC peripherals and digital consumer products. From a downward spiral, Madavi helped build the analog components business from $135 million in 1994 to $280 million in 1999.
The company recognized the impact that TI's DSP and analog signal processing capabilities could have in the communications and digital consumer markets Burr-Brown serves.
Op amp and data converter expertise, coveted by TI, gave Burr-Brown an enviable position in high-end and professional audio. By partnering with companies like Pairgain (Tustin, Calif.) and Paradyne (Largo, Fla.), Burr-Brown obtained "early visibility into emerging applications," Madavi said. By supplying high-performance building blocks to these customers, Burr-Brown got a two-to-three-year head start in the digital subscriber line market. "We got to participate way, way earlier," he said.
TI will cultivate Burr-Brown's ability to offer high-performance building blocks like high-resolution data converters and wide-bandwidth amplifiers, said Dan Reynolds, TI's vice president in charge of analog and mixed-signal products. Burr-Brown's high-end products serve as a "beachhead" in these markets, he said.
Dataquest Inc. identifies TI as the world's largest supplier of analog and mixed-signal ICs, with about $2.8 billion in revenues in 1999. But in the data-converter market, TI's $113 million shipments in 1999 lagged far behind the $465 million of Analog Devices Inc. TI's acquisition of Burr-Brown will elevate its position in data converters, Dataquest said, as Burr-Brown shipped $113 million worth of data converters in 1999. But TI and Burr-Brown principals said the attraction goes beyond data converters.
Standard linear components help end-equipment manufactures get first-generation products to market quickly, which is particularly important in new markets where standards may shift and prototypes need to accommodate an array of end-user choices. But this invariably sets the stage for high-volume manufacturing even customization through the use of application-specific standard products in the subsequent product generations.
Some applications of analog and mixed-signal expertise like cellular handsets, hard-disk drives and printers use custom-crafted components. The TI-Burr-Brown combination can intersect new mass-market applications at a number of points, Reynolds said, from small-volume prototypes to high-volume customs. The company's manufacturing power would let it ride down the cost curve, he said, inevitably becoming the competitive differentiator for Burr-Brown in precision analog: the ability to churn out tens or even hundreds of millions of devices for new consumer applications.
"Let's also remember this is a diverse market, requiring a broad range of products," said Alun Roberts, TI's strategic marketing manager. The merged companies are targeting DSL, motor control, cellular basestations, DVD players and recorders, digital cameras and camcorders, and dense wavelength-division multiplexing for fiber-optic networks.
Madavi said the TI deal was not an easy decision for Burr-Brown's board. What clinched it, he said, was not just an obvious business and product synergy, but a perception that TI was committed to success in the analog markets his company served.