BY PAT BROCKETT President and Chief Executive Officer, Zarlink Semiconductor, (former Mitel Semiconductor), Ottawa

In the communication-semiconductor arena where Zarlink Semiconductor competes, the need to stay connected-via wired or wireless-in every aspect of our lives continues to drive growth opportunities. The core of the network is going optical, wireless technology is popular everywhere and, since much of the world still hasn't made a phone call, demands for traditional time-division multiplexing and voice technologies remain strong. The ongoing need for communication ICs will bring us out of the downturn and propel us forward.

What's disturbing is that some companies are discovering that the business models of expansionary times are not suited to weathering stormy conditions. Debt-serving costs are high, revenues depend on a few large customers, the corporate portfolio is too narrowly targeted, margins are too tight, key products are becoming commodities and the corporate geographic selling base isn't broad enough.

Mitel Corp., Zarlink's parent, began building its merchant semiconductor capabilities in 1993 and deliberately adopted a balanced approach to its business. With a broad base of over 3,000 customers, no single customer accounts for more than 10 percent of sales, and geographic revenues are nearly evenly split among North America, Europe and Asia.

Zarlink competes in the wireline, wireless, optical and medical IC spaces, with high-performance analog, mixed-signal and digital chips. Our balance sheet is strong, with cash in the bank and no debt, giving us the flexibility to pursue carefully selected strategic opportunities.

At this juncture, the most critical task for any company is conducting a brutally thorough portfolio review. The rollout of broadband interactive TV services and the anticipated switch-off of analog networks, beginning in Europe then spreading globally, will boost the market for digital and integrated digital television (iDTV) to more than U.S. $4 billion by 2004, up from $800 million in 2000. There's also a huge potential market-growing to $1 billion in four years-for very short-reach optical interconnect products that will help solve the Internet-induced bottleneck in terabit-class switches, routers and transport equipment.