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 What Would Joe Do?
Peggy Aycinena
Peggy Aycinena
Peggy Aycinena is a freelance journalist and Editor of EDA Confidential at www.aycinena.com. She can be reached at peggy at aycinena dot com.

Altium: Balance underpins the new paradigm

 
January 17th, 2013 by Peggy Aycinena

If you design boards or embedded software, you undoubtedly know Altium. You may not know, however, that these last several years have been a period of immense growth and change at the company. Following a corporate move to Shanghai in 2010, last year saw Altium’s revenue increase by 21 percent and a new executive team installed.

On a recent call, Altium CEO Kayvan Oboudiyat, CTO Aram Mirkazemi, and CMO Frank Hoschar described the philosophical underpinnings driving all of this change. Oboudiyat started with the view from 75,000 feet.

Kayvan Oboudiyat: Electronics is at the heart of a smarter world, and a smarter interface to the web and the design ecosystem, an Internet of Things emerging at the global level. Altium sees itself as a provider of tools and technology to the device-design ecosystem. We are part of the Internet of Things phenomenon, rather than an operator of it. The basic elements of the ecosystem, as we see it, are the CAD companies that provide the tools for design and a link to the [rest of the design chain].

Aram Mirkazemi: Our path to the ecosystem of devices, a phenomenon happening from all directions, is just the next stage of evolution in the web and the world that we live in. Our devices connect to the web, and the web to our physical environment. Altium is quite active in building a foundation to orientate its tools and technology along those directions. We have always been very aware, active and motivated in taking advantage of such broad movements.

The company was born in the 1980s with the emergence of the PC. Very early in the 1990s with the emergence of Windows, Altium was the first company to move PCB and design onto the Windows platform. In fact, we moved to Silicon Valley in order to take advantage of that.

[At the time], we wore window-cleaning outfits in our booth at DAC, then a very formal setting of suits and ties. Seeing us with our cleaning equipment made an impression on attendees, but we were officially told we did not have the appropriate garb. We were quite passionate [about our technology], however, we introduced the EDA platform, and we worked really hard on it.

Prior to that, all design systems were still point-to-point integration, one tool feeding to another with back annotation to the next tool. But we had an integrated platform in those days and that is what we worked on. It was the basis for the next generation [of our technology], what we called DXP Platform.

Altium invested heavily in developing a design platform integrated into one environment, the seamless integration of a number of processes, extended through our 2010 acquistion of Morfik. Now the next generation of the DXP platform includes the web and an ecosystem. Very central to [it all] is the engineering content management system, which is unlike any other we see out there.

We have moved to a content-driven subscription model for the delivery of services and updates. Before, we had upgrades every couple of years with major points of progress. We now have a continuous stream of updates through subscription.

We have also made supply-chain investments, integrating design tools with suppliers of parts. That’s reaching the point of maturity, so we now put ourselves in the heart of Asia Pacific where we feel the ecosystem will be the most relevant to helping Chinese suppliers. [And previously], we were a closed as a system, not open to the outside world – or if we were, it was very limited. This area is now a change of paradigm [for the company].

Kayvan Oboudiyat: This new paradigm for Altium has several key underpinning concepts – one is openness and the other is balance. ARM had touched on the idea of opening our platform and technology, so third parties can use our our platform and develop apps. This is something very different from the past for us.

For over 25 years, Altium has had a closed platform and technology. This has helped us to get where we are today, but 3 years ago we decided that strategy had to change. The first step was to purchase Morfik and bringing their portal and technology into Altium.

Another facet of openness is actively pursuing strategic partners to help expand our reach, to form complementary partnerships with supply chain people, and devices. This is also an area where we have not focused on the past, but we will now be changing and pursuing strategic partnerships actively. Also, we will be forming partnerships in the financial world to have access to capital if we need it.

Of equal importance is the restructuring of our internal organization for openness, to create capabilities to create these strategic partnerships. These are the key underpinnings of [the evolution of Altium]. Now I will ask Frank to talk to the custom-centric side.

Frank Hoschar: Altium has created a platform, a quite successful platform with 80,000 users worldwide with teams in all major markets. Now we have a balanced presence in all markets.

Previously, we were very product-centric although there were a lot of inquiries for partners, [which we did not accept]. Now with our new initiative, one of our formulated strategies is to [pursue more partners].

For example, we are working much more closely with SolidWorks channels in the States – a true 3D mechanical product and a true 3D circuit board product, now much more closely linked through channels and training, with all the necessities that come with it.

Kayvan Oboudiyat: Balance underpins the new paradigm. Since the formation of the company, we’ve always been very much focused on development of technology and products. This has been a strong strategy for us.

You may know that in 1999, we listed Altium, became a public company, and raised a significant amount of money to do important acquisitions. Over the past ten-to-twelve years, we have heavily invested in further development of technology and putting different types of features into our applications. The last step, the acquisition of Morfik in 2010, gave us the capability on the web front.

But we’ve been very lucky. Our shareholders have been very tolerant and patient with us, and supported us for more than a decade. Now we need to turn from being a one-dimensional company, focusing on just technology, to being a three-dimensional company. Developing products is still key and the most important factor of our business, but now we need to form appropriate strategic partnerships to reach those companies who complement [our business and technology]. These are two dimensions [of our strategy].

The third dimension is that we have to make sure as a company that we have financial strength. Over the past few years, at no time has the share price of Altium represented the true value of the company. It’s been a huge gap between the value and the share price, although we have seen a significant improvement because we started from a very low basis. Our 52-week high and low – the low was around 20 cents and the high was at $1.30, but even at $1.30 that is not anywhere close to the true value of the company.

Now we believe we are on the right path in an area where we are sure we are financially strong. We have a 3-year plan, which is focused on implementing all of the things that we have discussed today. Overall, we will be focusing on these three areas – technology, strategic partnerships, and financial strength.

For the same reason that we have to develop technology, we also have to provide ROI for our investors. As we deliver on our plan, and on the financial front to our shareholders, we expect to see that share price continue in the right direction. We have been around for more than 25 years, and we would like to be around for another 25 years.

WWJD: Would the company instead consider being acquired by a company like Mentor or Cadence?

Kayvan Oboudiyat: As a public company, you cannot rule out an acquisition. At the end of the day, if someone puts an attractive enough offer on the table, that’s the reality of life, the commercial reality of life. Whether that is something that I or the key stakeholders within the company like it or not, it is what it is. But we have enjoyed our independence for the last 25 years.

And while we have respect for Mentor and Cadence, their main focus is at the chip level particularly. Yes, Mentor is active at the board level, but we see ourselves as a strong player, creating a different sort of offering in the EDA industry.

There are 80,000 users of our platform, so in terms of the seats and usage – although not necessarily in revenue – we have a large market share and would like to keep that position and expand it and make sure that our products are the products that every engineer around the world uses. They can afford to have our product and use it for design and this idea is very dear to our heart

WWJD: So what are the technology initiatives?

Aram Mirkazemi: This is one area that we are very passionate about, leveraging around our 3-dimensional technology initiatives and extending our board level support for multiple board design. These days, [products] are comprised of more than a single board, but are all part of one system. It’s rare today to have a single board. We are very well positioned to extend our position [in this area] with our ability for designers to probe signals from one board to another.

WWJD: And where are these new technology developments happening?

Aram Mirkazemi: We have moved our whole development team from Australia to China, so we actually are doing the development there, although we have an office in Europe, in the Netherlands, where they focus on FPGAs and embedded, in particular. [Overall], we have people around the world with the main operations in Shanghai.

WWJD: What motivated the move to China?

Kayvan Oboudiyat: First of all, we’ve been doing business in China for 15 years. Frank and I came to Shanghai in 2003 and started our office there, so [our presence in China] is not new and not something decided overnight. We’ve been developing business there for a number of years.

Now that China has achieved the position of the manufacturing platform of the world, as did Japan back in the 1970s and 80s, if a company’s core competency is design-related [they will consider being there]. For those companies who wanted to be part of the [emerging] manufacturing capability of China and moved there ten-to-fifteen years ago, they are now benefiting from the right move at the right time. For those who did not move into China, now the window may be closing. By the end of this decade, the opportunity may not be there.

This is a characteristic of Altium. When we moved to Silicon Valley, it was a big move as well, but it put us on the map in the U.S. This is another such move – a bold, risky, expensive move – but we did not make it without careful thought. It’s a move for the next decade.

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