October 03, 2005
Catching Up with MIPS
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| by Jack Horgan - Contributing Editor
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In the last fiscal year for MIPS which ended on June 30th the company had year-over-year revenue growth of 28% and went from a net loss of $1.5 million in the previous year to a net profit of $13.4 million. On September 6, the firm announced it had acquired First Silicon Solutions (FS2), as a wholly-owned subsidiary. FS2 specializes in silicon IP, design services and OCI (On-Chip Instrumentation) development tools for programming, testing, debug and trace of embedded systems in SoC, SOPC, FPGA, ASSP and ASIC devices. I thought that I would catch up with what had been going on.
I had an opportunity to speak with Casey Eichler, CFO and Vice President, and Mike Ukler, Chief Technology Officer. Prior to MIPS Casey had served as CFO and vice president of operations for Visigenic Software. He also held financial management positions with Microsoft Corp. and NeXT, Inc. Mike joined the MIPS Group of Silicon Graphics, Inc. in 1994 as director of engineering. Prior to that, he spent 15 years at Digital Equipment Corporation, working on SMP operating systems and system design, and as the lead architect for VAX microprocessor chips.
Would you give an overview of MIPS?
Casey: As you knowing coming out of SGI we kind of focused on the other half of the business instead of on the high end workstations and PCs design activity. What we focused on is developing and licensing processor architecture or MIPS architecture both the 32 bit and 64 bit architecture and then complete designs done by MIPS built on that architecture for the embedded space. We've kind of defined the embedded space as everything other than workstations, servers and PCs. In 1998 when we started this, we had just seen the first couple of waves in the embedded space. Printers, console games and cell phones were just starting up. We thought we saw and thankfully we were correct many
different markets starting to emerge. We really focused on getting ourselves into position. Obviously the things that you see today like DVD recordables and broadband devices, the automotive, digital cameras, set-top boxes - a lot of stuff that had traditionally been 8 and 16 bit have migrated to 32 bit arena. That's really been our focus and charter since we went public in 1998. You probably know we did a secondary transaction in 1999 and a final separation in a spin out from SGI in 2000. Right now we have no revenue from SGI, no SGI ownership. We are 100% publicly owned and focused on the charter I just talked about. A big piece of that has been to develop 32 bit and 64 bit market
leading products and then make sure that people have the ability to perform in two critical ways. One is to differentiate in their design ability. In the MIPS architecture or the core designs that we've done we think enable that. The second thing is to accelerate time to market which in the consumer space is very, very important. That's a little bit I think where FS2 comes in. FS2 helps bring to reality some of the performance story and application performance. That's not only in some of the older family like 14 and 24K but we are also currently doing design work around multithreading and they play a big part in trying to realize value and application performance from multithreading.
But FS2 also provides us with another piece in our complete platform strategy. They've got several different products; you can get the details from Mike.
They have been very strong with several of their products in design services, development tools, testing, debugging and tracing both on and off chip. That what's they are all about. It's part of the story.
You have targeted a wide range of end user applications. Is it the same product across the board?
It really depends upon the vertical market and the application in that market. For example take the cable set-top box. A MIPS processor can provide many different functionalities within the set-top box. But depending on what type application you are trying to drive and what kind of functions you are trying to provide in the box with a MIPS processor, it could be anywhere from our low end 4K family up through our 24K family which we recently talked about Scientific Atlanta using in some of their set-top boxes. The way we look at a vertical market and I will stay on set-top boxes as an example is that we try to look at OEMs who are market drivers or market leaders. In set-top boxes they
are clearly Motorola and Scientific Atlanta who combined have probably 70% to 75% of the market. There are other providers like Pioneer and PACE. That's really the market leaders from an OEM perspective. We then look at who the silicon suppliers are to these OEMs. Those are the people like SA, ATI, Broadcom, LSI Logic etc. We focus on either licensing one of our designs or our architecture for them to do their own designs to those OEMs. So in that market we have Motorola or Freescale, Broadcom, ATI and I mentioned SA. They are not shipping things yet but are working on that. We announced that in January. LSI, NEC etc. With that collection of people we have 75% plus of that market
today. That doesn't always have to be with one a specific product. We don't have a product that is a set-top box design if you will. Depending on the functionality that they need and use they may select from different product families, different products for different applications within a set-top box. We try to do designs that are general purpose. A customer could do or we could do an application specific extension that might add unique functionality to it but we don't try to limit our designs to a particular market or to a particular function.
You license both architectures and cores. What is the difference?
Fundamentally, if you think about it, an architecture gives you a series of blueprints so that you have the ability to design your own house. Sticking with that analogy, it might have designs for twenty different bedrooms, twenty different bathrooms, kitchens etc. You then will take that and put it together in a design that makes the house you want based upon your needs. That's an architectural license. You're only going to take an architectural license, if you want to differentiate in the way you design, in my example the house. If you know you want a three bedroom, three bath house and the way you want to differentiate is the way you design the furniture, landscape the yard etc,
you'll then license a core from us and then do the design, development and implementation around that. That allows you to get to market more quickly and not have to start and design everything from scratch. But it does take away from some of the differentiation you might be able to get in designing based on your own architecture. The people that tend to be architectural licensees tend to be people like Toshiba, NEC, Broadcom and Philips; the bigger players that are trying to differentiate with their own design capabilities. Others who are really trying to differentiate in the way they go to market or the way that they implement with our IP or other IP tend to be more core licenses.
Some people do both. Broadcom as an example in some markets do their own designs and in other markets they license our cores. They do both.
What is the revenue split between the architectural and the core businesses?
Predominantly, the revenues today are from core licenses on the license side. Obviously, royalties are centered on both. To choose an architectural license, as I mentioned, you really want to differentiate in your design and be chasing a pretty big market. You might spend $3 million to $5 million getting an architectural license with us maybe even more depending upon the rights you want. But that's just the start. You then need to get a design team and do a design. In today's market with mask costs and everything else you could be $30 million into a design, if you start with an architectural license and go from scratch. If you're doing a PlayStation Portable or a
device like that, it may well make sense for you to do that. It's basically a big enough market where it could make sense and indeed that's what Sony has done. But if you are looking to do VoIP chip or a broadband chip or something and differentiate it in some of the algorithms or some of the things that you're doing, it probably doesn't make sense to design the core. It makes sense to focus on the implementation with other IP.
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-- Jack Horgan, EDACafe.com Contributing Editor.
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