SigmaTel

» see sigmatel.com as it lived, on the wayback machine

~ the obituary ~

SigmaTel sold chips, which means almost nobody who depended on it could name it. It started in Austin in 1993 doing contract design work for other people's silicon and began making parts of its own in 1995. The late 1990s went on telecom and modem chips that led nowhere in particular. A new chief executive, Ronald Edgerton, arrived in early 2001, killed the ADSL system-on-chip the company had been betting on, and pointed everything at two markets instead: audio codecs for PCs and the controller chips that run portable music players.

That second bet paid immediately and enormously. Revenue went $100.2 million in 2003, $194.8 million in 2004, then $324.5 million in 2005, by which point 90.6 percent of it came from portable multimedia chips. The stock listed on Nasdaq as SGTL on 19 September 2003, and five months later a follow-on offering moved 8.5 million shares at $25.01 apiece, most of them sold by existing holders rather than by the company.

Then came $159.4 million in 2006 and $127.1 million in 2007, and on 3 February 2008 it signed a merger agreement with Freescale Semiconductor at $3.00 per share in cash. The stockholders approved on 21 April. Nasdaq's notification of removal and the deregistration filing were both stamped 30 April 2008, and Freescale announced the deal complete the next day.

~ the case file ~

~ the socket ~

The first iPod shuffle shipped in January 2005 with a SigmaTel decoder inside, and SigmaTel parts stayed in the shuffle line from then on. How that arrangement ended got settled in public, by accident, in a research note. In November 2006, after a teardown of the second-generation clip-on shuffle was published, a Wedbush Morgan analyst told SigmaTel's own investors that the processor in the new one looked like a Samsung part, and that the socket was gone. An analyst at another firm had warned them it was coming nine months earlier.

Losing Apple was the loud half. The quiet half was the PC audio business, where SigmaTel codecs sat on the sound side of a great many mid-2000s laptops. If you reinstalled Windows on a machine from that era and went looking in device manager to find out why there was no sound, the name in the sound section was often this company's. SigmaTel sold that entire codec line on 31 July 2006, in the middle of everything else going wrong. Codecs had been 12.1 percent of that year's revenue.

~ the price war ~

What took the portable chips away was not Apple but Zhuhai. Actions Semiconductor built the same class of part for less, and SigmaTel's answer in January 2005 was to sue, and to ask the International Trade Commission to investigate Actions' products at the US border. Actions attacked the patents and counter-sued. The companies settled on 20 June 2007. Every claim was dismissed with prejudice and the patents were cross-licensed in both directions, under a three-year standstill in which neither side would come after the other or the other's customers.

The 10-K describes the outcome without euphemism, as lost market share and sharply lower average selling prices, and the company's own accounting of its legal victory is that the dispute "resulted in significant legal fees and costs." Revenue fell 51 percent in 2006 and another 20 percent in 2007. There were 327 employees left at the end of it.

~ what three dollars buys ~

Freescale wanted the parts and the part numbers, not the company. SigmaTel went into the Multimedia Applications Division, the STMP chips kept shipping to the customers who had designed them in, and in 2009 the STMP3780 was renamed the i.MX233 and carried on into a new catalog under a Freescale name. Most of the engineering team was let go in February 2009. Freescale itself was swallowed by NXP in 2015, so the chip that ran your music player now has a lineage three corporate names deep and a datasheet that is hard to find under any of them.

The stock is the cleanest summary. Shares that institutions bought at $25.01 in February 2004 were cashed out at $3.00 in April 2008, four years and one price war later, and the whole company changed hands for a figure the trade press put near $110 million. The $324 million year sits between those two prices.

@}-->--

              )
             (_)
            .-'-.
            |   |
            |   |
            |   |
            |   |
          __|   |__   .-.
       .-'  |   |  `-:   :
      :     `---'     :-'
       `-._       _.-'
           '""""""

« previous  ·  random  ·  next »