VLSI Technology

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

~ the goodbye ~

I write computer vision software for drones, and the boards I put it on run ARM cores. I had still never heard of VLSI Technology until I went looking for it, which is what tends to happen to a company sitting two layers beneath anything you actually touch. It was one of the three shareholders who funded Advanced RISC Machines in 1990, alongside Acorn and Apple, and for a period it was the only manufacturer making chips with ARM cores in them. Its name was printed on none of them.

Jack Balletto started it in San Jose in 1979 with two colleagues from Synertek, Dan Floyd and Gunnar Wetlesen, all of them out of Fairchild before that. It reincorporated in Delaware in May 1987 as successor to the original California business, which is the kind of paperwork that tells you a company has stopped being a startup. By the mid-1990s it ran its own wafer fabrication in San Jose and in San Antonio, Texas, and employed around two and a half thousand people.

What it sold was not a product in the way a phone is a product. VLSI made application-specific integrated circuits: you came in with a thing your device needed to do, and the company's libraries and design flow turned that into silicon with your name on it and VLSI's name nowhere. Ericsson alone was 28 percent of revenue in 1998, with Nokia and Sagem on the customer list behind it. Several hundred million dollars a year of chips, and the brand recognition of a part number.

~ the chronicle ~

~ other people's silicon ~

The design tools were a real business on their own, and in 1991 VLSI spun them out as Compass Design Automation, which was sold to Avant! in 1997 and eventually wound up inside Synopsys. That left the parent as a chip company that had given away the part of itself most likely to still be valuable in twenty years, which is a thing semiconductor companies did repeatedly in that decade.

The revenue line explains the ending better than any narrative does. 1994 brought in $542.3 million, 1995 $670.3 million. Then 1996 came in at $669.0 million and lost $49.5 million doing it. 1997 was the best year the company ever had, $712.7 million with $71.8 million of net income. And 1998 fell 23 percent to $547.8 million, with profit down to $20.9 million and headcount cut from roughly 2,500 to roughly 2,200. A company that peaks and then drops by a quarter in a single year is a company with a bid on it inside twelve months.

~ the ARM shares ~

ARM Holdings went public in April 1998, and VLSI's filing describes its position in the flattest possible language: as an early stage investor, its holding equated to 2.5 million shares at the time of the offering. It sold about a fifth of them into the IPO for a gain of nearly $4.7 million, then sold more in the fourth quarter for a further $22.4 million. The carrying value before that, the 10-K notes, had not been significant.

So the books treated an eight-year-old stake in what became the dominant processor architecture of the mobile era as a rounding error that happened to come good. That is not hindsight being clever about it. VLSI did in 1990 what a fab should do when a customer is too small to pay cash, which is to take equity instead, and it had no particular reason to expect that this one customer would outgrow every company at the table.

~ two prices ~

Philips already owned a piece of the company when it made its move. On 25 February 1999 it put $17 a share in front of VLSI's chairman, a large premium on the trading price, with a deadline of about a week. The board did not take it. On 5 March, Philips went over the board's head and opened a tender offer directly to shareholders, and asked that the rights plan standing in the way be dismantled.

Six weeks of that produced a second number. The merger agreement is dated 1 May 1999 at $21.00 a share in cash, and a board which had refused $17 in February signed for $21 in May, which is roughly what a defense is for. The tender closed on 1 June with Philips and its affiliates holding about 93.2 percent of the stock. On 17 June the acquisition vehicle merged into VLSI, every remaining share converted into the right to receive $21.00, and the company became a wholly owned subsidiary of Philips. Philips Semiconductors was spun out as NXP in 2006, and vlsi.com now redirects to an unrelated audio-chip firm in Finland.

@}-->--

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

« previous  ·  random  ·  next »