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Cirrus returns to its audio roots

Posted: 16 Feb 2006 ?? ?Print Version ?Bookmark and Share

Keywords:David Lammers?

Almost everything new that Cirrus Logic Inc. tried over the last decade didn't quite work out. Now, with a renewed focus on audio-related markets, Cirrus is going back to the analog and mixed-signal roots put down by Crystal Semiconductor, a Cirrus acquisition 15 years ago.

After withdrawing from the cutthroat arena for HDD silicon five years ago, Cirrus acquired three startups with plans to compete in the DVD silicon and home wireless-networking markets. The plan was to take the company's expertise in disk drives and audio, combine those skills with the acquired video technology and compete in the high-volume DVD chip market. The consumer thrust would rely on Cirrus' well-established presence in A/D and D/A conversion and other mixed-signal parts to fund the new DVD thrust.

It didn't work out. Taiwan's MediaTek Inc. did a better job creating integrated DVD-player silicon. Last year, Cirrus spun out its video intellectual property to Magnum Semiconductor, which continues to compete in the recordable DVD chip market.

While Cirrus was struggling with its video strategy, competitors in Austin were swooping in to hire many of Cirrus' design engineers. Silicon Laboratories, itself founded by three ex-Crystal Semiconductor engineers nearly 10 years ago, recruited from Cirrus' engineering team, as did SigmaTel and D2Audio. Cirrus itself went through several layoffs, cutting 10 percent of its employees three years ago. Employment at Cirrus went from 1,500 in 1996 to about 400 now, including 240 engineers.

"It was horrible," Cirrus CEO David French said of the hiring blitz by his Austin-based competitors. "We felt like we were under siege."

Negative synergy
Wall Street was unhappy with what French called the "negative synergy" between the steady analog and mixed-signal businesswith defensible gross margins of 60 percentand the volatile DVD consumer-chip business.

Wall Street has come to value analog. "Five years ago, people didn't fully appreciate the analog business," French said. "It is now much more attractive than it once was."

Indeed, Cirrus' stock price has roughly doubled since March, when the company first announced plans to sell its video assets to an investment group that formed Magnum Semiconductor.

A Cirrus sales manager, who asked not to be identified, said morale has soared over the past nine months as the tighter focus has paid off. Within the Austin engineering community, he said, Cirrus' reputation has risen to the point that a few employees who had left for greener pastures are starting to trickle back to Cirrus.

Not everyone is so bullish. "Cirrus is in a death spiral," said a former top manager, who also requested anonymity.

An Austin-based venture capitalist blames the board of directors for allowing the failed acquisition strategy to go unpunished. French should have been fired, this VC manager argues.

Asked about those criticisms, French acknowledges that "our performance was not very good for a number of quarters. It wasn't fun. But I felt duty-bound to stick it out and I'm thankful that the board stuck with me."

About two-thirds of Cirrus' 2005 revenue of roughly $200 million came from audio applications, with the remaining third from various industrial markets. The audio IC market is expected to grow about 15 percent annually in the coming years, French said, with portable MP3 players and home theater systems leading the way.

New codecs
At the Consumer Electronics Show, the company touted its new line of low-power-consumption codecs aimed at the MP3 player market. French said that as much as two-thirds of the market for MP3 player silicon is likely to go to highly-integrated MP3 chips from SigmaTel and other vendors.

But other system companies will create higher-quality MP3 players with discrete silicon, including Cirrus' codecs, as long as the cost penalty is small for the extra decibels of quality.

New markets also beckon. Cirrus has worked with satellite radio carriers Sirius and XM Radio to create reference designs for systems that convert a satellite audio feed to the MP3 format.

The market for audio-friendly wireless headsets is also on the horizon.

"Wireless headsets do become an interesting application as the cellphone becomes an entertainment center with television and music capabilities," French said. One school of thought holds that point-to-point connectivity will take root in the handset market, with battery life preserved by sending uncompressed audio to a Bluetooth-enabled headset. The headset, with a D/A and other silicon, would process the audio stream rather than use processor cycles in the cellphone itself.

Home studios are another growing market, using a PC as the platform for storing an amateur musician's chords. By leveraging high-bandwidth USB interfaces, the market for affordable home studio equipment has grown rapidly.

Other companies are using the PC as the center for add-on home theater systems that provide five-channel audio for $200 to $400.

- David Lammers
EE Times




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