NEW YORK-RadiSys closed March 1 on a $28 million purchase of IBM Corp.’s Arctic business, the
first of up to 10 acquisitions the Hillsboro, Ore., company plans during the next three years, primarily to bolster its
presence in telecommunications.
“Our first interest is telecommunications-base stations, infrastructure,”
Brian Turner, RadiSys’ chief financial officer, said of the company’s expansion and acquisition strategy during a
briefing March 4 at the New York Society of Security Analysts meeting.
Arctic, which had about $40 million in
revenues last year, manufactures wide area network telecommunications infrastructure products. With Arctic under its
corporate umbrella, RadiSys expects to see business from telecommunications, its fastest-growing customer segment,
grow from 12 percent of its revenues in 1998 to 50 percent this year, Turner said.
“This (acquisition) adds
some significant telco technology, like [Signaling System 7) stacks, which control features like call waiting, and
[Advanced Intelligent Networks], Turner said.
The 12-year-old RadiSys defines itself as a designer and
manufacturer of “invisible” Intel Corp.-based computer components and subsystems that original
equipment manufacturers embed in smart products. Intel is the company’s largest shareholder, with an equity stake of
about 15 percent, Turner said.
RadiSys earned net income of $15.4 million on revenues of $125.4 million in fiscal
year 1997. Its year-end 1998 results for the latest fiscal year, which ended Dec. 31, are due out by the end of this
month.
In 1997, RadiSys acquired Sonitech International Inc., a digital signal processing company. Sonitech’s
founder, Yogendra Jain, now is vice president of what RadiSys calls its “center of expertise” in DSP
hardware and algorithms for voice compression in telecommunications applications.
“We are expanding into
the DSP business, which is important to telecommunications,” Turner said.
While outsourcing of
manufacturing by OEMs already is commonplace, RadiSys seeks to capitalize on the emerging trend of OEM design
outsourcing, Turner said.
“The Nokias of the world have never outsourced design before, but they are now a
customer of ours. (Likewise for) Lucent (Technologies Inc.) and Cisco Systems, which have become our
customers,” he said.
No single customer or product accounts for more than 10 percent of RadiSys’ revenues
today, Turner said. Nokia, he added, could possibly become a 10 percent customer.
RadiSys also counts Harris
Corp., Hewlett-Packard Co. and Nortel Networks among its clientele, with which it has multi-year contracts, while
retaining ownership of customized designs it develops for them. RadiSys also does manufacturing in-house.
Early
last year, it realigned its engineering and marketing staff into three vertical market divisions, including one focused on
telecommunications. In this sector, RadiSys’ offerings include Intel-based controllers, Microsoft Windows NT-based
real-time software, DSP input/output modules, network input/output interfaces and voice coder algorithms.
Turner
said RadiSys also is part of a telematics joint venture with Intel and Microsoft “to put a true, on-board computer
… in ambulances, limousines, 18-wheelers … so the driver can control things like a cellular phone, global positioning
system, (etc.)”
Intelligent highway systems are another area of telecommunications that RadiSys sees as a
business opportunity, he said.
The telecommunications marketplace looks “very hot for the next four to five
years,” Turner added. The overall market for custom-designed and made embedded computer products today in
all industry sectors is about $5 billion, he said.
