Despite a difficult business year John Bourgoin, chairman and chief executive officer of MIPS Technologies Inc., made sure the name of his processor core licensing company was prominent at the Embedded Processor Forum. SBN asked Bourgoin about how he and MIPS have reacted to the prolonged downturn.
SBN: You recently cut back about one third of the company's workforce (see May 15 story). What happened? Were you caught out by the downturn, having set initial licenses too low and royalty rates too high and then your licensees didn't hit their numbers?
Bourgoin: It wasn't a case of us setting initial license fees too low and royalty payments too high. It's a free market out there and you end up having two separate negotiations; one on initial licensing and one on royalties.
No, unfortunately companies just aren't doing big deals. Where they are doing deals they are single-use licenses, not fully paid up licenses. Companies used to look for the lowest cost over several designs and went for a multi-use license, and they paid up front. With the uncertainty in the market companies have been going for single-use licenses instead. Which can make a difference of between a factor of three to five.
In fact, our new license royalty numbers are coming up steadily.
SBN: So it was missing out on initial license payments that has hurt you in 2002 and 2003?
Bourgoin: If you look at the number of deals done per year since we went independent [of Silicon Graphics Inc. (SGI)in June 1998] it was 5 in 1999, 15 in 2000, 24 in 2001 and 32 in 2002. And it takes two to three years for those deals to start generating royalty revenue.
SBN: But not all deals go to royalty revenue.
Bourgoin: That's true. So between two years and i nfinity, but there is still a lot of potential to come through.
SBN: So if things were OK why were the cuts necessary?
Bourgoin: We were unprofitable and we decided we needed to do something about that. The custom design team was an asset when we span out of SGI. But as the cost of development escalated we couldn't find enough customers who would spend big with us. It was weighing down our profitability. We have put in place a plan to be profitable in the December quarter or soon after.
SBN: How many people are left at MIPS?
Bourgoin: One hundred and ten plus the custom team which is finishing off a contract. We didn't cut our synthesis team. We didn't cut our architecture team. We did cut sales and marketing. We also redistributed ourselves, from Europe and towards Asia.
SBN: Yes, you opened up and then closed down a Copenhagen design center fairly quickly.
Bourgoin: Yes we had the opportunity to pick up an experienced MIPS development team f rom LSI Logic [in 1998]. Jens Kjelsbak's team had developed the TinyRISC and MIPS-16. They were very good at hardening synthesizable architectures. The trouble is they were so prolific we quickly populated our catalogue with multiple variants of MIPS cores, almost to the point of overlap, and people just weren't biting.
But we also picked up and still have Algorithmics in the U.K.
SBN: MIPS stood alongside a lot of its big-name licensees at the Embedded Processor Forum. Surely the bottom-line indicates they just aren't paying enough for MIPS' intellectual property?
Bourgoin: They feel strongly that MIPS should remain independent; that there is a community. If they felt we were threatened financially I'm sure they would support us in some sort of way.
SBN: But after the announcement of the cuts how could you lift [MIPS workers'] morale?
Bourgoin: It's very difficult. I told the team that we had to adopt a start-up mentality. We are a start-up, but in the fortuna te position of having all this great legacy intellectual property, a long list of prestige customers and a name in the market place. We'd learnt that the custom high performance space is not a good place for IP. It's an expensive business -- high investment. It has to be done by a fabbed or fabless chip company that can make its money selling the entire chip.
SBN: You mentioned the redirection towards Asia. How's that being done?
Bourgoin: Through Taiwan and China. We did eight deals in Taiwan last year. We've had a direct office for a year in Taipei and we are working extensively with National Chiao-Tung University.
SBN: And what about China?
Bourgoin: We are in China but in China timing means a lot. When you get paid is important. In China right now we are seeding the ground.