It is not easy to beat Intel if you are running a company that many analysts and investors have written off as moribund and out of touch.
It is not easy to beat Intel if you are running a company that loses its chief executive to a heart attack just as he embarks on a risky strategy.
But Texas Instruments beat Intel. Twice.
And Texas Instruments, an early darling of the technology industry that later lost its way, accomplished this feat in bravura fashion, not by eking out a few extra percentage points of market share from Intel, the legendary silicon-chip giant. Instead, Texas Instruments scored throw-in-the-towel, pack-up-the-lab and sell-the-division kinds of victories.
That, in turn, has emboldened it.
"Rarely has a leader of a previous era succeeded in the next period," said Richard Templeton, a former salesman and engineer who rose through Texas Instruments' ranks to become its chief executive in 2004. "I think there will be a leadership change. If not Texas Instruments, why not?"
Why not, indeed. More to the point, how did Texas Instruments, which posted revenue of US$13.4 billion last year, arrive at the enviable position of considering itself primed and ready to assume Intel's mantle as standard-bearer for the entire chip industry?
In short, it pulled off its own resuscitation -- a decade-long effort -- by abandoning ill-fitting product lines, focusing more closely on its core integrated circuits business and linking up with large but underestimated companies eager to champion new uses for its chips. It dusted off a chip called a digital signal processor and convinced Nokia, which had yet to become the leader in cell phones, to make it the core of its products.
It dusted off a second under-utilized chip called a digital light processor and wooed Samsung Electronics, then a scrappy South Korean electronics company trying to conquer the American market, to use it in big-screen, high-definition televisions.
"Their efforts to get back to their IC roots by shedding so many other business lines could be characterized as `focused diversity,'" said David Carey, chief executive of Portelligent, a firm in Austin, Texas, that analyzes consumer electronics components. "Pretty much one basket, but a lot of different eggs."
For his part, Templeton says he believes that the path Texas Instruments is following is not only logical but also unavoidable. He views the entire technology industry as beholden to 20-year product cycles that introduce seismic changes. The mainframe computer business gave way to the minicomputer and then to the personal computer. Now, he says, the industry has entered the era of the hand-held entertainment and communication device.
"It's unforgiving," he advised. "You can argue that the PC era isn't ending, but it is."
By the early 1990s, Intel was forcing Texas Instruments out of the PC microprocessor business, and analysts considered the company roadkill in Intel's relentless drive to dominate computer chip manufacturing. That crushing defeat forced Texas Instruments to reorganize and eventually go for what became the next big thing: cellphones.
Jerry Junkins, Texas Instruments' chief executive at the time, began an effort to slim down the bloated company: he started selling off nearly everything except the chip business.
But in 1996, Junkins died of a heart attack on an overseas business trip. His successor, Thomas Engibous, finished the divestiture. Out went radar and missile-guidance systems, mold manufacturing, inspection equipment, software and chemicals. He forced the company to stick to its knitting by nurturing a chip that was the brains in the Speak & Spell educational toy, the one E.T. used to phone home in Steven Spielberg's 1982 blockbuster film. It turns out that Engibous and the movie alien were both on to something.
That chip, a digital signal processor, is now the core technology in cell phones. And the Texas Instruments manager who made it a cash cow by forging a tight relationship with Nokia was a tall, square-jawed engineer -- Templeton.
His deal with Nokia became a template for the company's future successes. He aligned Nokia's and Texas Instruments' interests by having his engineers customize the DSP chip for Nokia's phone software. It wedded the Finnish company to Texas Instruments and the successful partnership attracted other phone makers to the Dallas chip maker.
Templeton wasted little time pushing the company to duplicate his success with cell phones by moving Texas Instruments chips into the next generation of consumer electronics. That set up the company for a confrontation with an old nemesis: Intel. This time around, Texas Instruments scored its twin victories.
Its dominance of the market for large-screen television processors -- chips that use millions of tiny mirrors -- forced Intel to halt development of a rival chip two years ago. Then, last month, Intel announced that it was giving up its efforts to make processing chips for cell phones and that it planned to sell that operation to Marvell Technology.
Templeton said Texas Instruments had outflanked Intel by acting as a design laboratory that could help realize any customer's ambitions.
"When they invent, they grow faster, and that is good for us," he said. "We can build a relationship with every company that needs a chip."
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