Texas Instruments’ (NYSE: TXN) acquisition of Israeli Bluetooth technology company Butterfly for $50 million, was one of the most prominent deals on the local market in the boom year of 1999. Texas Instruments had previously acquired Libit Signal Processing for $365 million. In contrast to other acquisitions of Israeli telecommunications start-ups (of which Chromatis Networks was only one example), Texas Instruments’ strategic decision appears to have been correct. As a result of these two acquisitions, Texas Instruments currently has two development centers in Israel: one (based on Butterfly) dealing in distance wireless (SDW) telecommunications, and one (based on Libit) in cable modem technologies.
The person responsible for the Butterfly deal, which has become Texas Instruments’ SDW wireless telecommunications unit, was senior VP Gilles Delfassy. He has been in charge of wireless telecommunications at Texas Instruments since 1994. “It’s important for us to have a presence in all wireless capabilities, and Bluetooth is a relevant protocol for us,” Delfassy said in explaining the motives underlying the acquisition, which he described as “very important for Texas Instruments, and not just because of the technology.”
”The people working at Butterfly when we acquired the company think systematically," Delfassy says, "That’s very important at Texas Instruments now, because our customers demand that we demonstrate complete system capability. The ability of the employees to analyze specific cases, such as the way a product behaves in various environments, is very significant for us.”
Delfassy asserts that the development of complete systems constitutes a real change for Texas Instruments. “In the past, Texas Instruments focused on product lines, each of which stood on its own. The product lines weren’t part of one system that provided a complete solution,” he says. He explains the changes his company has undergone in recent years: “In 1994, we decided to set up groups specializing in the development of solutions, one of which was in wireless telecommunications.”
As an example of a perfect solution, Delfassy pulls out a small calling card, which illustrates the design of a smart telephone, including all its functions. In addition to all its components, the product includes the software, the application, and all the documentation concerning the manufacturing and testing processes. “The difference between this product and an ordinary telephone manufactured by Nokia (NYSE: NOK), for example, is that there is now a demand for a complete solution. Component suppliers are required to do all the work they previously carried out, but on the software and testing, not just on the hardware.”
”Globes”: Is this a commercial product?
Delfassy: ”The first generation of the product is on the market, and telephones are based on it. This product, which is second generation, is in trials with customers.”
In addition to the complete solution, Texas Instruments is moving in a new direction expanding the variety of possibilities in various wireless devices. “The product are becoming more and more diversified,” Delfassy explains. “Once upon a time, a telephone was used only for calls. Today, it has many additional applications, such as cameras and MP3 video. We’re preparing ahead of time for these demands. Our solution is called OMAP, a very powerful applications processor. This field currently accounts for over 50% of Texas Instruments’ growth.”
Getting rid of cables
Butterly’s Bluetooth technology, which is currently being applied by Delfassy’s division, constitutes an important layer in the wireless solutions basket of Texas Instruments. The technology has revolutionized the personal connectivity market by making it possible to get rid of cables through the use of a wide range of products that are interfaced and connected with wireless links.
Hardware conforming to the Bluetooth specifications guarantees worldwide telecommunications compatibility. The technology is relatively cheap, requiring low voltage, and also benefits from fairly wide support on the part of companies in the telecommunications industry.
The SDW telecommunications unit, currently headed by former Butterfly employee Ari Rauch, is responsible for Texas Instruments’ global marketing and development efforts for a variety of products that the company is developing in this field. Among other products, these include Bluetooth products on a single chip, and complete solutions designed for supporting SDW telecommunications for mobile terminals.
”The division in Israel is an important part of the international wireless division,” Delfassy stated. “Actually, everything involving Bluetooth is done here in Israel. Furthermore, Israel has wireless local area network (WLAN) activity (based on the Libit acquisition, E.L.), which is part of the broadband division, and is not part of my responsibility. In terms of manpower, development in Israel is Texas Instruments’ second largest activity in Europe, behind our large facility in Nice, France, where I began my activity. In general, Israel is in fourth place worldwide in the number of engineers working on development for Texas Instruments.”
Why isn’t the WLAN business part of your wireless division?
”It really could have been part of either of the two divisions. It was decided to make it part of the broadband division, because WLAN is a technology for transmitting information in a home from the same pipeline that comes from ADSL and cable. Texas Instruments therefore decided to make it part of broadband for households. That doesn’t keep us from working together. We are now seeing increasing demand for built-in WLAN capacities in wireless phones, and the two divisions are now cooperating in order to provide such solutions.
”The combination of Wi-Fi and Bluetooth solutions is very important for Texas Instruments, particularly where joint activity in a single product is concerned. It’s important for us to develop products to make that possible, and the divisions in Israel are the ones developing these joint products. It’s vital for us to have capability and understanding of the various wireless technologies. Wireless products currently account for 30% of Texas Instruments’ total revenue, so we want command and understanding of all the technologies that are relevant to us.”
How do you regard the current Israeli market not just for development, but as a target market for your products?
”The Israeli market as a whole is a fairly small market for Texas Instruments, and the company does not make significant decisions in relation to it. It is of interest, however, because of the various standards used in it. We regard the Israeli market as important because of the development abilities of the people here. Before I founded the wireless division, I was in charge of Texas Instruments’ DSP division in Europe and Africa, and Israel was our largest customer. Israeli companies, such as Tadiran Communications and ECI Telecom (Nasdaq: ECIL), were very advanced in the development of products based on signal processing. They have developed products here, and exported them all over the world.”
Published by Globes [online] -l www.globes.co.il - on November 25, 2003