Another startup in Sonoma County's Telecom Valley struck it rich Friday
when semiconductor giant Texas Instruments said it would pay $300 million in
stock for Alantro Communications, a Santa Rosa company with just 50 employees.
Alantro's founders and employees, who own the majority of the company and
built their business with seed money from local investors, celebrated the sale
Friday with popping champagne corks.
``I felt numb when I first found out,'' said Matthew Shoemake, a project
manager at Alantro. ``It is still sinking in.''
The deal for Alantro is the eighth-largest buyout in Sonoma County history
and is the latest in a string of takeovers in Telecom Valley, led by Cisco
Systems' record $7.3 billion acquisition of Cerent Corp. in Petaluma last
year. The buyouts herald the arrival of the world's biggest high-tech
companies in Sonoma County, which is quickly becoming a national hub for
telecommunications technology.
Alantro is developing a powerful computer chip that will serve as the heart
and brains of new high-speed wireless networks envisioned inside homes and
businesses. The technology is scheduled to be released later this year, said
Chris Heegard, Alantro's chief executive.
Texas Instruments, whose calculators are a familiar sight in school
classrooms, has moved aggressively into data networking technology over the
past three years with the explosion of the Internet. The Dallas company
manufactures an array of semiconductors, including computer chips used inside
cable modems and superfast DSL connections to the Internet.
``Alantro's technology will distribute that bandwidth throughout the home
or office without the need for wires,'' said George Barber, vice president and
manager of Texas Instruments' Broadband Access Group.
Alantro will become part of that group under the direction of general
manager Michael Hogan. The company will remain in Santa Rosa as a stand-alone
business unit, Hogan said. No layoffs are anticipated.
``We expect to grow the business in Santa Rosa,'' Hogan said.
The acquisition, approved late Thursday by both companies after several
months of negotiations, is expected to close by the end of September.
Alantro was founded in August 1997 in Ithaca, N.Y., by Heegard, then a
professor at Cornell University, and Eric Rossin, a former graduate student in
Heegard's electrical engineering program. Rossin discovered Sonoma County's
Telecom Valley while working at Next Level Communications in Rohnert Park,
inspiring Alantro to move to Santa Rosa in January 1998.
``It's a nice place to live, and yet it is close enough to where the action
is in Silicon Valley,'' Heegard said.
Initially, the company focused on developing a technology for cable modems,
but shifted gears when the engineering team realized there was an opportunity
to create computer chips that would underlie wireless local-area networks.
While Friday's payday is huge for Alantro's employees, the company's future
was not always a sure thing.
Shoemake, who also earned his doctorate at Cornell under Heegard, moved his
wife to California one week after their wedding day and settled in a small
townhome when he became the startup's fourth employee.
``We took a risk on a company with little capital, a few good human
resources and a good business plan,'' he said. ``The bet paid off.''
Unlike some high-flying startups, Alantro took the low-budget approach to
building a company. As a result, Alantro's founders and employees owned the
majority of the company when Texas Instruments offered to buy the business.
Unwilling to turn over a big chunk of the company to venture capitalists,
Alantro financed its early development program by winning contracts to develop
components of chip sets.
The company also pinched pennies along the way. For example: To save $1,000
on airplane tickets, engineers would take 6 a.m. flights on Saturday mornings
when flying to Monday morning meetings with potential customers, Shoemake
said.
In May 1999, Alantro raised $650,000 from the North Bay Angels, a group of
local investors that backs early-stage companies. Herbert Dwight Jr., the
former chief executive of Optical Coating Laboratory Inc. in Santa Rosa,
shepherded the deal and joined Alantro's board. Four months later, the company
raised $6 million from VantagePoint Venture Partners and Cisco Systems, which
had been scouting Telecom Valley for promising technologies.
To attract talented engineers, Alantro opened design centers this spring in
San Diego and Research Triangle Park, N.C. Today, the company employs about 35
people in Santa Rosa and 16 at its two design centers.
The buyout caps a ferocious three-year development program. Alantro's
engineers worked long hours, frequently every weekend without a break, to turn
a promising idea into a product.
Alantro's chips are designed to go inside computers, telephones, TV sets
and other appliances, linking them together in a wireless local-area network.
A central access point, known as a ``residential gateway,'' would connect the
network to the Internet through cable modems or high-speed DSL hookups.
Heegard said the chips are capable of moving data at 22 megabits per second
-- twice the speed of current wireless networking technologies -- paving the
way for delivery of video to remote devices inside the home.
An estimated 20 million households will be networked by 2003, according to
a forecast by In-Stat, a market research firm. Texas Instruments believes most
consumers will want wireless networks, because the technology is easy to
install and gives users freedom to stay connected while roaming throughout a
building -- or even outdoors in the back yard.
The market for wireless local-area network equipment is gaining more
attention from equipment suppliers. Major corporations such as Cisco Systems,
3COM, Apple Computer, Compaq, Dell, Intel, Lucent and Nokia have agreed to
standard specifications for wireless networks.
Last year, Apple introduced its own wireless networking system, AirPort,
developed in partnership with Lucent, and Cisco acquired Aironet Wireless
Communications to enter the market. Texas Instruments dove in last year with
its acquisition of Butterfly VLSI, which focuses on short-distance wireless
technology, and expanded its portfolio of technologies Friday by acquiring
Alantro.
``Alantro is a key piece of the puzzle,'' Hogan said.
Alantro is the second major acquisition this week for Texas Instruments. On
Wednesday, the Dallas company announced a deal to pay $7.6 billion for
Burr-Brown Corp., a Tucson, Ariz., company that makes chips that convert
signals from analog to digital and back again.
Texas Instruments stock dropped Friday to $75.75, down $5.88 on the New
York Stock Exchange.
Ted Appel can be reached at tappel@pressdemocrat.com or 521-5288.
PHOTO: color by John Burgess/Press Democrat
CHART: b&w by Press Democrat Graphic: Top 10 buyouts in Sonoma County
(see microfilm)
Alantro Communications CEO Chris Heegard toasts the sale Friday.
Keywords: TELECOMMUNICATIONS
