MIPS Technologies
Chief Executive Sandeep Vij doesn't believe in clutter. His office has no photos. There's nothing on his desk, just a plant his assistant sneaked in, a travel itinerary and a chicken burrito.
MIPS, based in Sunnyvale, Calif., is just a sliver of a semiconductor company--it has a market valuation less than 1% that of rival
Intel
--and it sells just a sliver of a product: a compact processor design licensed by the makers of assorted electronic gizmos. MIPS has more than 125 licensees, who together ship more than 500 million MIPS-based processors each year. Crack open a set-top box or a DVD player and you'll almost certainly find a MIPS chip. They're also used widely in cellular base stations, Internet routers and high-performance data-networking switches.
The chip technology at the center of the company's stripped-down business model is 30 years old but has attracted fresh attention from investors that has sent the stock zig-zagging. Demand for MIPS-based parts has been growing rapidly: Sales for the December quarter rose 44% to $21.9 million.
MIPS licenses a minimalist processor design first developed in 1981 by cofounder John Hennessy, then a Stanford engineering prof and now the university's president. Hennessy took his mantra from French writer Antoine de Saint-Exupéry: Perfection is not when there is nothing more to add; perfection is when there is nothing left to take away. It's a philosophy shared by many of his former students, Vij included.
Stumbles, however, clutter the company's complex history. Founded in 1984 as MIPS Computer Systems, the company went public in 1989. MIPS was acquired by
Silicon Graphics
in 1992 after nearly running out of money, then spun back out to the public market as MIPS Technologies in 1998. MIPS was worth more than $3.5 billion at the peak of the dot-com boom as investors dreamed that MIPS-powered machines would drive the new economy. They didn't. Instead, the technology industry continued to standardize on cheap, ubiquitous processors cranked out by Intel and rival
Advanced Micro Devices
, driving MIPS out of markets where it once thrived.
It's up to Vij to turn that story around. He joined the company in January 2010 from
Cavium Networks
, a MIPS customer, where he led the broadband and consumer networking division. In March Vij hired another veteran chip designer, Ravikrishna Cherukuri, to lead MIPS' engineering efforts and to build a three-year road map for new products. MIPS added ten marketing people to help pitch its products in new markets. Vij then hit the road to reassure existing customers that MIPS will stay relevant. The result: About a third of MIPS customers have been added in the last three quarters. That new business has meant a wild ride. Investors bid up the stock more than 250% in 2010, then shares fell more than 10% in late January after MIPS reported revenue just shy of Wall Street expectations.
In China the company's designs even show up in some desktop computers. Vij likes to point to a $444 PC built and marketed in China that runs Linux and uses a MIPS processor. "The only American company making any money on it is MIPS," Vij says with a laugh. "The world has changed."
Vij is determined to seize the opportunity
Google
has created to put his chips in smartphones and tablets. Unlike Windows, which has been tied to Intel's processor architecture, Google's Android operating system is processor agnostic. Write an Android application once and it will run anywhere. Earlier this year MIPS showed off a pair of smartphones and tablets based on processors from MIPS licensees Actions Semiconductor and Ingenic Semiconductor. "The whole processor business is more wide open today than at any point in the last 20 years," says independent microprocessor analyst Nathan Brookwood.
That puts MIPS in a market that Intel wants for its own (see Q&A with Intel CEO Paul Otellini). MIPS' designs, like those from rival
ARM Holdings
, are stripped-down and compact enough to power handheld devices without the need for a leap forward in processor manufacturing. Three high-performance MIPS computing cores--or brains--can be crammed into the same space within a phone or mobile device as a single Intel Atom mobile processor core without increasing the device's power draw.
MIPS' edge is that its designs are more pliable. Intel designs a small number of chips and builds vast numbers of them in multibillion-dollar factories. MIPS, by contrast, has long survived in the nooks and crannies that Intel's standardized designs couldn't reach. With the proliferation of mobile devices that tightly integrate hardware and software, more companies want processor designs they can weave together with other building blocks--such as graphics processing cores--to create a customized package for their device called a "system on a chip."
Of course ARM does that already, dominating the booming market for smartphone processors.
Qualcomm
,
Nvidia
,
Texas Instruments
and
Apple
license the U.K.-based company's designs. And in a coup
Microsoft
announced in January that Windows 8 will run on ARM processors. MIPS can't say the same.
MIPS' not-so-secret weapon against ARM: price. An ARM license can cost more than $10 million, and that doesn't count the royalties that licensees pay for each device. MIPS won't say precisely what it charges for its licenses, but Chief Financial Officer Maury Austin says MIPS' average deal size is between $800,000 and $900,000. "Price may be no object, but it's always a consideration," says Will Strauss, president of chip tracker Forward Concepts.
Yet another way less can be more.
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