Avago Technologies on the go at ex-Agilent site

For James Stewart, seeing a new logo adorning the entrance to the campus where he’s worked for more than 20 years wasn’t a new experience.

Stewart, the vice president and general manager of the imaging systems division of Avago Technologies Inc., is now on his third company in two decades, but the scenery has changed very little. He started working for Hewlett-Packard Co. 21 years ago, right out of college.

In 1999, HP spun off Agilent Technologies Inc. Agilent actually carried on the history of HP’s original business – electronic test and measurements products. In August, Agilent announced it would sell its Semiconductor Products Group to a couple of high-profile investor groups, Kohlberg Kravis Roberts & Co. and Silver Lake Partners.

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The $2.66 billion sale included 6,500 employees and five design centers in Asia, four in the U.S. and two in Europe. Agilent’s Fort Collins site was one of the design centers.

For a region hemorrhaging tech jobs faster than expanding and new companies could soak them up, the announcement was faced with some trepidation. Prior to the sale, Agilent employed 780 at the Fort Collins site, most of whom work in the Semiconductor Products Group. About 50 to 100 employees not in the group were moved to Agilent’s Loveland site, according to a company spokeswoman at the time of the sale.

Three-quarters of Avago’s employees are located in Asia, and the company is co-headquartered in San Jose, Calif., and Singapore, facts that, more than likely, made some locals a little uneasy.

Avago started off the year with a slew of product announcements, as well as a few divestures. In early March, Avago sold its storage semiconductor business to PMC-Sierra Inc. for $425 million in cash. Prior to that, the company sold its printer ASIC (Application Specific Integrated Circuits) business to Marvell Technology Group Ltd. for $240 million.

Investing in R&D

The printer business was part of Avago’s imaging division, headed up by Stewart and headquartered at the Fort Collins site. Stewart said the sale to Marvell only affected about 5 percent of the local employees – all of whom have been offered jobs at Marvell.

Stewart didn’t specify how many employees Avago has at the Fort Collins site now, but he said it was between 700 and 800. And that could soon grow.

“We’re hiring here on the site into (research and development),” Stewart said.

The two early divestures may not be an indication of things to come. Silver Lake Partners is not known for piecing out its acquired companies. In fact, Silver Lake has gotten attention for its long-term investment strategy.

According to a February Red Herring article on Silver Lake Partners, “The firm’s portfolio companies have a track record of being able to pump up spending on research and development, capital investments and customer support …”

As a result, many of the firm’s past portfolio companies reemerged on the public trading market after mergers or acquisitions. Silver Lake, founded in 1999, still retains ownership in several of its early acquisitions.

The changes between working for a public company and a private company are already apparent.

“Because it’s not a public company, you don’t have millions of owners,” Stewart said. “The decision-making is very fast and very efficient.”

Stewart is already seeing Avago’s commitment to investing in research and development. The divestures, he said, freed up operating costs that could be flowed back into the company.

At the Fort Collins site, there are two main business segments – wireless, and imaging and ASIC. The wireless business includes development of components used to power handheld devices, such as cell phones.

The imaging and ASIC business, headed by Stewart, generally serves the enterprise market. Components developed by the segment are used in computer servers, networking systems and switch routers that control the flow of Internet traffic.

The imaging division also creates the tiny image sensors for cell phones that are essentially cameras-on-a-chip.

“We have some content in all (of the major) cell phone companies,” Stewart said.

Product mix for growth

The mix of consumer and enterprise market products at the Fort Collins Avago site puts it in position to be part of rapid and predictable growth.

“In the earliest days of the industry, government drove the semiconductor market, then it was corporate IT. Now, it’s consumers,´ said John Greenagel, director of communications for the Semiconductor Industry Association.

Greenagel said the consumer market for semiconductor end-products became 50 percent of the entire industry just in 2004. With semiconductors powering technology in everything from cars to cell phones, the consumer market is experiencing the most rapid growth.

However, the market for cell phones, handhelds, personal audio devices and high-tech vehicles is only as deep as the consumers’ pockets.

“The consumer market is more sensitive to economic cycles,” Greenagel explained.

Conversely, the more mature enterprise market is experiencing a slower growth curve, but offers more predictability.

“Companies tend to have long-range plans for IT system spending,” Greenagel said. “(The enterprise) market doesn’t tend to be affected by cycles.”