Pixelworks, Inc. History

Address:

8100 SW Nyberg Road
Tualatin, Oregon 97062
U.S.A.

Telephone: (503) 612-6700
Fax: (503) 612-0848

Public Company
Incorporated: 1997
Employees: 241
Sales: $176.2 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: PXLW
NAIC: 334413 Semiconductor and Related Device Manufacturing

Company Perspectives:

Pixelworks is a new breed of company that truly operates without borders. We believe this will be the model for companies in the new millennium. We have optimized our culture and operations to take advantage of a dynamic new style of business fueled by technology and free trade in which people, products, and ideas flow freely around our planet. We leverage the strengths of every country and every culture where we do business to create a dynamic, flexible, aggressive engine of growth that can quickly take advantage of business opportunities around the world.

Key Dates:

1996:: Allen Alley and partners from InFocus found Pixelworks.
1997:: Pixelworks incorporates.
1998:: Toshiba Corporation helps Pixelworks develop its first semiconductor for use in flat-panel monitors and high-definition televisions in exchange for assuming its manufacturing business.
1999:: Pixelworks hold its third round of venture capital financing; moves into its new office building.
2000:: Pixelworks holds its first public offering.
2001:: The company acquires Panstera, Inc. and nDSP Corporation.
2002:: Pixelworks acquires Jaldi Semiconductor Corporation.

Company History:

Pixelworks, Inc. designs, develops, and markets semiconductors and software for advanced televisions, multimedia projectors, and flat-panel monitors. Its system-on-a-chip integrated circuits (ICs) or interface IC products integrate a microprocessor, memory, and image processing circuits that function as a computer on a single chip. Its customers include Dell, Epson, Hewlett Packard, InFocus, LG Electronics, NEC-Mitsubishi, Philips, Samsung, Sanyo, Sony, Tokyo Electron Device, and ViewSonic. Close to 90 percent of the company's sales come from its Asian customers.

1997-99: Pioneering a New Technology and Management Style

In 1986, Allen Alley, acting as a venture capitalist, invested in a start-up company called InFocus Systems, which produced projector systems that display output from personal computers and other electronic devices. InFocus founders were convinced that a new program called PowerPoint was the trend of the future. Once the market caught on and InFocus became an international force, Alley who had a background in mechanical engineering and business, became an employee of InFocus Systems and worked there for four years.

Then, in 1996, Alley along with a group of InFocus employees that included Michael West, Robert Greenberg, Bradley Zenger, and Ken Hunkins, decided that they wanted to "make money, have fun, and play fair" and founded Pixelworks. At the time other, larger companies were moving into selling component technology. Pixelworks instead focused on designing and building semiconductors that let flat panel displays translate output signals from such video sources as digital television receivers, digital video disc players, and computers.

At first, Pixelworks focused on the computer market. Its self-contained modules featuring an embedded operating system, source code, and the software tools needed to customize display devices replaced a handful of electronics in flat panel displays and helped flat-display makers reduce the cost of their products. Displays with a Pixelworks controller could show web pages, spreadsheets, and a television broadcast in different windows on the same screen.

Recognized for its innovative product, Pixelworks also stood out in its industry for its distinctive management approach. In its earliest days, Alley ran the company without a strict budget, a style that grew out of his stints at Ford, Boeing, and InFocus Systems. "Most of the metrics and reports you get are like trying to drive the car by looking in the rearview mirror," he said in Oregon Business in 2001. "What I rely on is feedback from customers and employees. I can tell you the health of our business by talking with customers much better than I can by reading any report."

Management's goals in 1997 were to grow revenues in the millions; secure customers in Europe, Japan, Asia, and the United States; and introduce Pixelworks chips into three basic markets, televisions, monitors, and projectors. It achieved those goals and reached $12 million in revenues in its first year. "The problem with any [technology] market is you can't figure out how big any of these things is going to grow and when," Alley asserted in the same Oregon Business article. His solution: "[Y]ou don't bet on it happening next quarter or next year. You build a platform that can survive an up, down or sideways market."

Pixelworks also kept costs down by keeping a small staff and asking its employees each to do a variety of tasks. Every new employee that joined Pixelworks was literally issued a set of juggling balls when he reported to work as a simple, physical expression of the company's expectations of its workers. Most learned to juggle. They also all flew coach and competed to see who could spend the least on lunch.

Pixelworks' founders also believed that their system-on-a-chip ICs would someday be used in televisions, and they thus positioned Pixelworks to influence television design. "We looked at the business model for computers and said if the model works for computers, the model should work for televisions," said Allen Alley, the new company's chief executive officer in a retrospective 2003 Wall Street Journal article.

When, in 1998, the recession in Asia led some Asian high-tech corporations to create partnerships and joint ventures with Northwest firms, Pixelworks had the opportunity to enter the television market. Toshiba Corporation, eager to lure work for its new semiconductor plant in Oita, Japan, agreed to absorb some of the cost of developing Pixelworks' first semiconductor for use in flat-panel monitors and high-definition televisions in exchange for assuming its manufacturing business. Toshiba extended a line of credit to Pixelworks on manufacturing and rushed the production of the first batch of test chips.

In 1999, Pixelworks' staff of 45 workers moved into the company's new 23,000-square-foot office building, and Pixelworks held its third round of venture capital financing, bringing its total capital raised to close to $20 million. This third round of money went to develop the next generation of the company's ImageProcessor products designed to take advantage of the surge in liquid crystal display (LCD) monitors. That year, ViewSonic, the top-selling monitor manufacturer in the United States, chose the ImageProcessor to power the first flat panel displays to incorporate digital, analog, and video inputs into one display.

Although the company lost $5 million on revenues of almost $13 million in 1999, Red Herring magazine named it one of the country's ten young companies to watch in mid-1999. Moreover, Pixelworks continued to grow during troubled financial times. When the company held its initial public offering (IPO) in the spring of 2000, the NASDAQ was past its crest and declining steadily. "A lot of people thought we were crazy to go out," recalled Alley in a 2001 Oregon Business article, "but one of my philosophies has been, if I can raise the money, raise the money." The money from the IPO went toward working capital and general corporate purposes. Shares, issued at $10 per share in May 2000, reached more than $50 per share by October. Named Technology Company of the Year by the Oregon Entrepreneurs forum in 2000, Pixelworks became profitable in the quarter ending June 2000 and remained so. Total revenues climbed to $52.6 million for the year 2000, and Pixelworks began to supply products to Compaq and IBM, among others.

2000-01: Increasing Its Technological Capabilities Through Acquisitions

Beginning in 2000, some of the major electronics manufacturers began to integrate Pixelworks' ImageProcessor architecture into their products. Samsung Electronics employed the ImageProcessor in a line of its flat panel displays in 2000 to provide its monitors with the flexibility to offer video and computer graphics on the screen simultaneously. In 2001, NEC-Mitsubishi Electronics Displays high resolution, premium-quality LCD monitors incorporated the ImageProcessor.

Also in 2001, Pixelworks expanded its scope through acquisitions. With the purchase of Panstera Inc., which manufactured fully integrated handheld devices, it entered the low-cost XDA market. This acquisition also brought with it the technology to offer screenmakers a single-chip solution that combined analog capabilities with an extended graphics array. Pixelworks' second acquisition, nDSP Corporation, strengthened its advanced video processing product and technology portfolio with the addition of low-cost, high-performance video processing ICs and the technology to enhance the image quality of mainstream consumer televisions and other digital display products. The addition of nDSP Corporation, which had two offices and 24 employees in Beijing and Shenzhen, also established Pixelworks' presence in China.

By 2001, the global economic downturn had caused the projector market growth rate to slow to 25 to 30 percent annually, but growth in flat panel displays more than made up for the decline for Pixelworks. Alley acknowledged his company's luck in Oregon Business: "I absolutely believe it is sometimes better to be lucky than good. We've done quite well. It's fundamentally because the markets we sell our products to are still robust." Pixelworks had grown from its five original founders to 150 employees and had revenues of $90 million.

2002-05: Looking to the Future of High Definition Television and Internet Appliances

The following year, Pixelworks put together a complete design for the electronics inside LCD and plasma televisions. When Xoceco decided to use this design as the base for its first flat-screen television, Pixelworks' engineers taught the company how it worked and how it could be modified via software. It also acquired rival Jaldi Semiconductor Corporation as part of the move toward consolidation among the manufacturers of chips used in television and computer displays.

Pixelworks finished work on a new video-processing chip, code-named Photopia, in the fall of 2003. Photopia integrated many functions onto one chip, saving space and cost. Alley took the product first to his customers in China, the fastest-growing market for the company's fastest-growing product line. That

By 2004, consumer trends were leaning toward flat panel and high definition televisions and Pixelworks decided that its immediate future lay in high definition television. Thus, early in 2004, it partnered with byd:sign and Xoceco to introduce a complete line of flat-panel plasma and LCD televisions for sale in the United States. The plan moved Pixelworks into the position of becoming a dominant supplier of microchips for flat panel LCD televisions. In fact, 2004 revenues for the company were $176.2 million, up 25 percent from $140.9 million in 2003. However, the limited capabilities of the manufacturers LCD panels used in computers and televisions, mostly in Asia, kept prices for 30-inch LCD televisions above $1,000 and out of reach of many consumers. Not to have all of its chips in one basket, Pixelworks also began to look to the next logical extension of its technology by adding browsing capability to its products and moving into Internet appliance space.

Principal Subsidiaries: Pixelworks Japan, LLC; Pixelworks Taiwan, LLC; Panstera, Inc.; nDSP Delaware, Inc.; nDSP Corporation; Pixelworks Ltd.; Pixelworks Nova Scotia; Jaldi Semiconductor.

Principal Competitors: Genesis Microchip Inc.; Macronix International Co., Ltd.; Micronas Semiconductor Holding AG; National Semiconductor Corporation; Philips Semiconductors; Silicon Image, Inc.; Silicon Optix Inc.; STMicroelectronics N.V.; Texas Instruments Incorporated.

Pixelworks, Inc. History

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Key Dates:

Company History:

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