Another company we believe to have "capable, dynamic management operating in fertile fields for future growth" is programmable semiconductor designer QuickLogic (QUIK).*
QuickLogic is currently a small company, with a market capitalization of only a little over $200 million. The company designs semiconductors which can be used in consumer electronic devices to perform a variety of tasks
in conjunction with the main processor (or apps processor) to enhance the device's overall performance while at the same time reducing power consumption and extending battery life. These two characteristics (enhanced performance and reduced power consumption) are extremely important to designers of mobile devices, for obvious reasons.
Having another processor, such as those sold by QuickLogic, handle certain tasks rather than making the apps processor handle them typically saves power, because running the apps processor consumes a lot of power.
Also, apps processors by their nature are typically "general purpose" -- they are designed to be able to run all manner of applications, from helping you find your way with turn-by-turn navigation to allowing you to play Angry Birds, and everything in between. Therefore, the apps processor does not really enable makers of consumer devices to easily differentiate their product in the highly competitive markets in which they compete. Many of their competitors will be using the same (or similar) apps processors, and the consumer will only notice a difference when one processor is noticeably faster or more powerful than a competitor.
QuickLogic's products, however, are designed to provide very distinctive features that enable device manufacturers to differentiate their devices. For example, one product category offered by QuickLogic enables better visibility of a display screen in conditions of bright sunlight, while at the same time providing savings on power consumption (because QuickLogic's solution runs algorithms to optimize aspects of the image and contrast, but does it outside of the apps processor using Quick's inherently low-power logic). This capability is an example of the kind of differentiation which makers of consumer electronic devices desperately need in the highly competitive race to produce the next popular smartphone or tablet.
Another important category of products, newly announced by Quick and discussed in the
video above, is a processor designed to monitor sensors. The number of sensors on mobile devices is growing rapidly; sensors can be anything that is designed to measure and monitor the environment or the device's position in three-dimensional space, and include cameras, microphones, thermometers, accelerometers, gyroscopes, compasses, and other tools.
Devices in general and mobile devices in particular are becoming more and more aware of their environment, and will soon be able to tell whether they are riding in a car, or being pushed in a baby stroller, or accompanying their owner in a pocket. They will be able to tell if their owner is looking at their screen at the moment, or not, or if he or she has gone to sleep. Some devices are already capable of some level of awareness, and some applications developers have already created apps to be able to take advantage of this awareness. Examples include games that can be controlled by tilting or shaking your smartphone or applications that count how many steps you take during the day and which give feedback on calories burned. Indications are that the number of sensors on mobile devices (and virtually every connected device in the "internet of things") is about to grow exponentially, as will the number of applications written to take advantage of all the new awareness these sensors will provide.
One of the challenges that all these new sensors will pose, of course, will be the potential for a massive increase in power consumption. If your phone's apps processor is required to constantly monitor the level of ambient light, the surrounding temperature, and whether the phone is at rest or in motion, that will create a major drain on the battery. QuickLogic's solution is to offer a separate processor (sometimes called a "co-processor") which is far more energy-efficient than the "speedy" but power-hungry apps processor, and to use
this processor to monitor all the sensors in the device. This co-processor in charge of all the sensors is sometimes referred to as a "sensor hub." The sensor hub can wake the apps processor up if it is needed, based on input received from a sensor, but otherwise it can let the apps processor rest in a low-power state while the sensor hub monitors the surrounding environment.
This type of capability can enable tremendous differentiation for makers of mobile devices. For example, perhaps some consumers would like to have a phone that can tell if their user has put the phone inside of a purse, so that the phone can know to ring louder when it receives a call or a text while it is in the purse. Or, as described in the video above, perhaps a phone with an app that is supposed to count steps taken during the day could tell if it is being pushed along in a jogging stroller, so that it could continue to give credit for those steps too, instead of thinking that it is sitting still and therefore not giving its user an accurate count.
The possibilities for sensors and the apps that developers can come up with are endless, but if the device's big, power-hungry, speed-optimized apps processor had to monitor all the sensors all the time, most of those possibilities would never see the light of day, because they would be too taxing on the battery. QuickLogic's solutions are extremely power-efficient, and (as described in the video above) are the first sensor hubs which use less than 2% of the battery power. In fact, Quick estimates that their processors use about
one-thirtieth of the power of other processors that have been put forward as possible sensor hubs by competitors so far.
Another important aspect of QuickLogic's products is the fact that they are programmable. This aspect is also extremely important to device designers attempting to differentiate their products in a competitive and rapidly-changing marketplace. Programmability enables equipment designers to customize a chip, and to do it much more rapidly than the non-programmable alternative which can be time-consuming and expensive.
In fact, QuickLogic has a long history competing in the programmable-logic market, which is dominated primarily by two much larger companies, Altera (ALTR) and Xilinx (XLNX).** QuickLogic's approach was far more power-efficient than that of either Altera or Xilinx, but in the era before the recent mobile-device revolution, that approach was not a significant differentiator in most large markets, and Quick eked out its living servicing a few very niche markets.
However, as CEO Andy Pease explains in the first part of the video above, when he was hired to lead the company, he assessed the company's key strengths and focused their efforts on addressing the areas where Quick's unique capabilities could provide the most value to their customers. It just so happens that the ongoing mobile-device revolution, and (we believe) the upcoming sensor-driven revolution, play right to Quick's strengths, a fact which tends to validate Andy Pease's vision for Quick's future and the decisions he has made since joining the company in 2006.
This point brings us back to the first important characteristic in the classic growth formula: not only must the company be positioned in front of fertile fields for future growth, but it must also be characterized by capable, dynamic management. Our interactions with the company so far, and the company's history since Andy Pease took the helm, indicate that QuickLogic is extremely well-led. His recent decisions to develop re-programmable technology in addition to Quick's traditional one-time programmable technology, very important for navigating the rapidly-changing environment as the sensor revolution unfolds, and to establish an "office of the CTO" in order to make his Chief Technology Officer more of a strategic executive steering the company's future technology course, are both briefly discussed in the above video and both support the conclusion that Andy Pease is an insightful leader capable of making tough decisions necessary to position the company for the future.
We believe that investors can learn a lot by studying QuickLogic as an example of a classic "Taylor Frigon growth company" that typifies capable dynamic management positioning their business to address fertile fields for future growth.
