In a bid to cash in on the growing market for voice over IP services, Texas Instruments Inc yesterday acquired Telogy Networks Inc in a stock for stock transaction valued at approximately $435m. Telogy, already a member of TI’s third party program, makes software to run on TI’s DSPs (digital signal processors), which are then incorporated into telecoms and data networking equipment to enable them to send digital voice, fax and data packets over the internet. In the past, said Leon Adams, TI’s manager for DSP strategic marketing, the two companies worked together to supply their products to equipment manufacturers in as coordinated a manner as possible, but gradually their joint customers starting asking for integrated products, that incorporated all the necessary software and silicon on one chip. It reduces time to manufacture and speeds time to market for them, he said.
Rather than just integrate their products, TI decided to buy Telogy because it thought the company would give it a substantial leg up into the VoIP market. Over the next decade, close to $700m phone lines will transition to digital voice, Mike Hames, TI VP and manager of the company’s worldwide DSP business said. With this acquisition, we offer the combined programmable DSP and software solution that communications equipment manufacturers are demanding to support this rapid transition. The ultimate aim, he admits, is to put TI chips in every phone, every interface and every web appliance that connects to the telecoms infrastructure.
Their joint customers already include the likes of Cisco, 3Com and Nortel Networks, who include the chips in devices such as remote access concentrators, DSl modems, internet fax machines and cable modems. But Adams says TI could potentially sell the chips to anyone that wants to connect a device to the web for voice and data transport. We’ll customize the product for different types of hardware, he said, we’re market leaders in DSP chips at the moment, but we want to make sure we stretch that lead. Under the deal, Telogy will become a wholly-owned subsidiary of TI reporting to the worldwide DSP business and all 110 employees will continue to operate from the company’s headquarters in Germantown, MaryLANd. The boards of directors of both companies have approved the acquisition, which is expected to be completed in August 1999.
