No company better embodies the last generation of Oregon technology than Lattice Semiconductor.
Founded in 1983 by employees from Intel and Tektronix, Lattice literally trademarked the phrase "Silicon Forest." It survived bankruptcy, an investor revolt over a prior CEO's lavish spending habits, and nearly a full decade of unprofitability following the dot-com bust.
A throwback to another time, Lattice wants desperately to be more than a relic. It moved its headquarters this year from Hillsboro to downtown Portland and paid $600 million to buy another chip business, emblematic of broader shifts as Lattice seeks to update itself for a new era.
Lattice Semiconductor
Product
: Programmable computer chips for consumer and industrial electronics and telecommunications networks.
Headquarters
: Downtown Portland
Revenue
: $366.1 million in 2014, up from $332.5 million.
Profit
: $48.6 million last year, up from $22.3 million.
Employees
: Lattice employed 784 workers at the end of 2014, including about 200 in Oregon. It's buying Silicon Image, which had 671 workers. Lattice has laid off some workers and hasn't indicated how many the combined company will employ, but says it expects its overall Oregon headcount to stay at 200.
Still a small company - Lattice forecasts revenue under a half-billion dollars 2015 - its fortunes are improving. Those would be its best results in 15 years, coming amid renewed interest in the kind of programmable computer chip Lattice produces.
While investment analysts wonder if Lattice will eventually be acquired, chief executive Darin Billerbeck said he's building a new future for the business to stand alone in Portland.
"We're not just a 30-year-old semiconductor company," said Billerbeck. "We're providing things people can use."
Lattice's move downtown reflects a seismic shift in Oregon technology, from sprawling factories in Washington County to downtown software startups packed with coders and kegs. Lattice wants to straddle that divide.
On the seventh floor of the U.S. Bancorp Tower ("Big Pink") downtown, Lattice's employees rub elbows with SurveyMonkey and New Relic's workers in the elevator and technologists from startups Jama Software and Puppet Labs at the food carts outside. Bikes hang in the office next to a ping pong table, evoking the atmosphere of much younger companies.
"We want that culture. We want that vibe, that vibrancy of technology," said Gloria Zabel, Lattice's chief of staff.
Lattice makes programmable computer chips, known as field programmable gate arrays (FPGAs). They boost the performance of industrial and telecommunications equipment and - increasingly - consumer electronics including smartphones, tablets, TVs and digital cameras.
To grow the business, Billerbeck said, Lattice needs to be more responsive to its clients and build capabilities for specific functions into its chips.
"To make it easier for our customers we're going to have to make it easier for them to use," Billerbeck said.
Doing so requires hiring software engineers and others outside the traditional chip industry, he said, and that's what motivated Lattice to move downtown from the suburbs.
"This is the primary reason we're here," he said. "This skill set does not exist out there."
Lattice, like other small chip companies, contracts out the actual manufacturing of its semiconductors to factories in Asia. So it doesn't need a big production floor or even a large lab - although it maintains a testing facility on the Hillsboro campus it sold last year for $15 million.
In January, Lattice made one of the biggest deals by an Oregon tech company in history, buying a California chip company called Silicon Image for $600 million. Lattice borrowed $350 million for the transaction, which it hopes will give it exposure to new markets and more consumer technology manufacturers.
As it integrates the two companies Lattice is repositioning workers at sites around the world. It announced last month that it's laying off an unspecified number of employees as it eliminates duplication between the two businesses and realigns operations, though it expects its overall Oregon headcount will remain unchanged this year at around 200.
FPGA's are suddenly hot, owing to this month's $16.7 billion acquisition of another - much bigger - programmable chip company, Altera Corp, by Intel. Intel and Altera compete in the low end of FPGA market, but Intel bought Altera to boost the performance of Intel microprocessors in high-end data centers.
If Intel allows the low end of the market to fester, Lattice will have an opportunity to take market share, according to Christopher Rolland, an investment analyst who follows the Portland company for FBR Capital Markets.
But the Silicon Image deal has been a disappointment thus far, according to Rolland. Samsung was the biggest customer for both Lattice and Silicon Image, and when Samsung shifted away from Silicon Image technology last year it cost that company $37 million in revenue.
"A declining revenue base is not something investors typically like," Rolland said.
Lattice's share price hasn't kept pace with the broad revival in the tech industry. The stock is up about 30 percent since Billerbeck took over in 2010, a period in which the Nasdaq index has doubled.
With the semiconductor industry rapidly consolidating - there have been $65 billion in deals announced already this year - Rolland said Lattice would be more valuable as part of a bigger, more profitable company's portfolio.
"I think they're a top contender, truthfully, for this wave," he said. "Their small scale (market value: $740 million) absolutely makes them higher probability target."
Lattice would listen to offers, said Billerbeck, the CEO, but he said he isn't shopping the company. Lattice expects rapid growth, especially in its consumer business, and Billerbeck said his plan is to make more acquisitions - not unload his own company.
"As a CEO, hell no, I don't want to sell," he said.
-- Mike Rogoway
mrogoway@oregonian.com
503-294-7699
@rogoway