Technology
Computer Networks
NASDQ:  RSYS

RadiSys Corporation

5445 N.E. Dawson Creek Rd.
Hillsboro, OR  97124
Phone:  503-615-1100
Fax:  503-615-1114

 

Dr. Glenford J Myers
Chairman, President and
Chief Executive Officer

Interview conducted by:
Diane Reynolds, Co-Publisher

CEOCFOinterviews.com
June 2001

Bio of CEO

Dr. Glenford J. Myers co-founded the Company in March 1987 and has served as the Company’s Chairman of the Board, President and Chief Executive Officer since that time. From 1981 to 1987, he held various management positions with Intel, including Manager of Microprocessor Product Line Architecture and Manager of the Microprocessor Strategic Business Segment. While at Intel, Dr. Myers had primary management responsibility for the feasibility and design of Intel’s 286 and 80960 microprocessor chips, both of which became industry standards in their respective application areas. From 1968 to 1981, Dr. Myers held various engineering and management positions with IBM. Dr. Myers holds a Ph.D. from the Polytechnic Institute of New York, an M.C. from Syracuse University and a B.S.E.E. from Clarkson College.

RadiSys Corporation is an independent provider of building blocks enabling next-generation Internet and Communications systems. The Company’s building blocks are design-intensive and require substantial engineering knowledge and a comprehensive understanding of the end product into which the building blocks are incorporated. RadiSys primarily sells building blocks to original equipment manufacturers (OEMs). The Company’s customers include many leading OEMs, such as AG Communication Systems, Agilent Technologies, Alcatel, Applied Materials, Inc., Avaya Inc., Cisco Systems Inc., Fuji Machine Manufacturing Company Ltd., International Business Machines Corporation, Lucent Technologies Inc., Nokia Corporation, Nortel Networks Limited, and Phillips Medical Systems N.E.D. B.V.

CEOCFOinterviews – Please tell us about RadiSys, and your service to the next generation Internet and communication systems?

Dr. Myers – We provide technology to communication equipment companies like Nokia, Nortel, Alcatel, Comverse, Cisco, Siemans, Lucent, etc.  We provide a broad spectrum of building blocks, usually in the form of board level or blade level products, like embedded computers signal processing modules and network interfaces; the basic kinds of building blocks that those companies need to build most of the equipment that they are producing today. 

CEOCFOinterviews – Do you do this on a global basis?

Dr. Myers – Yes, about 40% of our business is outside of the U.S. 

CEOCFOinterviews – Do you see sales outside of the U.S. starting to pickup?

Dr. Myers – Our ratios have been relatively constant about a 60/40 ratio.  We’ve seen about the same growth in both markets. 

CEOCFOinterviews – How are you attracting new customers? 

Dr. Myers – There are about 10-15 major telecom players in the world.  Some of the other big names in addition to the ones I mentioned before are Marconi, Ericsson, NEC, Fujitsu and so forth are customers on our target list.  Then of course in the Telecom area there are a huge number of startups and emerging players and we try to find a balance between the two.  Most of our business and focus is on the major tier one players the Nortels and the Nokias although; we try to find a balance with the startup companies.   We try to assess where they are going and whether it makes sense and a good fit for us and basically enlist our sales force into calling on some of those companies.

CEOCFOinterviews – Are these long-term contracts you have with them?

Dr. Myers – Yes, for most of our major customers we have in one shape or another a long-term agreement. 

CEOCFOinterviews – Is your company affected by the consolidation in the communication field?

Dr. Myers – The consolidation in our market place and our customer base is not of much concern to us.  We see a lot of the consolidation going on to achieve better times to market.  Actually, time to market is one of the key reasons why customers buy from us.  If anything, that is working in our favor.  We’ve also been fairly acquisitive ourselves.  We’ve done a number of acquisitions over the last couple of years to bring in new technologies and serve our customers.

CEOCFOinterviews – Do you see additional acquisitions just for the technology?         

Dr. Myers – Yes, as a matter of fact we went out and raised capital last year and when we did that we said that the primary use of proceeds was M&A types of activities.  We’ve announced one acquisition this year and we are looking at some other types of opportunities. 

CEOCFOinterviews – The S-Link Corp. acquisition, what were the benefits to the company?

Dr. Myers – S-Link was a set of outstanding technologists located in the Telecom corridor in N.J.  They are focused on SS7 Signaling basically, the network behind the scenes that makes the public phones and wireless network work.  They have the advantage of a startup by not having a lot of legacy things to worry about.  They were very focused on signaling in packet networks and have some products that are in trials and nearing development.  This is a capability that our customers of today are very interested in so this is a great set of technology to add to the portfolio.

CEOCFOinterviews   - How are you handling inventory?

Dr. Myers – We have an objective to have a very high number of inventory turns and a low absolute dollar value on inventory.   In Q1, which we completed in March, we ended up with an inventory position we were very disappointed in basically, because of the precipitous drop in the telecom equipment market.  Fundamentally, the way we operate is we get long-term detailed forecast from our customers; generally they are for a 12 month period and as we get closer in, then customers issue orders in one form or another.  We try to manage our inventory relative to the forecasts our customers are giving us and we are constantly updating.  The objective is a very low level of inventory and that is our customers’ objective for us also because they recognize if we have a lot inventory then one way or another it will end up costing them.

CEOCFOinterviews – Is the manufacturing of products done here or do you have more then one plant?

Dr. Myers – Our primary plant is here at our headquarters in Oregon.  We have had a manufacturing plant in Houston, TX as a result of an acquisition.  We announced this quarter that we’re consolidating and closing that plant down and moving everything up here.  Then we also do a small amount of production that is outsourced to some contract manufacturers. 

CEOCFOinterviews – Would you consider opening a manufacturing plant outside the U.S.?

Dr. Myers – Yes. Though it’s not a real demand from our customers at this point, the one exception being in China. Our largest customer is Nokia and I believe China, with the third largest market, and there are a lot of incentives in China for locally manufactured systems.  We do have one arrangement where we manufacture some things for Nokia for use within China.  Other than that for our size right now, we are satisfied with our one plant we have here in Oregon.        

CEOCFOinterviews – Are you able to keep up with the demand?

Dr. Myers – As I said we keep up with the demand by having what we hope are accurate forecasts from our customers for a 12 month period and that gives us a lot of insight.  It is an OEM business so it generally is more predictable that an end user or consumer business.  We have the capital to grow ourselves relative to the demand.  Right now unfortunately, we are in a position where we have a lot more manufacturing capacity than we are currently shipping today.  Keeping up with the demand is a problem I’d like to have for the next 12 months.

CEOCFOinterviews – Do you feel you have enough engineers and technicians in place?

Dr. Myers – Oh yes, that is not a current worry.  As you implied that kind of changes with the market.  People are staying where they are and not many companies are hiring, some companies are doing the opposite.  Right now it’s an environment where it is very easy to keep people and very easy to find new people who are very, very good.  We all go through these big cycles and we’ll be back in the part of the cycle before long where hiring will be tough again.

CEOCFOinterviews – How are you dealing with the fact that technology stocks have been hit hard, lately?

Dr. Myers – We’re standing pretty much where every other company is.  Like every other CEO I feel that we are undervalued.   The evaluation of the whole technology market has dropped significantly.  We’re working very diligently to position ourselves to be even stronger when the downturn occurs.  Sometimes these downturns are blessings in disguise and the good companies get even better in the downturns and explode in a positive way in the end.   We’re optimistic about the future.

CEOCFOinterviews – How much competition do you have and how are you dealing with it and what makes your company unique?

Dr. Myers – We do have competitors despite the desire to think otherwise.  I think we are very uniquely positioned from our competitors.  We have a very unique attitude towards our customers which we call being a virtual division of our customers.  We have a philosophy of being so close and intimate with our customers, that they ideally lose track of the fact that we are a separate company and they think of RadiSys as virtually part of their own company.  That’s one of the ways that we are highly differentiated from our competitors.  I think that our technology differentiates us.  We’re also extremely closely aligned with Intel and I’m trying to leverage Intel’s very heavy investment in the communications area.  I think that is another thing that sets us apart with all the other companies that we compete with. 

CEOCFOinterviews – Do you rely on any one customer more heavily than another?

Dr. Myers – No.  We have a small group of customers that is very important to us.  If you take our top five customers in any given quarter they represent somewhat north of 40% of our revenues.  We generally have 1 or 2 customers who are 10% customers and generally over the last couple of years Nokia and Nortel have both been slightly above 10% customers.  No one is for instance a 20% customer.

CEOCFOinterviews – How much are your customers involved with the design of the whole process?

Dr. Myers – The way we usually work is that a customer of ours will have a set of requirements for some new piece of equipment that they are building and we’ll talk to them about those requirements and help them refine the requirements. Then we’ll try to match up those requirements with our databases of building blocks and intellectual property and technology then formulate a unique and hopefully a high volume product for that customer.   We drive for the most part the intellectual property and the design.  Although, depending on the situation and the customer, sometimes the customer is involved in somewhat of a secondary way on the design.  Usually, we drive the design and the intellectual property is owned by us. 

CEOCFOinterviews – In terms of the telecommunications market with voice and everything that is new, is there more to come?

Dr. Myers – I am a big believer in technology and change and therefore, there has to be things beyond that.  One of the things we can add to that is video delivery that today in communications is voice centric. Video is a completely different way of communicating and has many more demands in the infrastructure.  I think movement to that is inevitable and I think the third generation wireless system will in part be an enabler for that. 

CEOCFOinterviews – Do you have enough capital to continue with the acquisitions or do you see your company holding back and concentrating on internal growth as you move forward?

Dr. Myers - We raised $120 million last year and basically have roughly that in a cash position right now.  That gives us a lot of room to maneuver in either direction.  Our strategy basically combines internal growth and acquisition and to have a broader set of building blocks over time for our customers so we take a careful look at that and decide what we are going to do through internal development and what is more cost effective to acquire.  We try and call the shots that way. 

CEOCFOinterviews – What would you say to a potential investor to spark their interest in your company?

Dr. Myers – The principal thing I would say is that we believe very strongly in the growth of the communications marketplace and the demand for more and more higher bandwidth and more and more complex communications equipment.  RadiSys has a lot of technology in the form of building blocks for that type of communications equipment.  That’s what excites us every day when we come to work.  The prospects for getting involved in a lot of leading edge applications with some of the leading communication companies in the world and being the key part of the next generation communication products that they deliver. 

CEOCFOinterviews – Is there another area that you would like to enter into?

Dr. Myers – We are big believers in focusing and not getting involved in diverging things. We want to stay focused on the communications equipment marketplace and deliver building blocks to companies who are building communications equipment. 

CEOCFOinterviews – What has motivated you personally day after day?

Dr. Myers - I always wanted to face the challenge of building a large company from scratch.  I had joined Intel when Intel was a fairly small company and saw Intel soar through a billion dollars and beyond, and basically wanted the challenge of doing that myself.  I actually left Intel and founded RadiSys and started at the very beginning as employee number one.  The motivation for me is to see if I can build a multi-billion dollar company and that’s what keeps me going.