Who’s To Blame for Tech’s Woes? You and Me

The last time technology investments took a hit, it was easy to look around at the scattered sock puppets and dark fiber, and blame the downturn on the rapid run-up in venture-backed funding for me-too companies and unproven business models. But this time around, what will haunt technology companies isn’t their wholehearted embrace of the web — it’s consumers’ wholehearted embrace of credit. That’s right, this tech downturn could be pinned in part on you and me.
Before you get all huffy about sub-prime lending and greedy bankers, consider this: In the last five years, consumers have taken on massive personal debt, in the form of home equity loans and credit financing, which they’ve used to buy fancier cars, appliances and gadgets. Tech companies have been the recipients of a lot of this spending, either directly — through the increase in sales of high-end gadgets such as cell phones — or indirectly, through the rise in things like luxury automobiles that contain more semiconductors and displays. As a result, when consumers stop spending, tech companies will start hurting. Read More about Who’s To Blame for Tech’s Woes? You and Me

Aluminum: Canary in the Tech Mine

Alcoa, the world’s largest aluminum company, this week slashed its growth forecast and suspended its stock repurchasing program, battening down the hatches as the global credit crunch continues to hurt demand. My feeling is that aluminum is the canary in the coal mine and is foretelling tough times ahead for both the consumer electronics and computer hardware sectors.

Freescale to Spin Out MRAM Business

Today Freescale said it would spin out its MRAM business to a consortium of venture investors under the name EverSpin Technologies. Such a move makes sense for Freescale, which doesn’t have the resources to focus on developing a competitor to Flash memory, but is also somewhat of a shame; MRAM has the potential to be a large moneymaker if it can scale.

MRAM is one of many fledgling attempts to create better non-volatile memory that can retain information even after the power is turned off. Like Flash, MRAM could find a home in portable computing devices such as laptops or MP3 players. Compared to Flash, MRAM is faster and requires less power (hello, longer battery life). Freescale made news in 2006 when it introduced a 4 Mb MRAM chip. That doesn’t hold much, but it was the result of a decade of research into the technology.

The creation of EverSpin follows similar memory spinouts, such as Numonyx, set up by Intel and STMicrosystems to research PRAM, and the less research-oriented Infineon from Qimonda. AMD and Fujitsu spun out their Flash memory operations as Spansion. Memory is a commodity business that requires large economies of scale to become profitable. Freescale does need to focus on a few core businesses, but I hope its stake in EverSpin gives it plenty of upside if MRAM becomes a market success story.

Freescale Needs to Divide to Conquer

Freescale should get ready for change. I visited the Austin-based chip maker yesterday to talk about wireless and networking chips as well as broad trends in the industry, and walked away realizing that the firm needs to split itself up in order to survive.

The company has some very cool technology — especially around its multicore processors for embedded systems such as printers, storage arrays and routers — and a huge base of users for its Power architecture. But it has too many areas of focus. In the next two years, it’s unlikely that the company will have the same combination of businesses it has today.

Specialization is key in the chip-making industry because it allows a company to allocate its R&D more effectively, optimize manufacturing processes and generally improve profits. Freescale, which makes chips for automobiles, RFID systems, cell phones, base stations, networking equipment and industrial applications, designs both high-volume chips at advanced process nodes and low-volume chips that require a lot of manufacturing tweaks.

It’s likely that Freescale’s private equity owners will divide the company along the lines the firm established late last year: networking and multimedia; microcontrollers; cellular; and RF, sensors and analog. Each of the divisions made more than $1 billion in 2007 and could be combined with similar divisions at other firms such as Infineon, Broadcom, STMicroelectronics or even Intersil. Earlier this year, Freescale got a new CEO (from Intersil) with M&A experience, so change is certainly in the air.

Hope for the Fuel Cell Phone

Today, scientists working at the French equivalent of the Atomic Energy Commission said they have created a backup hydrogen fuel cell for powering cell phones. According to Agence France-Presse, the device is being developed by Bic, the French company more familiar as a maker of pens and lighters than mini fuel cells, and won’t appear until 2010. The article says the researchers have been working with European wireless chipmaker STMicroelectronics since 2005 on the project.

If the backup charger (to be used after the battery is drained) makes it to the market, it should have plenty of company. Samsung is developing a similar device for cell phones to hit the streets in 2010 as well. Motorola is working with a startup called Angstrom Power to develop a prototype hydrogen-powered phone. MTI Micro plans to start selling its products in 2009, including a backup power system and potentially a fuel cell embedded cell phone. And Medis Fuel Cells already makes disposable fuel-cell chargers for phones.

As consumers grow more and more mobile, these companies’ plans fit with the dream of having a power source that is truly free from the power cord. And as companies look to go greener, the goal is to develop a backup power source for consumer devices that can essentially run on water, and other non-toxic chemicals. Both were big topics this year at the Consumer Electronics Trade Show, but getting fuel cells to market will still need a lot of work. Still it’s good to know so many firms are trying.

PayCycle Offers Online Payroll for Small Business

img paycycleRunning your business usually involves tasks that fall into two major categories – the stuff that you want to do and the stuff you have to do. Administrative tasks like invoicing and payroll are likely to fall in the latter category.

While there an abundance of time tracking and invoicing solutions available, choices for online payroll processing have seemingly been sparse. Most businesses use a manual process to trudge through the task or delegate a portion out to their accountant with mixed results. If you are looking to streamline your payroll process, you may want to check out PayCycle as an alternative.

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STMicro-NXP Takes on Qualcomm, TI

With mobile phones hotter than PCs, it’s no wonder STMicroelectronics has paid $1.55 billion for 80 percent of NXP Semiconductor’s wireless division to create a wireless-focused joint venture. Everyone wants to be in the cell phone market. And for those who can’t, it’s mobile Internet devices all the way!

This deal is all about scale. STMicro is the No. 3 chipmaker for wireless chips and NXP is No. 4. Together, their joint venture will still rank third behind Texas Instruments and Qualcomm, but my guess is they combined their wireless divisions to stay in the running. In the chip world, when the going gets competitive, the competitive get bigger.

The move follows some of the logic proposed earlier this year by a French engineer who suggested NXP, STMicro and Germany’s Infineon merge. But instead of mashing three large chipmakers together, this involves pulling out specific divisions and creating a large player with singular focus — although anyone building wireless chips from 2G to LTE and Ultra-wideband to GPS can hardly be accused of a singular focus. My question is: What do they plan on calling this JV — “Alphabet Soup”?