For Cir­rus Logic, back-to-ba­sics bear­ing fruit

Austin American-Statesman - - TECH MONDAY - KIRK LADEN­DORF

Ja­son Rhode got his sec­ond lengthy shot of na­tional TV ex­po­sure as a tech ex­ec­u­tive last month. The CEO of Austin-based Cir­rus Logic Inc. was sit­ting in a small video stu­dio in Austin, talk­ing live by satel­lite with CNBC’s Jim Cramer of the high-en­ergy in­vest­ment show “Mad Money.”

Cramer, as is his wont, was talk­ing a mile a minute, and Rhode — who had an au­dio link but no way of see­ing Cramer’s on-cam­era gy­ra­tions back in New York — worked hard to get a few words in edge­wise.

“It was fun and kind of weird,” Rhode re- called last week. “I couldn’t see him at all.”

Cramer, as it turned out, was re­ally high on Cir­rus’ stock, cit­ing the chip com­pany’s grow­ing busi­ness ties to Ap­ple Inc.

Cir­rus is re­ported to sup­ply au­dio pro­cess­ing chips for por­ta­ble me­dia play­ers (the iPod), smart phones (the iPhone) and tablet com­put­ers (the re­cently launched iPad).

Rhode, like all good Ap­ple sup­pli­ers, is care­ful not to say much about his com­pany’s largest cus­tomer. Ap­ple prefers to keep its com­po­nent sup­pli­ers far in the back­ground.

“Some cus­tomers don’t like it when sup­pli­ers talk about them, and we try to be re­spect­ful of that,” Rhode told Cramer.

But Rhode didn’t have to say any­thing. His com­pany’s an­nual fi­nan­cial dis­clo­sure re­port said it all. Ap­ple ac­counted for 36 per­cent of Cir­rus’ sales for the year that ended in March, up from 16 per­cent the prior year.

The growth in sales to Ap­ple gave the Austin com­pany a big jolt of rev­enue growth — up­ward of 26 per­cent — and a huge boost in profit, which ex­panded by 10 times, to $39.4 mil­lion.

Wall Street no­ticed. The stock, which was be­low $2.50 a share in early 2009 at the height of the re­ces­sion, ad­vanced strongly this spring. It has nearly quadru­pled in the past

year, clos­ing Fri­day at $17.64.

Mean­while, other tech stocks have lost al­ti­tude in re­cent months. The tech-cen­tric Nas­daq com­pos­ite in­dex has risen less than 2 per­cent in the past year.

In May, Cramer told view­ers the stock was a bar­gain. A month later, the stock had gained 29 per­cent.

“Mr. Rhode, you are a hero to me,” Cramer gushed on the air. “You have turned this around into a great com­pany.”

In the ver­nac­u­lar of Cramer, it was a dou­ble boo-yah moment.

Rhode, who is a com­mit­ted team player, used his few sec­onds left on the TV seg­ment to note that plenty of other folks at the com­pany have played big roles in the turn­around story.

(You can find a link to the nearly eight-minute clip on the home page of Cir­rus Logic’s web­site, www.cir­rus.com.)

Cir­rus, which had toiled in me­dia ob­scu­rity for years, sud­denly is an overnight suc­cess story.

The com­pany’s share­hold­ers are smil­ing, its work­ers are up­beat, and it is adding jobs. Cir­rus, which em­ployed a lit­tle more than 500 work­ers at the end of March, hired be­tween 20 and 30 more dur­ing the past quar­ter. That’s rapid growth for a mod­est-size tech com­pany with spe­cial­ized en­gi­neer­ing needs.

‘Mr. Rhode, you are a hero to me. You have turned (Cir­rus Logic) around into a great com­pany.’

JIM CRAMER

‘Mad Money’ host

“For tech­ni­cal peo­ple, this is a very ful­fill­ing sit­u­a­tion,” Rhode said. “It’s like be­ing on a sports team. You feel like you are win­ning.”

A long­time en­gi­neer and prod­uct man­ager for Cir­rus, Rhode took over as chief ex­ec­u­tive in 2007. He re­mem­bers well the time when Cir­rus wasn’t win­ning — when its at­ten­tion seemed scat­tered in too many di­rec­tions.

As a novice CEO, Rhode said, he tried to do a few com­mon-sense things.

He fo­cused on fewer prod­uct ar­eas that fit well with the com­pany’s tra­di­tional strengths. He hired more good en­gi­neers dur­ing a down econ­omy, when there were signs that some of the com­pany’s new prod­ucts were start­ing to catch hold. And he and the rest of man­age­ment worked to make sure em­ploy­ees felt ap­pre­ci­ated and in the loop.

The com­pany con­cen­trated on de­vel­op­ing in­no­va­tive au­dio chips — a long­time Cir­rus strength — and an en­ergy-re­lated prod­uct line with chips that go into prod­ucts such as smart power me­ters.

Then Cir­rus’ ties as a re­li­able sup­plier to Ap­ple took off as that com­pany’s smart-phone and tablet com­puter busi­ness ex­ploded. Tear-down stud­ies of the iPhone 4 and the iPad have re­vealed Cir­rus au­dio chips — sell­ing for a lit­tle over a buck each — right in the mid­dle.

The chip­maker says it is spend­ing a lot of time de­vel­op­ing new prod­ucts for mo­bile In­ter­net de­vices.

Last month, Cir­rus an­nounced two new prod­ucts: a low-power au­dio coder-de­coder chip de­signed for smart-phone ap­pli­ca­tions and a low-power au­dio am­pli­fier chip. Both are de­signed to de­liver high per­for­mance while con­serv­ing bat­tery power, which is cru­cial for mo­bile de­vices.

Now Cir­rus is plan­ning to build a new cor­po­rate head­quar­ters on West Sixth Street down­town, which Rhode says will im­prove the com­pany’s work en­vi­ron­ment while sav­ing money. Work hasn’t started, but the build­ing is ex­pected to be ready for move-in two years from now.

“It’s funny how some of the most im­por­tant wis­dom in run­ning a com­pany is ba­sic com­mon sense,” Rhode said. “You should fo­cus on some­thing that you are truly good at and make sure that it is an area that you can be re­ally ex­cited about.

“There has been a lot of progress in our au­dio busi­ness over many, many years,” he said. “The com­pany had so many other things go­ing on. We have cleared things away. Some of the de­bris is not there any­more, and we are con­sis­tent about not stray­ing from the ar­eas of our strength.”

Ja­son rhode CEO cred­its co-work­ers, com­mon sense for turn­around.

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