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22 October 2001
Chennai: Ray Stata, head of the $2.58-billion-turnover Analog Devices Inc USA, is optimistic about the future of communication technology and is least worried about the present slowdown in the global economy.

In fact, Stata foresees a revolution in the field of communication technology in the next five years, when the speech-recognition technology is expected to stabilise. In the next decade, technology is going to influence a large population. So, he says, the future is bright for IT and communications industries.

''This is the time for us to focus on research and development, since the pressure of market deliveries is not severe today,'' he says. As for the future growth of Analog Devices, which witnessed an 80-per cent growth last fiscal, Stata hopes to maintain an average 30 per cent annual growth rate.

Instead of laying off people, Analog Devices is cutting costs by reducing perks and bonuses. ''The stress is on managing finances and protecting strategic investments made by the company,'' he says. Pointing out that huge investments were made in communications and IT in the past five years, Stata says this had generated unrealistic expectations particularly from e-commerce.
A leader in high-performance analog, mixed signal and digital signal processing (DSP)-integrated circuit (used in signal processing applications), Analog Devices gets 45 per cent of its revenue from the communications sector including products for wireless applications and high speed-net access.

Analog Devices had set up its Indian development center at Bangalore six years ago. The centre today employs 60 engineers working on VLSI design and DSP application software on the newest DSPs. Last year, Analog Devices bought the Hyderabad-based Chip Logic. The company has also been associated with the TeNet group of IIT-Madras and a clutch of companies promoted by the latter.

Stata, born in 1934, is also an active venture capitalist, and has contributed $10 million to Ventureeast Trust Capital India Pvt Ltd, Chennai. He owns another venture fund in the US. Stata, who had donated $25 million to the Massachusetts Institute of Technology (MIT), was here to establish a chair at IIT-Madras for which Analog Devices has donated a huge sum. 

Stata took off some time to discuss with domain-B the strategies companies should follow to survive the present slowdown and why Analog Devices is considered as an ideal work place. Excerpts:

Domain-b: What do you think of the current slowdown in the software and IT industries? How should companies manage their businesses during this volatile period?
Stata: It is true that huge investments went into IT and e-commerce with lots of expectations, some of which were unrealistic. But I am optimistic about the future for these industries in India and the US. In five years' time, the technology for speech-recognition by computers will get stabilised. There will be a revolution in system architecture and convergence. Till date, technology impacted only a small percentage of the population. But over the next decade, it will impact large population. So the future is bright for IT and communications industries.
The strategy to be adopted now is to manage financial assets and to protect all those strategic investments made. At Analog Devices we are cutting costs by reducing perks and bonuses instead of laying off people. This is the time for us to focus on R&D and innovate, as the pressure of market deliveries is not very severe.

Domain-B: How can a country like India benefit now and later?
Stata: There are several companies in the US with innovative ideas, but not enough funds. Such outfits can set up their offices in India, which has a huge potential of becoming a global design house because it has huge technical talents. Engineering professionals should stay back here and gain experience so as to showcase their success stories. In this regard, the TeNet group of companies of IIT-Madras is a good example.

Domain-B: What is your management philosophy? Analog Devices has come in for special mention by management gurus.
Stata: My philosophy is management by walking around and demonstrating the value. These principles are universal and there will be slight variations in their implementation, based on the local conditions. My stint at Hewlett-Packard enabled me to learn how a company is to be managed. Similarly, management experts like Ross Ackoff of the University of Pennsylvania Japanese Professor Shoji Shiba also influenced me. The most important attribute of a successful organisation is its ability to adapt and integrate change. From a single-product company, Analog Devices gradually went into signal processing, and finally to complete software solutions.

Domain-B: Analog Devices, from its Indian centre, had launched a chip, breaking the $10-barrier. How important is pricing for a successful management strategy?
Stata: As far as I am concerned, pricing is a crucial management tool. But more important is innovation, which is rewarded in terms of premium prices; and when competition catches up prices will naturally come down. Most venture companies don't succeed on pricing but on innovation and that necessarily calls for premium pricing.

Domain-B: Now you are an active venture capitalist. What do you look at to put in your money in a venture? An attractive rate of return?
Stata: The one important aspect I look for before committing my money in favour of a startup is the relationship of the technology with the needs and the user market. Will there be a technological breakthrough, is the question I would ask. Further, if there is no technology or management talent, I would stay away from such companies. Again, I don't invest in or even affiliate with companies that have an authoritative management.

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