Mistral aims at 30% revenues from IP

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Currently, Mistral, with its 200 engineers, earns 95 per cent of its revenues from servicing big names in the industry, such as chip-maker Texas Instruments. What Mistral wants to do is take a core chip from such a partner and architect a combination of software and other off the shelf chips to come up with proprietary "reference designs" or in the long run, full products that it can licence.

Mistral announced on Wednesday, the result of its first real shot at a reference design around one of the less powerful OMAP chips that it says has the potential to become an international hit. The design is for a hand-held device that can be a mobile phone and record and play music and video among other things.

This year however, most of the revenues will still be from design services, where margins are under pressure, due to a combination of high staff costs and customers unwilling to pay significantly more for services. Revenues for the year to March 2004 were Rs 21 crore.

"We aim to end this fiscal with revenues of about 35 crore," Ahmed said. "Next year, with more money from licensing reference designs, we should earn about Rs 60 crore."

By 2007, when it wants its own IP to take centrestage, Mistral would have roughly doubled its engineering staff, partly because the services end of the business can't be stopped, or hived off as industry sources say it wants to.

Starting with the seed money of "a few lakhs" some seven years ago, Mistral's starters managed to bring it to a stage where a Washington DC-based fund, e-TEC Ventures, forked out $3 million in 2001. e-TEC holds a 20 per cent stake in Mistral.

Founders, Ahmed, R Rajeev and B K P Narayanan, both chief technology officers at Mistral, and Rajshekhar Reddy, its vice president-finance, hold some 60 per cent with the rest distributed among key staff.

Like many other firms in the same boat, Mistral uses its services side of the business to keep itself going. So, for instance, it is an OMAP Technology Centre, which is a strategic partnership with Texas Instruments (TI). This allows Mistral a shot at developing products around the "latest Silicon that TI puts out".

OMAP, originally called Open Mobile Applications Platform, soon morphed into an emerging brand for TI, which dominates the digital-signal-processors (DSP)-for-wireless-applications market.

And companies such as Mistral got to show original equipment makers and original design makers all that was possible with the OMAP family of chips that combine the DSP and another chip from ARM Technologies, a UK company.