Ittiam becomes bridgehead for IT product firms

Ittiam, the product company in the digital signal processing space entirely devoted to producing its own IP (intellectual property), is emerging as a bridgehead for Indian product companies.

In the last three to five months it has passed product milestones that mark the first steps in its journey to become a successful product company at the cutting edge of technology.

One is the IP video phone with which it is targeting individual users likes homes, apartments, small offices and even desktop users who would like to have high quality video interaction with the other person at the end of an internet connection anywhere in the world.

It is a complete reference design including the software and the board. An OEM using this technology can target an end market price of $ 350-400.

"We have now got one design win for this in Korea and that customer (which will make the end product) is going to launch it in the first quarter of 2005," says Srini Rajam, chairman and CEO or Ittiam.

Another key development has been the technology for a portable multimedia player and recorder, a digital video camera, still and movie. Production has begun and the product is likely to be one of the hot offering this Christmas in the US.

"That's going to be a very big take off. This will really put us next year on the map in terms of volume. Royalty has already started flowing in," reveals Rajam.

This has enormous significance. An India company, manned by Indian engineers, is providing the core technology right at the forefront of consumer electronics for a gizmo. The heart of the technology, the IP, is Ittiam's.

"We still think we are in the early stages. But you can say that we are seeing the fruits now in the full sense in terms of customers, revenues, royalties for the key R&D investments made in 2001 and 2002. The full technology, the entire reference design and software, as we call it, are ours. It will be priced at $ 499, with promotion at $ 399," adds Rajam.

Leading DSP market researcher Forward Concepts has done a survey of customers for their preferred IP vendor, for software and silicon. Rajam is "glad to say that Ittiam is figuring in both the lists. We have taken out first small step of achievement by featuring in the worldwide survey. The real or ultimate goal, in line with our vision, is to be on the top of the league, to be recognised as the leading DSP IP supplier. Out of 25 companies surveyed, today we are in the middle."

"We will be definitely capturing 30-40 per cent of the global demand for this technology. We will be supplying to multiple brands. There will be three or four technologies supporting the brands. A lot of differentiation will come in the way they package it, what features they put in it and the pricing. Japanese, Korean and at least one Chinese company will launch this product," says Rajam.

Total available market in 2005 is a million units, and it could explode to 5-6 million units by 2007. Volumes will go up if the price comes to sub-$300. It is currently projected as a high tech product but could soon become a common man's product.

In 2003-04, its third year of existence, Ittiam earned revenues of $ 4.78 million and a net profit $1.04 million, with a staff of 125. What is "encouraging" to Rajam is that the royalty income has the potential to grow from about 3 per cent of revenue in 2003-04 to 30 per cent in 2006-07. By 2007-08, it is targeting a revenue of $ 25 million.

Ittiam has so far received only one round of funding of $ 5 million. "At the moment of course a lot of investor interest being shown, seeing that it is a viable, feasible. We are looking at an IPO tentatively in 2007-08.

"There is need for more funding, definitely as the R&D has to be sustained. If you want to have four to five streams of products yielding revenues at any time, you are looking for at least two three rounds of funding." The first round has seen two lines of products.