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ARCHIVED  November 19, 1999

Kota Micro courts mega success

Small Business Profile

LOVELAND — The building that houses Kota Microcircuits Inc. is a simple structure: A large, white cube conspicuously affixed to the semi-developed flatlands of south Loveland.

But behind the white cube’s walls, Kota Microcircuits’ staff is not so large, its product line of super high-speed microcircuits is far from simple and its facility — cube-like though it is — is more a monument to courage and last-minute resourcefulness than a symptom of uninspired architecture.

“They told us we had until Saturday to get out of there and move out all our equipment before they changed the locks on the doors — and that was Monday,” recalled Kota director of sales and marketing Dan Secrest of the company’s hasty departure from National Semiconductor in early August 1998.

In the mid-1990s, National Semiconductor Corp. purchased Comlinear Corp., a microcircuits developer based in Fort Collins. In December 1997, the company “determined that the Fort Collins manufacturing operation was no longer seen as part of their strategic vision and [discontinued] all Comlinear projects,” Secrest explained.

Hundreds of Comlinear employees suddenly faced the specter of unemployment.

The company remained in operation for about a year after the announcement, fulfilling outstanding product orders and making other preparations for the shut down. During that time, Secrest, Gary Ross and Steve Smith — all Comlinear employees — approached National Semiconductor with a proposal to buy the discontinued division.

“We got a group of nine people together, pooled some of our own money and bought the manufacturing line [of Comlinear] in August 1998,” Secrest said.

And the rest is history. Secrest, Ross and Smith are now the principals of Kota Microcircuits. Ross is president and CEO; Smith is chief design engineer.

“It was a very fast transition,” Secrest said. “We moved in one week, had our first product line running by October and were profitable by late October.”

When National Semiconductor’s decided to dismantle its operation, Comlinear employed roughly 140 employees — 22 of whom left with Secrest, Ross and Smith to form Kota. Kota has since hired on three more, but more than 100 Comlinear employees remain unaccounted for. “A lot of those were laid off,” Secrest noted, “and those were very good employees. We will be contacting some of those ex-Comlinear people as we expand.”

And it’s a good bet Kota will expand. The company’s hybrid thin-film microelectronic modules can be used in an ever-increasing array of high-tech applications spanning missile guidance, flight avionics, radar and communications systems. After little more than a year of business, the company is well on its way to posting 1999 projected revenues of $2 million and commands a high-powered client base unheard of among 1-year-old start-ups.

“The advantage of spinning off to create your own business is you don’t have to build products or build a customer base,´ said applications engineer Debbie Brandenburg. “When we spun off, we had 10 products already developed — we were a start-up with a 15-year background.”

Comlinear’s niche in the semiconductor industry was defined by a hybrid product line developed in the 1970s by David Nelson, who founded Comlinear in 1980. In the 18 years before its rebirth as Kota Microcircuits, Comlinear established a solid base of customers, including Lockheed Martin Corp. and Motorola Corp. The challenge for Kota wasn’t finding good customers — it was keeping them, Secrest said.

“One of the challenges was to have them see us as a viable company when we were just a start-up,” he said. “They were a little skeptical of a little 20-person start-up. We spent the first six months visiting customers directly to reassure them that we were a viable entity.”

Kota Microcircuits’ responsibility to its clients parallels the company’s commitment to its employees, and early on, its principals went to great lengths to earn the confidence of both, Secrest noted. “It took a lot of commitment to our own people, having regular discussions with our employees and their family members to give them confidence that we knew what we were doing, that we were being fiscally responsible.”

Ed Brackett, senior sales engineer for one of Kota Microcircuits’ key suppliers, On Semiconductor Inc., offered evidence of the company’s success in maintaining its business relationships through the transition.

“We enjoy working with them and the technologies they develop,” he said. “We’ve had a good relationship with them for 15 years, first with Comlinear and in the last few years in its new life as Kota.”

Ross, Smith and Secrest continue to look out for their company — its employees, its clients, its suppliers or its future.

“Every start-up has plans in place for an exit strategy of some kind, either an IPO or a merger or to be bought out by a larger company,” Secrest said, addressing the possibility of an initial public offering. He suggested an IPO might very well be waiting somewhere down the road for Kota Microcircuits, but added “my guess is it won’t be for five to seven years.”

The future for Kota Microcircuits is bright, and brightening as the semiconductor industry is finally rebounding from the doldrums of the mid-1990s.

Daven Oswalt, communications director for the Semiconductor Industry Association said that the company’s timing is good. “Basically, in the mid-1990s, the industry was growing rapidly, but then it hit a big bump in the road followed by some rough years,” he said. “But 1999 has been a year of recovery, and in the next two to three years, we expect 20 percent growth each year.”

The industry’s growth, he explained, is being driven by the surges in Internet-related markets and other forms of communication.

“We will have 15 percent growth with chip sales topping $144 billion in 1999 increasing to $234 billion by 2002,” he said. “The growth is quite robust.”

Small Business Profile

LOVELAND — The building that houses Kota Microcircuits Inc. is a simple structure: A large, white cube conspicuously affixed to the semi-developed flatlands of south Loveland.

But behind the white cube’s walls, Kota Microcircuits’ staff is not so large, its product line of super high-speed microcircuits is far from simple and its facility — cube-like though it is — is more a monument to courage and last-minute resourcefulness than a symptom of uninspired architecture.

“They told us we had until Saturday to get out of there and move out all our equipment before they changed the locks on the…

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