Intrinsyc Software - History and Overview
The story of how Intrinsyc became a leading global developer of mobile software and provider of integration services to handset manufacturers
Nature of the business
I founded Intrinsyc Software in 1996, and over the 12 years that I was involved as its President, CEO, Chairman and Advisor, it evolved into a global mobile software and services company, servicing handset manufacturers via offices in Canada, USA, China, UK, and Israel. With close to 500 employees by mid-2008 when my involvement with the Company ended, Intrinsyc counts over half of the Fortune 100 companies as its customers including all of the top tier mobile industry ecosystem vendors: Nokia, Motorola, Samsung, Microsoft, Intel, Agere, Freescale, Symbian, HTC, Wistron, and Mitac/Mio.
With $200M in historical sales and numerous industry awards for the innovativeness and excellence of its products and services delivery, Intrinsyc became a global software vendor in the mobile space. Some of its most important achievements include the development of the original mobile software tools for Windows CE and Windows Mobile in 1997, the underlying radio interface and telephony software for Windows Mobile in 2000, and the CDMA extensions for the Symbian platform in 2003. Intrinsyc also demonstrated important innovation in the development of its low cost Soleus featurephone/smartphone platform in 2004, pre-dating Apple's iPhone and Google's Android platforms by several years, which both borrowed several of the concepts behind Soleus and its highly integrated developer tool chain.
Intrinsyc's stock made many of its investors substantial returns on their investments over the years, at points hitting a peak market capitalization of close to $1/2 Billion in 2000, from an initial valuation of less than $1 Million in 1996 - along the way Intrinsyc's shareholders have traded almost $1 Billion in the value of its shares on the TSX Exchange in Toronto. But like most tech startups, Intrinsyc evolved from humble beginnings, starting life as a general embedded systems software licensing firm, focused on Windows CE based devices . . .
Starting off by Focusing on Creating Licensable Window CE Software Components and Tools
We entered the mobile software space via the general embedded systems market by developing our original Rainbow Web Server and Remote Management technologies in 1996 and early 1997. At the time we had raised a total of $2.5M in growth capital via a few private placements. By the spring of 1997 we had started to expand our development efforts to include Windows CE software tools for the mobile and embedded markets. Shortly afterwards we negotiated our first strategic partnerships to co-develop and distribute a range of derivative products, including Integration Expert for Windows CE and Windows NT, which ultimately became the foundations for Microsoft's own 'Platform Builder' tool chain for its Window CE and Windows Mobile developers.
By the fall of 1997 we had become a darling of the Microsoft Windows CE group and had also forged strong ties with Intel, Motorola (now Freescale Semiconductor), and Hitachi by combining our software with their embedded processor chips to provide the mobile and embedded industry with turn-key solutions based on Windows CE. Microsoft awarded us the distinction of being 'One of 14 Exception Emerging Technology Companies' at Comdex in the fall of 1997, and we were likewise invited to a private reception to meet with Bill Gates and Steve Balmer, as well as present at the Comdex Red Herring investor forum. Our stock was a high flier then, moving from $0.40 to $2.50 during that period. I was also invited to appear in a 20 minute nationally televised 'Investors Online' TV interview. What a great start for our little company.
The Proposed Annasoft Merger
In 1998 we took the aggressive stance that Intrinsyc needed to merge with a US partner, Annasoft Systems, and use their US based marketing position as Microsoft's leading Windows CE and DOS licensing distributor, and training/publishing company, to act as our channel into the markets for our products. Annasoft's owners were interested in such a potential transaction.
After several trips back and forth to Annasoft in San Diego during the spring of 1998, it appeared that an MOU was ready to be signed towards a fall merger of our 2 firms. Our board of directors met and approved the transaction in principal, which would have created a large enough combined company to list successfully on the NASDAQ small cap exchange as early as the spring of 1999. We swung into action and raised $7M as part of the closing conditions, announced the deal, and our stock rebounded and reached new highs of $3.70 by the early summer of 1998.
We worked with our lawyers and the Annasoft principals all summer of 1998 only to hit a critical general stock market collapse in mid August when the Dow Index fell over 500 points in a single day. Most of our investors called to try and pull out of the transaction. Within weeks the deal was dead.
Recovering from the Annasoft non-Merger
We ended 1998 on somewhat of a mixed note. The Annasoft merger was torn up but Intrinsyc was starting to build its business on a number of fronts. We had added our reference design series of CerfBoards to our product line in late 1997 which were an immediate success, and deviceCOM, a communications product, was gaining traction as a software protocol for the industrial automation space. Customers were also lining up for our new engineering services offerings, helping to boost our revenues past $2M in calendar 1999.
It is interesting to note that our original business model was to be a pure software licensing story and only belatedly did we start to offer our own engineering talent to our customers on a fee for service basis. Some years later we learned that our licensing revenues for our Windows CE based software components in 1997-1998 were actually the highest in the industry at the time, and in fact were similar to the licensing revenues Microsoft itself was receiving for its Windows CE licenses. Such was the early state of the embedded software market in those days - perhaps we were just too early to the market?
Announcing Deals with Ford and Siemens, Completing $20M in Financings, Securing our Senior TSX Exchange Listing, and Acquiring J-Integra
2000 was a golden year for us after a long uphill battle to build our business and gain some respect in the industry. We were fortunate enough to be able to deliver some great news releases surrounding our deviceCOM deals with Siemens and Ford in the spring and summer of 2000, and when combined with the buoyant tech stock market bubble at that time, our stock shot up past $9 and we were able to quickly leverage our way into $20M of new equity financings in Toronto with the major funds there during the spring and summer of 2000. Securing a senior TSX listing after that was almost an automatic process.
During this period we had discovered a potential partner for our deviceCOM product line in a UK based company that specialized in Microsoft COM to Java protocol conversion products. We were interested in using their technology in our mobile and embedded market applications. In what turned out to be one of the best acquisitions of my career, we negotiated to acquire J-Integra for $4M in cash and shares just at the point (late 2000) where their product licensing was set to explode from less than $1M to ultimately generating more than $25M in high margin software licensing for the Company.
Driving Towards a Leadership Change in 2001
During the 1996-2000 period we had managed to deliver a significant financial return for our investors, and some of the executives of the company had become first-time millionaires as well. Needless to say it was a heady time for most of us. But I remember it as a period of extreme stress, even though I had personally achieved an increase in my net worth as well, at least on paper.
I announced to the board of directors that I wanted to step down as CEO and leave the next phase of corporate development to a new leader. This process started in late 2000 and by the fall of 2001 we had recruited my replacement and made the operational transition. I felt pretty good about the CEO transition process, and my track record as founder and CEO, so I walked out with my head held high thinking I had seen the last of the Intrinsyc corner office . . .
The period of 2001-2003 ended up being very tough on Intrinsyc Software, as it had been for all technology companies, as the Internet Tech Bubble burst and investors sold their tech stocks. Customers disappeared, revenue growth stalled, profits evaporated, only to be replaced by mounting losses, and the board ended up sacking my replacement and asking for my return as CEO by early 2003.
Returning as CEO in 2003, dreaming of Soleus Powered Feature Phones
When I came back as CEO of Intrinsyc in early 2003 it was all hard work and no sunshine with layoffs and restructuring clouding the ultimate challenge of having to re-build the blue-sky potential for the company. We were a $14M/year business, partly software licensing, with almost 70% services based revenues - and the really tough part was the lack of investment capital. After 6 months we were back to a break-even financial state, but we were missing the critical business growth strategy, and growth capital for that matter, to move the company, and the stock back to exciting territory.
We embarked on a bold new product development initiative, called 'Soleus', in early in 2004, with the concept of using a stripped down version of the Windows CE kernel, which also powered Microsoft's Windows Mobile smart phone offerings, to create a lower cost, re-brandable consumer focused operating system that Intrinsyc would receive per unit royalties for - getting back to our earlier corporate dreams of receiving the bulk of our revenues from software licensing royalties on millions of devices.
We realized that embarking on the Soleus feature phone development path would take a number of years of concentrated development effort, tens of millions of dollars of investment capital, and a considerable amount of execution excellence, but the potential result would be a fantastic return on investment with hundreds of millions of dollars in downstream royalties and derivative revenues from owning a meaningful slice of the mid-range phone market. This was several years before the Apple iPhone and Goggle Android mobile operating systems were launched into this space. We knew the market potential was there - the question was, would Intrinsyc secure market traction for its Soleus offering before competitors emerged?
We knew we had the basic foundation building blocks for this story to unfold our way: we were one of the top Microsoft Windows CE/Windows Mobile 'Gold' partners worldwide, we had a history of building Windows CE/Windows Mobile radio and telephony software components for OEMs and Silicon Vendors (and had in fact helped deliver the first Windows Mobile products to market in 2001-2002), and we had access to the public markets where we could raise the required $30-50M to fund all of these development and commercialization efforts. We persevered, raised the required funds, hired more than 100 new software developers in Bellevue, WA, developed the product, promoted it to the industry, and closed our first strategic partnerships and customer design wins for Soleus by mid 2006.
Passing the baton to the next CEO in late 2006
I had mixed feelings about moving on as the CEO of Intrinsyc for a second time and handing things over to its next leader in late 2006. On the one hand I felt that I did not have an effective working relationship with some of the members of the board of directors, and I was burnt out mentally and needed a change of environment. On the other hand I loved the Company and have always held a true fondness for the staff and the industry space we were playing in.
Little did I know that within 2 years of my departure Soleus would face direct competition from Apple and Google with their mobile operating systems and related hardware platforms. The next CEO responded by diversifying Soleus into a broader 'converged device' platform and also acquiring and further developing navigation application software. Intrinsyc ended up embracing the Android software platform and started developing applications and offering services which have taken the company in new directions. Intrinsyc continues to be a global software and services provider to the mobile space, operating in several companies around the world. I continue to wish them the best of luck.