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Telegent goes public on strength of analog, digital mobile TV tuner-on-a-chip sales

Since Telegent sold its first analog mobile TV tuner-on-a-chip in 2006, the Sunnyvale, CA-based startup has been defying conventional wisdom. Now, in its latest defection from groupthink, the company is going public. Combined with other good news from the IPO front, this news has Silicon Valley pundits announcing the rebirth of the IPO market.

They may be breaking out the champagne prematurely. Telegent's value as an economic barometer is unclear. The company's success — it has been consistently profitable since 2007 and is growing at sizable rates — coincides with the credit/default-triggered global economic calamity.

Instead, Telegent may illustrate the old-fashioned principle of making something people want and selling it to them at a price they can afford — that and the value of skepticism when it comes to accepted wisdom.

Semiconductor and communications industry veterans Weijie Yun and Samuel Sheng started Telegent in 2004. Both hold doctorates in electrical engineering from the University of California at Berkeley and have impressive resumes. Recently, the two won the Hua Yuan Science and Technology Association's 2009 Entrepreneur of the Year Award.

Sheng holds patents in RF tuner and DSL modem design and was named LSI Logic Distinguished Engineer in 2002, as well as receiving LSI's Inventor of the Year in 2002 and 2003. Yun, who led marketing and product management at Berkana Wireless prior to its acquisition by QUALCOMM, founded AIP Networks (now Octoplex), a supplier of fiber-optic components, and SiTek, a spin-off of sensors and communication component maker BEI Technologies. In 2008, Ernst and Young named Yun a Northern California Entrepreneur of the Year.

The partners didn't start Telegent specifically to build mobile TV tuners, Yun explains. Instead, they started out by looking for markets with significant growth potential. Mobile TV caught their interest because it seemed like a natural. "We asked, why didn't [analog broadcast] mobile TV happen?" he says. The answer to that question seemed to be "a technical problem that seemed un-doable;" namely that receiving analog broadcast TV on mobile devices required too much power.

"We said, let's go back to the drawing board," Yun says. Yun and Sheng saw mobile TV not as a problem, but as opportunity. If they could solve the technical challenge, Telegent could take advantage of a built-in market with a built-out global infrastructure.

Between 2004 and 2006, Telegent developed an integrated TV-on-a-chip, including RF tuner, demodulator, decoder, video processor and universal interfaces, with low enough power and high enough picture quality. Telegent's patented SureTrak architecture supplied the "secret sauce" for stable mobile reception.

Today, Telegent's analog receivers are currently embedded in more than 80 handset models worldwide and sold in China, Africa, the Middle East, Latin America and Europe. This year, Telegent won the GSMA's Asia Mobile Best Mobile TV or Video Service Award.

Analog TV will continue to be the world's largest mobile TV opportunity through 2013, according to recent research by In-Stat, and Telegent's numbers (from the company'sS-1 SEC filing) support that.

Telegent has been consistently profitable for three years. For FY2009 (ending March 31) the company reported $124 million in revenues (more than twice FY2008 revenues) and $41 million in net income (a more than 500 percent increase from the previous year's $7 million). From March through September this year, Telegent's revenues nearly doubled, growing to $73 million from $45 million for the same period in 2008, with net income increasing by 50 percent to $39 million from $26 million.

Since its founding, Telegent has gotten about $50 million in investment capital, most of which came from three major investors: New Enterprise Associates, Walden International and Index Ventures.

So what is Telegent going to do with the $250 million it hopes to raise? "Further improve the consumer experience," according to the S-1, by enhancing picture quality for severe reception conditions, supporting more digital standards, lowering power consumption and making mobile TV available on more consumer devices.

In terms of technology, this means:

• Transitioning to smaller-geometry CMOS technologies;
• More advanced circuits, architectures and algorithms consuming smaller die area;
• New generations of decoders with higher sensitivity, Doppler shift immunity and mobility performance;
• RF designs in CMOS with improved performance and lower cost, size and power consumption;
• Additional system-level multimedia functions such as video and audio decoders;
• Proprietary algorithms to suppress noise and other errors in audio/visual signals;
• New mobile antenna technologies; and
• Support for additional digital broadcast TV standards that are expected to have significant market adoption.

Telegent succinctly sums up its marketing and business development goals in one phrase: “Our ultimate goal is to enable our technology and products to be incorporated into any consumer-electronics device with a display." To that end, the company intends to use some of that $250 million for market education; cultivate an ecosystem of device makers, 3G network operators, distributors, retailers and broadcasters; build on its success in Southeast Asia, the Middle East, Africa and Latin America; and increase its presence in China, India, Russia/CIS and Europe.

Nowhere in the S-1 does the company speak about the North American mobile TV market (ATSC mobile/handheld), and the company has been close-mouthed on the subject. When asked about it, all Telegent marketing VP Diana Jovin will say is, "The question is: is it truly impossible to put ATSC on a mobile device?"