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Questioning Market Leaders For Long Term Investors


BULENT CELEBI - SCENIX
CEO Interview - published 07/27/00

DOCUMENT # KAL248

BULENT CELEBI joined Scenix as President and CEO in January 1999. Prior to being named CEO, he served on the company’s Board since its formation. From the beginning, Mr. Celebi has been highly involved in Scenix product definition and strategy. Mr. Celebi has almost 20 years of experience in engineering, marketing and general management in the semiconductor industry. Most recently he was Vice President and General Manager for Analog Devices, Inc. computer division based in Santa Clara, Calif. At National Semiconductor he held several posts, including Manager for both the Microcontroller and the Ethernet/LAN business units. In addition, Mr. Celebi was Director of Asian Marketing for National Semiconductor in Hong Kong. His other experience includes senior management positions with Philips/Signetics and Monitek/PCEC. Mr. Celebi attended the University of California, Berkeley, majoring in Electrical Engineering and Computer Science.

Sector: Semiconductors

TWST: Would you give our readers an overview of Scenix?

Mr. Celebi: We’re a communications software and processor company that focuses on Web-enabling everyday electronic devices. What we do is provide the underlying technology that allows you, for example, to be able to connect your sprinkler system, your security system, your industrial process controller, vending machines, and things like that to the Internet. That way, you can use an ordinary browser to manage and control any electronic device anywhere in the world. And the browser is a very rich and graphic user interface. We provide this Web-serving capability at price points as low as $5 because it’s not practical to put a Pentium or a PC in a consumer device. With our reconfigurable embedded Internet processor and software, we’re basically making Internet connectivity available for the mass market.

TWST: Do you have markets all over the world?

Mr. Celebi: Yes, we do.

TWST: What do you see as the most significant trends or developments in your segment of the market over the next few years?

Mr. Celebi: Right now, this is very much an emerging market, and we have no real competitors in this space. So we’re one of the early pioneers. But I think everybody who I talk to can easily see how this thing can just be explosive. A lot of people are talking about home LANs and that type of thing, but they aren’t necessarily talking about being able to Internet-connect virtually anything that’s electronic. I think what will happen is that we’ll see explosive growth in the number and types of devices being networked and, over time, I’m sure our success will attract quite a few competitors.

TWST: Who would you say your customers are?

Mr. Celebi: Our customers are anybody who produces a piece of electronics, ranging from white goods — in fact, one of our investors is one of Europe’s largest white goods manufacturers; you know, washing machines, refrigerators, TV sets, and that type of thing — to the Ciscos of the world. Cisco and Dell are also investors in the company, by the way. We just closed a $42 million round that included them in addition to other manufacturers, investment bankers and traditional venture capitalists. We even have a toy manufacturer as a customer that has announced a handheld e-mail device that, for example, lets teenage girls pass notes to each other in the classroom. This thing is sold for $70, it has a touch screen that you can write a note on, and it will send and receive e-mails in the same room over RF. Or you can plug it into the wall and send and receive e-mails over the Net. I think we haven’t seen anything yet on being able to Webify anything that’s electronic. I’m just giving you a few examples. We have another customer that’s making cardiac sensors. If you have a heart condition, you wear a vest with the sensors built into it, so it’s always monitoring your heart. It also has a wireless connection, so if it detects a problem, it sends out an e-mail to your doctor, who gets on his browser and surfs your heart. So instantly, he can tell your health condition.

TWST: They get on a browser and then you are connected?

Mr. Celebi: It can be any browser. What we do is just make the sensor look like a Website. So you get on your browser and you do http://www.myheart.com or something like that, and you’re looking at your heart.

TWST: What do you see as the single biggest opportunity for Scenix over the next few years?

Mr. Celebi: I can’t predict it because I would have never guessed at this heart thing, okay? At first, we said: Who do we think are going to be the early adopters? Then we said: It looks like we should go after security guys because they’re already connected up to a phone network, and they’re already doing this type of thing. So that’s one of the things we “targeted.” But I would have never guessed a toy or a heart monitor was going to want a Web capability in it. So although we have identifiable target opportunities, we’re also trying to react and be as nimble and as fast as we can to take advantage of any opportunities that come up.

TWST: You mentioned earlier that there’s virtually no competition. Do you see any competitors on the horizon in the next few years?

Mr. Celebi: It’s hard to say. It’s getting fashionable for some of the chip guys to talk about embedded Internet, but they have nothing that compares to our approach. I won’t go into the details, but there was one controller manufacturer that basically introduced what was just another one of its normal products. Yet all of the ad text and news release were about embedding the Internet. It didn’t really make any sense because their product wasn’t actually able to provide complete Internet connectivity. What we’ll probably see is that as we develop market segments, others will follow us in.

TWST: Are there any opportunities for improvement in your company that need to be addressed at this time?

Mr. Celebi: At this point, it’s just pure execution from our side. Our customers want faster chips with more memory, with more of this, more of that; you know, just higher speed. And they want a wider selection of software modules. We just need to deliver.

TWST: What are your goals for the company?

Mr. Celebi: We want to be the leader of this embedded Internet movement. We hope to be the dominant player in that sector. My personal goal is to build a $500-million company in five years. I think we can do it.

TWST: What would the rate of gains in sales and earnings be in the next couple of years, besides making $500 million?

Mr. Celebi: I think it’s going to grow well over 100% compound annually.

TWST: Are you public or private?

Mr. Celebi: We’re private.

TWST: Despite the fact that you’re private, what two or three reasons would you give potential long-term investors for investing in Scenix?

Mr. Celebi: Number one, we’re going after an explosive market segment. Whenever I talk to anybody about the ideas, it instantly rings. So it’s just an explosive, open-ended market. Number two, we’re the only guys in this space right now. Number three, we have a revolutionary solution. Our software-configurable embedded Internet processor solution gives customers a tremendous time-to-market advantage.

TWST: How does that solution differ from older

solutions? Mr. Celebi: It’s radically different, actually. For example, every function — things like modems and DSL, and all the other communication protocols — starts out as an algorithm. With the older solution, somebody takes that algorithm and etches it into silicon. That’s where you get the system-on-a-chip and all those other big, expensive solutions. What we’re doing is saying that we’re going to keep the algorithm in its native software form, as a pre-built module, and run it on a very fast, but guaranteed-execution, embedded processor. We let the designer create a “software system-on-a-chip” by mixing whatever modules are needed to configure the chip for the application. Unlike the older solutions, our silicon stays the same, but its functionality changes. This is a revolutionary technology for the embedded market. When we do that, the benefits you get are tremendous. First off, you get a system cost and integration advantage. If you were to try to do what we do in the traditional way, you’d have to buy four or five different chips from different vendors that would have a total cost close to $50. We’re providing it in a single chip at a $5 price point. So, you get the integration and cost advantage. Then you get a huge time-to-production advantage. Our customers are able to stitch together the desired software modules into on-chip flash memory and get a prototype out in a matter of days. They don’t have to have a final version of the system design until the last minute of the production cycle because they can change and reconfigure the chip all the way through the process — they can even do it when the chip is already in the circuit. So we’re talking time to production measured in days instead of months. The other guys, with the older solution, have a year, year-and-a-half type of a cycle. Another advantage we provide is the ability to keep up with changes. All these communication protocols are constantly changing. It seems that every other day there’s a new one coming out. By using our approach, you can keep up with the changes and just keep on upgrading your product very quickly versus having to re-architect and re-design your entire product. Then, because we provide a single platform that’s configurable at the last minute of your production cycle, you have a lot of flexibility. You can have a product that’s designed as a core product, and modify it at the last minute by region — Japan versus the UK versus the US versus whatever — or for different market segments, or something along those lines.

TWST: Certainly, with the innovation advantage and the ability for customers to upgrade their existing products, this saves them a lot of time and money.

Mr. Celebi: Yes.

TWST: In other words, they don’t have to go out and buy a whole new system?

Mr. Celebi: Correct.

TWST: Is there anything else?

Mr. Celebi: The only other thing, probably, is that we have a very large and growing customer base. And we’ve already shipped over a million units. That’s public information.

TWST: Certainly, you have people from all age groups using your products as well?

Mr. Celebi: Yes.

TWST: Thank you.

BULENT CELEBI
 President & CEO
 Scenix
 1330 Charleston Road
 Mountain View, CA 94043
 (650) 210-1500
 (650) 210-8715 - FAX
Each Executive who is the featured subject of a TWST Interview is offered the opportunity to include an Investors Brief or other highlight material to be provided and sponsored by and for the company. This Interview with Bulent Celebi, President & CEO of Scenix, is accompanied by an Investors Brief containing corporate information.

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