Although it has been nestled in Silicon Valley for more than 14 years, semiconductor manufacturer Exar Corp. was never much for the limelight. As a wholly owned subsidiary of Japan's Rohm Ltd., its revenue and earnings were masked in consolidated statements.
The company was an insignificant fleck in comparison to Intel Corp., National Semiconductor and other major chip makers in this area. "We haven't been very well known here," conceded Ron Guire, an Exar vice president.
But past may not be prologue.
Last month, Exar became the first Japanese-owned electronics subsidiary to go public in America, and its success in doing so suggests that other Japanese subsidiaries are likely to follow suit. It sold nearly 1.4 million shares of stock at $11 a share, and the stock has risen as high as $15. (Rohm still owns 67 percent of the company.)
The stock has backpedaled a bit -- now it's trading at about $12 -- but company observers say that price is still good in light of the fact that subsidiaries usually have a hard time attracting investor interest. Goldman, Sachs & Co., the managing underwriter of the offering, said it is considering another half-dozen such deals.
American capital markets represent a logical target for the offshoots of Japanese firms, said Michael Murphy, editor of California Technology Stock Letter. Although the Japanese over-the-counter market is easier to crack than The Tokyo Stock Exchange, it's still much tougher than the American OTC market, Murphy said.
In, Japan, for example, companies usually have to go public at book value, making for very unattractive valuations. Companies also have to be profitable for several years before they go public, and they must establish a record of dividend payouts.
"With the positive reception that Exar got in the market, I would think a number of Japanese companies would be interested in coming over and trying the same thing," Murphy said.
Another Silicon Valley company -- LSI Logic Corp. of Milpitas -- has shown that American technology companies also are becoming more innovative about raising capital outside their home turf. In forming an affiliated company in Japan last year, Nihon LSI Logic, LSI offered one-third of its stock to Japanese investors and raised about $20 million.
Mel Phelps, a senior analyst at Hambrecht & Quist, a San Francisco venture capital and investment banking firm, believes that LSI Logic's move represents the first time that Japanese venture capitalists have been involved in funding a semiconductor company from scratch. "Why shouldn't the Japanese seek a bigger stake in the capital market here?" Phelps asked. "American firms are starting to do it over there."
Rohm, a large, Kyoto-based manufacturer of electronic components, decided to back a joint venture in Sunnyvale with three former Signetics engineers in April 1971 because it couldn't tap enough R&D expertise to move into chip production on its own.
Exar sticks to smaller, niche markets. Its strength lies heavily in analogue and analogue/digital semiconductors for the telecommunications industry and industrial control equipment market.
Still, the company hasn't escaped the semiconductor industry slump. All employes went on a four-day workweek throughout the first quarter, and Exar laid off 60 production workers in June, leaving it with a work force of 525. The company remains healthy, however. According to the stock prospectus, Exar reaped net earnings of $4.35 million on $56.9 million in sales in fiscal 1985, up from earnings of $2.93 million on revenue of $39.2 million in fiscal 1984.
Nob Hatta, Exar's president, credited a heavy Japanese management orientation for much of Exar's success. Although quality control circles are now commonplace, they were rare in the United States when Sato implemented them at Exar in 1976.
Exar also reflects Japanese management practices in terms of its promotion policies. About 75 percent of the company's 30 managers and executives have been promoted from within, an extremely high ratio by the standards of Silicon Valley, Hatta said