Texas Instruments Inc. is snapping up Maryland-based software company Telogy Networks Inc. for more than $450 million in stock -- part of the semiconductor giant's push to lead the burgeoning market in offering telephone services over computer networks.
TI announced yesterday that it would pay 4.1 million shares of stock for the closely held Germantown firm. TI shares rose $4.31 1/4 yesterday, to $110.93 3/4.
The Telogy purchase is just one of a string of expensive acquisitions of Washington area high-tech companies, including the $450 million sale of Torrent Networking Technologies Corp. to Sweden's Ericsson AB in May, that underscore the region's growing importance as a technology center.
Telogy, which is backed by Motorola Inc., Ameritech Corp. and such investment firms as Weiss, Peck & Greer, makes software that allows computer networks to be used for voice telephone calls, faxes and more. Telephone and computer networks are fundamentally different: Traditional phone calls tie up a phone line between the sender and recipient, while computer networks more efficiently break up information into packets of data. Using computer networks for voice calls can make the most of those networks, eliminating voice-only telephone lines, squeezing more calls into them and saving on long-distance charges -- reasons that Telogy believes the market for such services will top $1 billion by 2002.
Telogy's software is used by a who's who of computer networking companies, including Cisco Systems Inc., Minnesota Mining and Manufacturing Co., and Nortel Networks Corp.
Texas Instruments makes the "digital signal processing" (DSP) chips that are important to computer telephony, and that are used in cellular telephones. By bringing the software company under its corporate umbrella, "we're going to be able to offer better solutions," said Joseph A. Crupi, president and chief executive of Telogy.
Texas Instruments has increasingly focused on its successful digital signal-processing business in recent years. The company sold its money-losing memory-chip business last year, and has been acquiring other companies that can enhance its DSP line.
In the deal announced yesterday, Telogy will become a wholly owned subsidiary of TI but will continue to operate from Germantown. The acquisition will require approval from antitrust regulators and the shareholders of both companies.
The TI move comes a day after the world's biggest chip manufacturer, Intel Corp., announced it was buying another Internet telephony firm, Dialogic Corp.
Both purchases are attempts to benefit from the convergence of telephone and computer technologies, said Dan K. Scovel, a semiconductor analyst with Fahnestock & Co. "These guys are jumping on that bandwagon, trying to serve whatever [market] results from those two [technologies] crashing together," he said.
Business: Produces software that links voice and data networks
Chairman: John G. Puente
Chief executive: Joseph A. Crupi
1998 revenue: $14.2 million
1998 net income: $200,000
Web address: www.telogy.com