Court Victories Boost Prospects of Brooktree Offering
Buoyed by recent victories in patent disputes with two large Silicon Valley companies, Brooktree Corp. of San Diego announced plans Wednesday for an initial public stock offering that could raise about $40 million.
Founded in 1981 by San Diego entrepreneur Myron Eichen and computer scientist Henry Katzenstein, Brooktree’s sales zoomed to about $60 million last year, from $1.8 million in 1986. The company maintains its plant and offices in Sorrento Valley and employs more than 400.
The company’s primary products are integrated circuits that convert digital electronic data to analog, crucial in color computer graphics, and required 25 separate semiconductors before the advent of the Brooktree chip, the company has claimed. One version of the Brooktree chip is the so-called “color palette,” a kind of semiconductor that controls the images on color computer monitors.
Brooktree’s customers include virtually all major high technology manufacturers involved in computer graphics products, including Sun Microsystems, Apple Computer, Toshiba, and International Business Machines, to name a few. The company has signed a license agreement giving Toshiba the right to use its data conversion technology in its compact disk players.
Thomas A. Thornhill, a research analyst at Montgomery Securities in San Francisco, said Brooktree’s color graphics technology makes it “one of the brightest of the emerging companies that will be going public in 1991 . . . . There has been a significant appetite for (Brooktree’s) products.”
In a prepared statement, the company said the stock offering will occur sometime in the second quarter of calendar 1991. But Brooktree has yet to file the required registration statement with the Securities and Exchange Commission for the offering.
Claiming it was observing strict rules that prohibit it from “hyping” its stock offering, Brooktree refused on Wednesday to divulge much other information, including audited financial statements and whether an investment firm had been selected to underwrite the stock offering.
The fast-growing company has long anticipated going public, but its prospects were clouded by patent disputes. Brooktree has been locked in patent infringement litigation since 1988 with Advanced Micro Devices of Sunnyvale over rights to the technology used to manufacture the “color palette” chips.
Last September, a U.S. District Court jury found in favor of Brooktree, awarding it $26 million in damages and enjoining Advanced Micro Devices from selling chips using the disputed technology.
The Sunnyvale company has since filed an appeal with a special panel set up by the U.S. Court of Appeals to hear patent and intellectual property issues, an Advanced Micro Devices spokesman said Wednesday.
Another of Brooktree’s patent disputes involved Integrated Device Technology, a Santa Clara-based manufacturer of large-scale integrated circuits. Brooktree had sued the company claiming patent infringement. Earlier this month, Integrated Device Technology agreed to settle the suit in Brooktree’s favor.
An unspecified number of shares will be sold in the offering by Brooktree and by existing shareholders. Major shareholders include co-founder Eichen, State Farm Insurance and Schlumberger Ltd.
Brooktree is one of 2 dozen or more companies established by Eichen, who was named San Diego’s 1988 Entrepreneur of the Year. In March 1990, Eichen relinquished the position of Brooktree’s board chairman to James Bixby, who is also Brooktree’s chief executive officer.
