Brains behind a major player

THE FRIDAY INTERVIEW - Ray Stata, co-founder and chairman of Analog Devices:DRIVING THROUGH the Raheen Industrial Estate on the outskirts of Limerick, it's not hard to spot Analog Devices amid the rows of buildings. Outside stand two flags, those of the United States and Ireland, flying at full mast, side by side.

Analog Devices was one of the first US high-tech companies to establish a presence in Ireland, a fact that company founder and co-chairman Ray Stata is proud to note.

“When we came here in 1976 we did something that most people thought was impossible – started a semiconductor company in Ireland at a time when there was no infrastructure and when nobody knew anything about semi-conductors. It proved to be a successful move,” he says.

It may lack the big brand familiarity of other American companies such as Dell and Intel, but Analog has been a quiet yet formidable presence on the Irish technology scene for 33 years. The New York Stock Exchange-listed business employs just over 1,000 people in Limerick, where it develops and produces semiconductors that are essential components of thousands of electronic goods.

Stata co-founded the company in 1965 after graduating from Massachusetts Institute of Technology (MIT), the east-coast university which has churned out generations of the US’s top computer graduates.

Raised in rural Pennsylvania, he knew from an early age he was not destined for farming work. By the time he reached high school, he was avidly reading books on science and engineering. Nonetheless, he believes his upbringing had a seminal impact on his later choice of career. “Farmers are entrepreneurs and they’re their own boss. I think this had an impact on me as a child. I knew I wanted to get involved in some sort of start-up activity.”

Along with a classmate from MIT, Stata established Analog with the intention of making standard operational amplifier circuits, but the company’s activities soon expanded to include the development of data converters, digital signal processors and other integrated circuits, which still remain the core part of its activity today.

Within 10 years, the company had gone public, embarked on a series of successful acquisitions and emerged as a serious market leader in electronics.

The centre in Limerick was Analog’s first manufacturing plant abroad – and one of the IDA’s early coups in attracting foreign direct investment to Ireland.

It is estimated that the Government provided approximately 40 per cent of the start-up funding required for the plant.

While Stata admits that the financial incentive was a key factor in Analog’s decision to locate in Ireland, the availability of talented staff was the factor that kept it here.

“We knew there was a strong history of very good technical education, and training in engineering here. At the time we started, most of the engineers had to go elsewhere to find work. We figured that here we could get the pick of the litter, whereas in the US we were competing with companies like IBM and HP for graduates.”

It’s a tradition that the company has continued. “Since we’ve been here,” he adds, “every year we’ve brought in graduates and trained them up. As a result, we compiled a huge amount of talent over 30 years, many of whom have gone to other parts of our business in the US and around the world. Of the company’s 19 vice-presidents, 11 came from Ireland.”

Stata is in Ireland this week to recognise the role played by Irish universities in channelling talented graduates into the company’s ranks. On Wednesday he launched a scholarship programme in collaboration with the University of Limerick worth €125,000.

Intended to honour the memory of the late Hank Krabbe, the managing director who founded Analog Devices in Limerick in 1976, the scholarship will be awarded to the student who gains first place in first-year electronic engineering at UL.

Education is a key mantra of Stata. “The quality of engineering talent, the nature of the university systems is what we look for when we’re deciding to locate. To be able to innovate, to be able to work at the leading edge of technology is essential in our business.”

More than 80 per cent of Analog’s work-force in Limerick is educated to degree-level, with a significant proportion holding master’s and PhD degrees.

On a personal level, Stata is conscious of the importance of his own academic foundations for his success. He is heavily involved with his alma mater, MIT, and has been a member of the executive committee of the board of trustees for 10 years.

“I’ve always felt a deep debt of gratitude to MIT for helping me develop the knowledge and skills I have. I would never have been able to do what I did without that.”

But while educational standards are one thing, economic realities are another. Stata is up front about the challenges facing the company globally.

“Everybody is going through an unbelievably tough time. We’ve done relatively well, but nonetheless our sales our down 25 per cent. We do believe that we’ve seen the bottom, however.”

Although Analog announced 150 redundancies in 2007, it has avoided the mammoth job-cuts announced this year by its neighbour in Raheen Industrial Park, Dell. But how secure is Analog’s future in Limerick? Like all shrewd businessmen, Stata refuses to give a definitive answer although he seems confident that operations will remain at the current level.

“The strategic intent is that we’re going to continue to invest here, but like every other company, we can’t predict what will happen.”

Stata is reluctant to discuss the specific case of Dell and its high-profile relocation of the bulk of its Limerick operation to Poland. Industry commentators note, however, that while Dell was dependent on manufacturing one type of product, Analog has a much more diverse portfolio of products which may protect it from the worst of the recession.

Stata also says that by focusing on new and emerging trends, the company is securing its own future. “All the things we’re doing here at Limerick are modern, forward investments. The technology developments that are happening here are cutting-edge and are going to bear fruit in three, four, five years.”

But if the future of Analog’s Limerick operations seems to be safe for the short to medium term at least, Stata has a word of warning for Ireland Inc.

“Companies like us are already here, but getting any new people to come here is going to be difficult,” he says. “Ireland is much less attractive today than it was when we arrived. The IDA has a tremendously difficult selling job. Regardless of how many great engineering universities you’ve got, you’ve let the costs get out of control.”

The issue of cost is something he is beginning to see in his own company. “We have had a design centre in Shanghai for around 10 years. All of a sudden we have very talented engineers in Shanghai that speak Chinese and don’t cost as much as they do in the US so the cost-factor is an issue.

“At the moment, our Asian plants are not as productive as plants in the US or Europe, but over 10 or 20 years, if countries like Ireland and the US don’t figure out how to deal with costs, it simply won’t add up.” Sobering words.

ON THE RECORD

Name:Raymond S Stata

Age:74

Lives:Boston

Position:chairman and co-founder, Analog Devices.

Family:Married to Maria. Has two adult children, both entrepreneurs. His daughter Nicole has just sold a HR software company, while his son, Raymie, recently sold his software company to Yahoo.

Hobbies:A tennis player in his youth, Stata says his hobby now is "starting other companies". Mr Stata has personally invested in more than 40 start-up companies, in the process amassing a sizeable personal fortune. He is estimated to be one of Boston's richest men.

Favourite saying:"It's only the paranoid who survive." Stata believes that the most successful companies are those who are always looking over their shoulder. "Businesses need to constantly be looking at what's coming around the corner. You need to be prepared to make changes to your business model if needed."