Chipmaker Restructures, Lands On Feet Computer Industry Trends Work To Benefit Of Redmond’s Data I/O

Data I/O recently told its shareholders that they would no longer be receiving in the mail a quarterly profit and sales report.

If the announcement had come a couple of years ago, one might have easily surmised a reason: Data I/O had no profit to report, and red ink was bleeding the company dry. An $11.2 million loss in 1993 slashed the struggling company’s cash reserves to a paltry $1.7 million; net worth plummeted below the level required by lenders, forcing the company to scramble to rearrange debt. The other shoe was waiting to drop.

Now, roughly 18 months later, Data I/O finds itself not only back in its shoes but also back on its feet. A major restructuring, new management, an expanded product line and bone-deep cost-cutting - including elimination of the next-touseless quarterly “glossy,” shareholders report - has produced one of the more pronounced corporate turnarounds in recent Seattle-area business history.

After suffering through years of humdrum results, stock owners are finally seeing a payday. Redmond-based Data I/O has been profitable for four straight quarters and its stock has climbed from $2.75 a share in late 1993 to as high as $9.125, a five-year-high.

“We’ve gone from being in trouble with the banks to one of the best-performing stocks in the Northwest,” said Bill Erxleben, Data I/O president and chief executive. “Even the banks were amazed the turnaround was a rapid as it was.”

For once, the company finds itself in the right place at the right time.

Data I/O is a leading manufacturer of machines and software that program integrated circuits such as those found in computer chips - in other words, the 26-year-old company has heretofore been largely ignored as an oddball in a small and little-understood market.

But thanks to the world’s infatuation with personal computers, cellular phones and ever-more-intelligent automobiles, Data I/O suddenly looks to Wall Street like a well-positioned company in a fastgrowing corner of the very sexy semiconductor industry; silicon chipmakers have been the best-performing Standard & Poor’s 500 Index industry group, rising 49 percent in the past 12 months.

Counted among the company’s customers are some of the largest automobile and electronics manufacturers in the world. Ford and Bosch use Data I/O products to program the logic circuits in airbags and anti-lock brakes. Medical device companies and multimedia computer makers such as IBM are customers. So are chipmakers Intel and Advanced Micro Devices.

Data I/O’s single biggest customer is Motorola, accounting for about 15 percent of sales. Motorola uses Data I/O devices to program chips that go into cellular telephones to handle tasks such as speeddial number storage.

Although the worldwide semiconductor market is estimated to be worth about $100 billion, Data I/O ($61 million in 1994 revenue) actually competes in the area of programmable chips, a segment that accounts for about 6 percent of the overall market.

The lion’s share of computer chips used in electronic systems have hard-wired logic circuits, such as Intel’s Pentium microprocessor. They are designed and mass-produced for a specific function or set of functions, and cannot be altered.