NEW YORK — DAVID ST. CHARLES, president and chief executive officer of Integrated Systems Inc., sees promise - and corporate profit - in high-tech devices that are hidden from the eye.
Integrated Systems is a market leader in the little-known embedded software industry. The company, based in Santa Clara, Calif., has produced more than 40 consecutive quarters of earnings growth.
Embedded computing systems use special electronic devices that provide instructions for (or ``embed'') powerful, low-cost microprocessors used in thousands of products. These systems are found in toys, video games, cars, jets, and space satellites.
``The [embedded software] sector is definitely a growing market,'' says Wendy Rauch, president of Emerging Technologies Group, a Dix Hills, N.Y., market research/consulting firm. There may be as many as 50 key players in the embedded software sector, though many are quite small, Ms. Rauch says. Integrated Systems competitors include Wind River Systems in Alameda, Calif.; QNX Software Systems Ltd. in Kanata, Ontario; Microtec/Ready in Santa Clara, Calif.; and Microware Systems Corp. in Des Moines.
The embedded software sector has been largely ignored by the news media because ``it is just highly technical,'' says Harvey Hindin, vice president of Emerging Technologies Group. ``Most software companies do not make the [computer] chip'' used to carry the software instructions, Mr. Hindin says. Chips come from companies such as Motorola Inc. in Schaumburg, Ill., and Santa Clara, Calif.-based Intel Corporation. The software is ``ported,'' or made to work, on the chip to perform certain electronic functions. The software in the special electronic device (an EPROM) is like a road map for the chip. Competition within the embedded software industry is based on price, types of applications offered, and speed in getting new applications to market.
Companies are typically small, with annual revenues below $50 million. Worldwide revenues for Integrated Systems, for example, reached $42 million in its most recent fiscal year. Firms are highly specialized. ``We link our software to Intel processors,'' says Robin Oakley, a spokesman for QNX Software Systems Ltd., a privately held firm with annual revenues just under $40 million, in Kanata, Ontario.
``One of our most important specializations is interactive television,'' says Steve Simpson, marketing director for Microware Systems Corporation in Des Moines. Microware, which is privately held, provides software for advanced set-top boxes and decoders for TV sets, among other things.
Revenues for the market will climb to just under $8 billion next year, up from slightly more than $5 billion in 1993, according to the International Data Corporation (IDC), a research firm in Framingham, Mass. The sector is ``growing at an annual rate of about 20 percent a year,'' says Paul Zorfass, an IDC analyst.
Begun in 1980, Integrated Systems went public in 1990. The firm is traded on the Nasdaq market. Net income for the fiscal year ending Feb. 28, 1994, rose to 44 cents a share, up from 37 cents in '93. The firm has offices throughout the United States, as well as in Britain, France, Germany, Japan, and Sweden.
Integrated Systems is a leader in providing embedded software to the automobile industry. About 26 of the world's largest 29 car and truck manufacturing firms use an Integrated Systems program to design electromechanical systems for their vehicles. A typical car, experts say, has between 10 and 15 microprocessors.
A 1993 IDC study estimated that there were more than 400 million microprocessors and microcontrollers used in products other than desktop computers. ``And that number is probably conservative,'' Zorfass says.
Integrated Systems is the brainchild of Naren Gupta, a New Delhi native. Now an American citizen, Mr. Gupta is chairman of Integrated Systems. The high-tech sector ``tends to attract many bright and very savvy entrepreneurs from other countries,'' Zorfass says.
Integrated Systems has several key objectives, Mr. St. Charles says. It designs software systems that can be embedded for use in ``real time'' applications, such as the braking mechanism of a car. It also designs software systems for use in response to a user command and tools to speed the process of writing software programs.
Potential new frontiers for embedded systems include the multichannel communications sets of the ``information superhighway,'' as well as bionics, where human beings are embedded with software programs in medical processes, says Moses Joseph, vice president of marketing for Integrated Systems.
In the April edition of BYTE Magazine, science writer Jerry Pournelle calls Integrated Systems's control design system one of the ``most important computer programs of the year.'' The program was used to allow aircraft manufacturer McDonnell Douglas to write a flight-control software system for a space vehicle.