Vince Endres, vice president of new business development at the
Sarnoff Corporation, is the proud father of eight-year-old triplets
(two girls and a boy). At the time they were born, when he and his
wife were coping with the travails of first-time parenthood times
three, Endres was also helping with the birth of several companies
that spun out from Sarnoff – Orchid BioComputers, Delsys
Pharmaceutical, and Songbird Hearing.
Endres has been more than pleased with the growth and development of
his natural children but less than pleased, as it turns out, with the
development of the company spinouts. Orchid BioComputers moved away
from Sarnoff’s innovative “lab on a chip” technology by adopting a
radically different business plan that focused on high-speed DNA
analysis. Delsys was sold and closed when its Irish parent, Elan,
suffered financially. Meanwhile Songbird is struggling to gain market
share for its disposable hearing aids.
It was time to retrench Sarnoff’s business plan, says Endres, to
secure it from the vagaries of the economy. Until two years ago
Sarnoff – formerly known as RCA and as the birthplace of color
television – was eager to spin out technology to form a new company,
get the company funded by venture capitalists, and take the company
public or sell it. Under Sarnoff’s finely tuned profit sharing system,
the inventors of the technology – both the individual engineers and
the Sarnoff Corporation as a whole – could share in those profits.
But changes in the economy hit Sarnoff hard. It “right-sized” in 2002
and instead of employing its maximum of 720 people it now has 521
workers on Washington Road. Now, says Endres, Sarnoff will not be in
such a rush to turn new companies over to outside investors. Instead,
Sarnoff engineers will develop their ideas internally. Only when the
idea has reached the stage of being a viable product will a sale be
considered.
“Our focus is bringing products to the marketplace,” says Endres in a
telephone interview. “In the past we developed a venture and went out
and got venture money. Now we are trying to develop the product
internally until we have gotten sales on our own. Then many more
options are available. We will still need some venture capital, but we
are looking to take products to the marketplace on our own.”
Take the December sale of three surveillance technology products. The
underlying algorithms for these products were invented 20 years ago.
Ten years ago Sarnoff’s engineers were talking about using them for
“mosaicing,” stitching together different views of the same subject to
produce wide angle photos. Developed for the military (mosaicing was
used on some of the drones in Bosnia) they adapted it for consumer
photography as well and this company, Videobrush, was spun out and
sold. The underlying technology has been retained by Pyramid Vision
Technologies, a Sarnoff company formed in 1997.
After 9/11, as security needs ramped up, Endres says, Pyramid Vision
intensified its work on using its technology for such clients as the
Defense Advanced Research Projects Agency (DARPA), the Office of
National Drug Control Policy, the Department of Defense, airports,
seaports, manufacturers of unmanned aerial vehicles or drones, and law
enforcement agencies. “Two years ago, we realized that it could be a
significant business as an operating system for security monitors,”
says Endres.
Among the resulting Pyramid Vision products: VisionAlert, Hawk, and
Video Flashlight. Sarnoff made some sales, and Hawk made its official
debut at a conference last June.
Last month New York-based L3, a $5 billion firm that makes
intelligence, surveillance, and reconnaissance systems and products
for federal intelligence agencies and aerospace contractors, snapped
up all three. “It proved the model of taking what we develop under
government contracts all the way to where we could, in effect, shrink
wrap the products and make repeatable copies,” says Endres. “Before
the software was finished it was being installed at several sites
throughout the world.” These installations were the impetus to make
the commercial products.
What the take was on the L3 sale. Endres can’t say. “It was smaller
than a refrigerator and bigger than a bread box,” he jokes. “We
believe it was a win/win deal.” Here is what L3 bought:
VisionAlert turns video cameras into intelligent security sensors.
Even in bad light or stormy weather, this system can spot abandoned
objects, loitering people, or the intrusion of a strange person or
animal.
Hawk works for medium-to-large scale wide area surveillance. This
sensor management platform creates a unified, multi-dimensional view
of multiple alarm sensor types and video feeds.
Video Flashlight, a three-dimensional program for “immersive” video
surveillance, can take multiple, real-time video streams and stitch
them together to create a single seamless view. It takes different
systems – like gate and perimeter alarms, fire and smoke detectors,
and video alerts from cameras – and combines them into a single
platform. This, says Endres, results in faster threat assessment and
more effective response.
Don’t the Pyramid Vision engineers regret saying goodbye to their
children? “Pyramid Vision is a group that gets excited over NEW
things, and they are happy to see them hit the main stream, happy that
a company with 55,000 employees will be selling that product now,”
says Endres.
“And this was only one product in a technology suite in the vision
area,” adds Endres. “L3 has no right to the underlying technology.
Pyramid Vision Technologies continues to exist and to sell Pyramid
Vision-based products based on its algorithms.” They include Video
Detective, a law enforcement video analysis workstation; the Acadia
real-time video processing accelerator; and Jam video analysis
applications that are used in aerial reconnaissance, intelligence and
law enforcement. Another product, the STTV Helmet for United Defense
EagleVision, functions as a “transparent turret,” letting soldiers see
what is around them, without opening the hatch, simply by turning
their heads.
Selling products – lock, stock and barrel – is just one of three new
ways that Sarnoff is using to make a profit. Licensing is another
important avenue. For example, a way of improving the manufacture of
silicon chips, called TakeCharge, has been a licensing success. Twenty
licenses have been sold to integrated device manufacturers and silicon
foundries, and every major chipmaker in Japan in paying royalties.
Basically, TakeCharge deals with the static electricity that builds up
on the chips during the manufacturing process. Sarnoff had a head
start on learning to deal with electrostatic discharge (ESD) because
of its work with space satellites. Similarly, chip manufacturers are
hampered by static electricity that builds up during the manufacturing
process or even when somebody touches the completed product.
TakeCharge removes a process step and reduces costs by as much as $50
per wafer, yet it retains ESD protection and allows the manufacturers
to get to market without a misstep. The chip size can be smaller and
the design process is faster, because fewer mistakes are made. Press
releases went out last year about important contracts with such
clients as Toshiba, Ricoh, Sony, OKI, and Scintera.
Selling services is a third way that Sarnoff can help its bottom line.
One of these service businesses works with thin film products for
making prototypes. The Thin Film Technology Center has a 2,400-foot
clean room where it works on such projects as fuel cells; LAN
couplers, splitters, and terminations; satellite electronics; laser
submounts; DNA channels and calibrated monitors for biomedical
equipment; and organic thin-film transistors on flexible substrates.
“They had been flying under the radar for about 15 years, and they
started to actively market their services five years ago,” says Tom
Lento, the Sarnoff spokesperson. “This service is very hard to find,
and since they have it, they are providing it for other companies.”
Another service business is Sarnoff’s Integrated Circuit center that
sells ICs (integrated circuits) and imagers. Among its products are
the Generalized Emulation Modules that replace obsolete parts in
military aircraft. They also make imagers used in Sarnoff cameras for
outside companies. One long-term customer uses the imagers for its
spectroscopes.
A better known business within Sarnoff is HiTek, which does general
technical work. Both HiTek and the thin film laboratory recently
earned their ISO9000 certifications.
In addition to selling and licensing products and selling services,
says Endres, he has not given up on forming new companies. “It’s just
that we have a lot more options in our quiver.”
All of this retrenching and reorganization took place after the
investment bubble burst in 2001 when, nationally, venture capitalist
investments dropped from $110 billion to $12 billion a year. Sarnoff’s
change to its business plan, to eliminate dependence on investment
money, has produced a more optimistic balance sheet, CEO Satyam
Cherukuri is quoted as saying: “Last year was Sarnoff’s most
profitable in its history since the divestiture from GE.” Business
picked up on the commercial side last year and overall business
revenues are up significantly.
Endres estimates that actual product sales grew 10 to 15 percent a
year for two years. Sarnoff’s official viewpoint is that it has
changed from a contract research company to a global innovation
services company.
In any case, Sarnoff’s pipelines are filling up. Each of Sarnoff’s
six general areas has its own pipeline. The areas include Automotive
and Transportation, Entertainment and Digital Media, Healthcare and
Life Sciences, Solid State Technology (Silicon IP), Image Sensors and
Cameras, and the newest one – Homeland Security.
In the Image Sensors and Cameras area, one of Sarnoff’s imager arrays
is in use at California’s Palomar Observatory, where astronomers are
searching for objects – quasars, asteroids, and the exploding stars
known as supernovae.
Last year Sarnoff’s imaging division began to market high-speed,
high-sensitivity 1-megapixel digital cameras in the visible and
ultraviolet (UV) ranges for scientific and industrial applications.
Solid State Technology includes laser diodes, semiconductors, Silicon
IP, and optoelectronics. After providing custom-made laser diodes for
many years, Sarnoff launched its first off-the-shelf products, raw
diodes and mounted diodes, last year. They are not your basic laser
pointer, but are for those doing research or for biomedical
applications. Unmounted, they cost $3,000 and mounted and ready-to-go
they cost about $5,000.
In the Homeland Security area, Sarnoff announced four new products
late last year for airports – Portable Sentry, Wireless Gatekeeper,
Virtual Tripwire, and Border Barrier – shown on the cover. All are
marketed by a Sarnoff firm, Dynamxx (www.dynamxx.com), and although
they might have other applications, such as agricultural (helping
farmers protect their crops from deer), the first marketed application
is for general aviation airports, airports that cater to small planes,
and as temporary security devices for larger airports.
These four products can be used together or separately on a wireless
computer network. Authorities can set up modules and move them around
at will because they configure themselves into a system and
reconfigure themselves when they are moved. Because they are wireless,
they do not need an expensive infrastructure. In larger airports,
which have elaborate security in place, they might be used in
outlying, hard-to-reach areas, or for temporary situations.
Endres, the lead negotiator for the L3 sale, says he learned his
negotiation skills at Sarnoff, but one suspects he learned them in the
cradle – he is the fifth child of six. He grew up in Glenolden,
Pennsylvania, and Browns Mills, New Jersey. His father, a civil
servant at Fort Monmouth, was an industrial specialist who supervised
a couple of thousand people. His siblings are variously a patent
attorney, a priest, a steam fitter, and an artist. He majored in
business administration and computer science at Montclair State and
earned his MBA from Fairleigh Dickinson while working for the defense
division of the Singer company. He and his family still live in
Morristown.
Carmen Catanese, retired executive vice president, had recruited
Endres the very same month that he recruited Satyam Cherukuri, who
followed Jim Carnes as CEO. Endres was promoted to director of
business development in 1996, the same year his triplets were born.
“He started out in a financial administration position and quickly
fell in love with business development,” says Catanese. “Along with
Cherukuri, Vince has been one of the major movers in getting Sarnoff
in the biotech area, building Locus Pharmaceutical and Songbird. Even
though his background was not in technology, he probably won himself a
master’s degree in technology by osmosis.”
Some of the Sarnoff spinoffs have done well. Locus Pharmaceutical has
just announced a collaborative agreement with the National Cancer
Institute to develop drugs. Headed by H. Joseph Reiser, who had been
CEO of Cytogen from 1998 to 2002, it is located in Blue Bell,
Pennsylvania (www.locusdiscovery.com).
From its 50,000 square-foot facility in Westampton, New Jersey, Lamina
Ceramics has provided “light engines” for a chandelier for a theater
in Rhode Island, a spa building in Anaheim, California, and MGM Grand
in Las Vegas (www.laminaceramics.com). Songbird Hearing is marketing
an over-the-counter version of its hearing aid and has 65 workers at
Cedar Brook Corporate Center (www.songbirdhearing.com). “We have
equity interest in 10 other companies, but we don’t track them,” says
Endres.
Orchid, it is generally acknowledged, was launched ahead of the market
for Sarnoff’s technology, but it has found another niche in another
area – forensic and high throughput DNA testing. Princeton Lightwave
made its debut too late and it missed the telecom boom. “When we spun
Princeton Lightwave out in 2000,” says Catanese, “there was nothing we
had that we could not have spun out several years earlier. And had we
spun it out earlier, it certainly would have caught the market at the
right moment. Vince got the funding for that. He had a wonderful
rolodex of VCs, and he took the team out to Sand Hill Road in Palo
Alto and drummed up $28 million.” Sarnoff has managed to repurchase
the technology from Delsys which had been sold to Elan.
Pyramid Vision and Dynamxx remain mini-businesses inside of Sarnoff.
“We have 100 percent control,” says Endres. “If it makes sense, we
will spin them off or sell them off. The problem with some of the
ventures is that we gave up control. If anyone in that spinoff company
made a mistake in timing or product development, everyone here was
punished.” Now Sarnoff will control the timing and the development for
all its work. Says Endres: “Here, if we make a mistake on our own
product line, we can improve it.”
Sarnoff Corporation, 201 Washington Road, CN 5300, Princeton 08543-5300. Satyam Cherukuri, CEO. 609-734-2000; fax, 609-734-2040. www.sarnoff.com
