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

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