The Long Wave Brian Long's Parthus provides the technologyso your mobile phone can talk to your computer. Shares in the Celtic tiger's latest protege have enjoyed a stellar rise. But can it succeed in powering the internet's wireless revolution?

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Few people in Brian Long's local know what he does for a living. In fact, most people in his native Dublin are barely aware he founded and owns 23 per cent of a $2.8bn company blazing a trail with silicon-chip design just three months after floating on the London Stock Exchange and America's Nasdaq. The rise of Parthus Technologies has been remarkable, even in a sector noted for its hi-tech shooting stars, but its success has gone nearly unnoticed in its home city. Last week alone, shares in the company, which develops semi-conductor intellectual property for mobile devices, rose almost 50 per cent, which doubled the new company's market capitalisation.

Few people in Brian Long's local know what he does for a living. In fact, most people in his native Dublin are barely aware he founded and owns 23 per cent of a $2.8bn company blazing a trail with silicon-chip design just three months after floating on the London Stock Exchange and America's Nasdaq. The rise of Parthus Technologies has been remarkable, even in a sector noted for its hi-tech shooting stars, but its success has gone nearly unnoticed in its home city. Last week alone, shares in the company, which develops semi-conductor intellectual property for mobile devices, rose almost 50 per cent, which doubled the new company's market capitalisation.

The shy Mr Long, 43, and the just as low-profile Parthus are unusual successes, even for the Celtic tiger, where technology companies with the personalities associated with them often as well-known as soap stars, have helped power the near-10 per cent a year growth.

He is so retiring that some of his staff are concerned their efforts at Parthus are not getting enough recognition. He says his priority is protecting his five young children from the pressures of unwanted attention. Happily, he adds, his children have not suffered from their father suddenly becoming one of the richest men in Ireland, with shares worth more than $500m.

Seven years after founding the company and it is all going to plan. "Things are terrific. I hate to sound smug, but we have never had a bad day," says Mr Long. He is not being cocky. Despite major developments in the company often coming at inopportune times, Parthus has emerged unscathed.

The company was founded in 1993 when there was little interest in technology start-ups in Ireland. But the first funding round of $16m in December 1998 was among only three investments made that year in Europe by the astute investment bank Goldman Sachs. And that flotation came in May when technology stocks were suffering their worst pounding in years. Yet the shares rose 80 per cent on the day, making it the largest technology flotation for any Irish company.

The rise has continued. The shares were placed by Goldman Sachs at 85p, valuing the company at £808m, and on the Nasdaq at $12.60 per American depositary share. The company raised £90m in new cash it intends to use on expanding research and development, and on acquiring rivals. Appreciation in the share price has been relentless since, which arouses question marks.

The truth is that the company does not make anything and, like many an emerging tech company, it records losses. Yet the shares are trading at about 55 times this year's projected sales. Parthus is at a discount to its most comparable peer, ARM Holdings, but this reflects the early stages of its move to generate more of its revenues from higher-margin licence and royalty payments. Parthus has generated much of its revenues in contract design work for large electronics manufacturers.

The reason why Parthus has excited the markets is because it is in an area where fund managers feel they must have a piece of the action, and where there is a chronic shortage of investment options. It provides semi-conduction intellectual property designs for wireless communications products, internet-access mobile phones, personal organisers, MP3s that download and play music from the Net, global positioning systems devices and Bluetooth modules, which offer wireless communication between a TV and a PC.

This is cutting-edge technology in silicon design, and much of the revolutionary work done by the 360 employees, including 280 avariciously-sought technical engineers, will not hit the market for two years. Parthus styles itself as a company "powering the mobile internet". By 2003 the m-commerce market, where people can conduct transactions over mobile phones, should embrace up to 1.1bn global mobile users, plus over 400m internet users, says Goldman Sachs.

The Parthus customer list is impressive, including Texas Instruments, Cirrus Logic, Hewlett Packard, Sony and STMciroelectronics. The Parthus sales manager admits he will not entertain doing designs for anyone less than one of the electronics majors. Mr Long is unconcerned by the failure of phone companies to stir up excitement among consumers about accessing the internet over mobile phones. "People want high data rates and they will want wireless connectivity in the office and in the home," he says. So what makes the role of Parthus in the communications revolution so special? Is the sky-high rating merited? "We have strong technology and it is not easily copied. The barriers to entry are high and there is huge growth. Our research and development department is 10 times bigger than that in most multi-nationals.

"Your growth is there and your business model is there in terms of margins. We are losing money at present because we are putting 57 per cent of revenues into research and development, but we are building our backlog (contracted orders yet to be included in the accounts)." But Mr Long admits his company has some way to go to catch up with its rival ARM in changing its revenue model to keep ownership of its intellectual property and get an upfront licence payment and ongoing royalty payments from each deal. The company is moving that way with a 207 per cent rise in revenues from licensing in its last quarter. Licensing deals allow Parthus a royalty payment on every mobile device sold using its designs. More of the revenue from licensing would send gross margins shooting to around 90 per cent.

He also defends the cash-burn rate, down to $1m in the last quarter. The high market rating of Parthus has a lot to do with its ability to integrate lots of low-level chip designs into full "systems on a chip". Instead of going to up to eight semi-conductor design houses, original equipment manufacturers can have all work done at Parthus, which has operations in Ireland, Britain and several US cities.

An upstart rival would take five to seven years to assemble a comparable design team. Parthus, eager to their wizards, sets aside 8 per cent of the equity for a staff shareholding scheme, an unusually high equity allocation in Europe. And Mr Long even talks of "black arts" when referring to the highly complex designs the 70 engineers Parthus has in its analog and mixed signal division. No other chip designer has so many people in this area, he says. And he is equally proud of his company's links with 12 universities around the world.

Last week's announcement of a new chip design that will allow mobile devices to find their global position within five metres sent Parthus shares up almost 17 per cent in one day. Analysts feel position-based services will be "killer applications" for m-commerce. The company's NavStream technology uses global positioning technology developed in Northampton. This technology is to be incorporated into all US mobile phones by October 2001, and the Parthus technology has been licensed to ARM, which holds a 0.5 per cent equity stake in Parthus.

The ARM deal is a deliberate attempt to signal to the market that the two companies are, in fact, collaborators, Mr Long says. ARM chips are used in 80 per cent of the world's mobile phones.

Yet for all the excitement of the technology being developed by Parthus, its revenues are tiny and it makes a loss.Goldman Sachs forecasts pre-tax losses of $19.7m for this year, on sales of $28.2m.

Andrew Jameson, semi-conductor analyst with Dresdner Klienwort Benson in London, says: "Valuation is difficult. Obviously, Parthus is off the scale relative to the fundamentals but it is a sensible company and what they have done is impressive." He believes Parthus is a high-risk play, with future movements in the share price likely to be determined largely by the news flow from the company.

At Dublin-based Davy Stockbrokers, which had a role in the IPO, analyst Paul Phelan is highly impressed with the strides Parthus has made, but he feels the company deserves to be valued at less than ARM because its revenue model is not yet where he feels it should be. "Parthus is not as far down the road to the point where it gets all its revenue from licensing, but some investors seem to be saying they are not prepared to wait. Valuation is in the eye of the beholder, and it is approaching that of ARM, a remarkable achievement for a company effectively in transition. ARM gets all its revenue from licensing."

Brokers say Parthus faces a lot of niche competition from the design teams of some of its own customers. But the analysts also say even the mighty Intel has begun to outsource some of its chip-design work in a move that bodes well for Parthus.

Other potential to push the Parthus shares up can stem from announcements by Ericsson on Bluetooth or the growth for m-commerce in Asia. But those brokers warn that the ride is likely to be of the roller-coaster variety. Pronouncements from Parthus on major collaborations can also accelerate its shares.

For Mr Long, corporate celebrity status or his new-found fortune are not his spurs to further success. "Wealth is not what drives me," he says. "I have been reasonably comfortable for a while. The only benefit from wealth I can see is being able to take better holidays, and being able to help a few friends."

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