This week during our July 4th “break” I had been reading some articles about Synaptics. While Synaptics does still manufacture and has the dominant share in computer touchpads and fingerprint readers, most of its business is related to mobile and IoT, not just PCs. So, isn’t it time to ditch the “touchpad” moniker?
I like to look at technology companies’ histories in terms of generations and on the most recent quarterly financial call, Synaptics CEO Rick Bergman did us all a favor and used the moniker “Synaptics 3.0”. What is this? Let’s start with “1.0” and “2.0” and move to “3.0”. “1.0” was arguably the PC touchpad phase, which was then followed by “2.0” which was smartphone phase with touchscreens, displays and fingerprint technologies. This leads us to where we are now, at “3.0”, the IoT stage. It isn’t as if the company is leaving or exiting touchpads or mobile, but rather adding layers to the base businesses adding growth. This recent quarter, the company drove 62% of its revenue from “mobile”, 23% from “IoT” and 15% from “PC”. So, by calling Synaptics the “touchpad” company, you are less than 15% right.
If you follow Synaptics like I do, you know that the mobile and IoT growth was driven through a combination of organic growth and acquisitions. To Bergman’s credit, he positioned the company well for the next big market. He led Synaptics’ diversification into mobile when it was booming and the PC market was flattening, and now I believe, getting the company deep into IoT as its about to explode and smartphone growth wanes. Synaptics made two strategic acquisitions, Conexant, and the multimedia division of Marvell. These two acquisitions were focused on the booming consumer IoT market, but these technologies are certainly applicable to certain commercial and industrial IoT applications.
Conexant got Synaptics in the far-field voice-enabled market represented by products like the Amazon Echo, Google Home and Apple HomePod. In fact, Synaptics is designed into HomePod, and most Alexa-based smart devices. I can foresee in the not so distant future where we see voice input on just about every kind of device in the many rooms in the home, in the car and even at work, globally. Look at the way Samsung is driving Bixby into every one of Samsung’s consumer devices. I also see voice as a big driver in the AR and VR market as voice enhances the UX as the user can’t touch anything or of course, use a mouse. Marvell’s multimedia division was focused on consumer video capabilities, the processors in devices like Android-based set-top-boxes (soon with voice) and OTT devices like Google’s Chromecast and Amazon’s Fire TV. They are also the used as the main processor for Google Home. OTT video viewing has finally surpassed cable subscriptions and nothing will be putting that genie back in the bottle. No matter how you slice it, the smart speaker and OTT video market will be huge and it’s just a matter of how much of that business Synaptics can get.
I like Synaptics 3.0 as it is directed to where the puck is going but is additive on both PC and smartphone markets. It also better diversifies the company across more markets, and diversification, the way Synaptics is doing it, typically means growth and lower risk.
Now that you know that Synaptics is 85% non-PC business, can we please stop referring to it as the touchpad company? Thanks.