The Ups and Downs of Bitboys, Now Known As Qualcomm Finland

4/1/09

San Diego’s mobile-chip giant Qualcomm (NYSE: QCOM) said it wanted to enhance its capabilities in the mobile-graphics space when it acquired Advanced Micro Devices’s (NYSE: AMD) hand-held chip division in January. As part of the AMD deal, Qualcomm also acquired Bitboys, a small company in Finland that specializes in making mobile phone graphics look good and run fast and smooth. But Bitboys also has an amazing and turbulent past, and their story has not been widely told before.

The company now known as Qualcomm Finland has two locations, in Espoo and in Noormarkku, a remote municipality near the Gulf of Bothnia, the northernmost part of the Baltic Sea, with a population of just 6,151. Noormarkku is the important site, though, because it is the hometown of Bitboys’ founding brothers Kaj Tuomi, 38, and Mika Tuomi, 36. Both brothers still work for Qualcomm Finland as product development engineers, along with approximately 50 other employees.

The Tuomi brothers founded Bitboys in 1991 with other young Finnish coders who wanted to push computer graphics’ accelerator technology to its limits. Such services were very much in demand, and so were the Bitboys. Infineon Technologies, a chipmaker that was then part of German electronics giant Siemens, became their partner and funded them toward the end of 1990′s.

But Bitboys’ hallowed status as “golden boys” began to tarnish after the company failed to deliver on a couple of major projects, triggering criticism in the worldwide computer graphics community. In 1998, Bitboys promised a revolutionary ‘wonder chip’ called Glaze 3D. All three versions turned out to be ‘vaporware’ that never made it to market. The same thing happened in 1996 to Bitboys’ Pyramid3D chip. As the British IT journal, “The Register” put it, Bitboys became “… known chiefly for its ebullient performance claims and a string of missed deadlines.”

“It’s rare to have such a small company create such strong emotions,” says Mikko Saari, a Bitboys co-founder who is now country manager of Qualcomm Finland. Saari has been a friend of the Tuomi brothers since childhood, but he concedes, “The criticism was not unfounded. Bitboys were overoptimistic about what could be achieved—not technologically, but outside of the engineering work. We could have tried to fix our reputation, but we thought we’d handle it with just getting on with our work. We have learned our lesson. Luckily pros didn’t care. Nokia funded us in 2004, and they would not have thrown their money into a sink.”

Today, Bitboys founder Mika Tuomi is fed up with past criticism. “It’s easy to condemn some company from your home couch if you don’t know the facts. I’ve always been proud of what we have achieved with a small team,” he says.

Despite the problems with Pyramid3D and Glaze3D, Bitboys got approximately $7 million from Finnish investors in 2000. The Finnish government funding agency for technology and innovation, Tekes, also provided approximately $3.9 million to Bitboys from 1999 to 2004. “Tekes funded Bitboys when investors didn’t trust the company,” according to Saari.

Bitboys showed no profit between 1992 and 2003. But things began to change in 2002, when Bitboys was forced to move into mobile-graphics hardware. “Mobile phone graphics started to be a hot potato,” says Saari. Mobile phones got color displays. Bitboys got a profitable product-development deal with the Japanese giant NEC. Then came a series of extraordinary deals that few companies ever see.

—In February 2006, Nokia Growth Partners invested $4 million in Bitboys, acquiring a 20 percent ownership stake in the privately held company.

—In May 2006, ATI Technologies (Canada) bought Bitboys for $44M. ATI said in a press release that Bitboys would form “the nucleus for ATI’s centre of new European design.” Soon after this, ATI and Nokia (NYSE: NOK) announced a strategic long-term partnership. Founding brothers Mika Tuomi and Kaj Tuomi stayed and continued to work with the company.

—In July 2006, Advanced Micro Devices bought ATI for $5.4 billion. Bitboys became AMD Finland.

Country manager Saari refers to this time as “the maelstrom,” and says it actually began in 2005 when three other companies tried to acquire Bitboys. “We are a rare company. In 1995-96 there were 70 companies of this field in the world. Now there’s just a handful left.”

After operating Bitboys for almost 2 ½ years, AMD sold its mobile division, which included 250 employees around the world, to San Diego’s Qualcomm. According to Saari, Qualcomm wanted the Bitboys team unchanged, and Qualcomm’s chief financial officer William Keitel now oversees Qualcomm Finland as chairman.

“We had a lot of challenges with AMD and their several layoff rounds,” Saari says. “Now we can concentrate on business. I just heard it being said that ‘these dudes couldn’t have gotten a better home.’”

For Mika Tuomi, the big mental change came when Canada’s ATI acquired his company. “It wasn’t easy,” he says. “It was your child leaving home.”

Tuomi now feels proud their activity resulted in Qualcomm coming to a small village. “A lot of people here in Noormarkku are surprised that Qualcomm has bigger market value than Nokia,” he says.

As for the Qualcomm-Nokia rivalry, the two wireless giants settled a three-year old legal battle just six months before Qualcomm bought AMD’s mobile chip division. Since then, Qualcomm and Finland’s mobile giant have announced that they are now developing advanced mobile phones for North America. But just what that means in hard to say.

After asking Saari about Bitboys’ possible role in the Nokia-Qualcomm collaboration, he answered with his first, “no comment.” He added, “You can guess it is kind of a huge question for us.”

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