R&D is the key

Chestnut Ridge, NY--LeCroy Corp. has seen a lot of changes in its 38 years of history. It started in 1964 as a small operation in the esoteric world of high-energy physics instrumentation, went public, and now contends for a significant share in the digital oscilloscope world.

What's more, LeCroy has blended a variety of cultures as an international company.

In the beginning, the company became preeminent for capturing and analyzing signatures of short-lived, high-energy elementary particles that typically have a single electron charge and travel at nearly the speed of light. By the 1980s, according to Michael Lauterbach, LeCroy's product management director, the company decided to turn its technology to a more general-purpose use. In 1985 the company put out its first digital oscilloscope. It was a good move. In the following years, high-energy physics money evaporated when governments pulled their funding from accelerator programs, but the high-speed electronics business was beginning to boom. The makers of communications devices, computers, automotive electronics, and medical electronics all were developing new products that they wanted to get to market before their competitors, and they all needed good test instruments. LeCroy recorded 20 to 30% compounded annual growth in 1995, '96 and '97. Revenues last year totaled $131 million--"Primarily due to the digital oscilloscope business," Lauterbach says.

Four years ago, about 80% of LeCroy's revenue came from digital oscilloscopes. Now about 89% does. Other sales are related equipment that generates test signals, some equipment for high-energy physics, service, repairs, and up-grades. "I think that LeCroy is generally recognized as best in the field in the capture and analysis of long, complex wave forms," Lauterbach says.

The electronics field has fed nicely into that specialty. A lot of signals are becoming longer and more complex, such as communication, datacom, telecom, local-area networks (LAN), and wide-area networks (WAN) signals. Lauterbach says LeCroy increased its market share in 1997, and revenues are growing, albeit slowly.

LeCroy couldn't stand still even if it wanted to, and obviously it doesn't want to. Jim Mueller, acting worldwide engineering manager, says that the company is moving from a smaller company mode of operation into a larger company mode. "[We're] trying to get an infrastructure in place that will support better quality, better reliability, and also a bigger, more spread-out company, and at the same time [continue to] bring out the kinds of products that will keep the revenue coming in," he says.

But, sometimes change is hard on people. Mueller explains: "Originally, LeCroy was totally a technology company. Engineers and engineering were the hub and everything supported it. Now, as the company matures, [we must] bring more balance to the company. We need a strong, vital marketing effort that contributes to the business. We have a stronger, independent manufacturing that not only takes the designs over the wall, but really tries to get involved with the design process. It means a lot more meetings."

And not just meetings in the New York facilities. About half of the engineering staff is in Geneva, Switzerland, where CERN is an important high-energy physics laboratory. As LeCroy has garnered more market share, and as the digital oscilloscope business has grown, engineers in New York and in Geneva have to collaborate tightly, Mueller explains. There are advantages to having a Geneva base. Marty Miller, chief scientist in Geneva, is an expatriated American. "When you mix those two cultures [Swiss and American] together, it tends to be a very powerful combination," he says. "The Americans tend to be innovative and risk-taking, and the Swiss, thorough, complete, and careful about details." The collaboration wouldn't be possible without video conferencing.

At Mueller's weekly engineering managers' meeting, three managers in New York and three or four in Geneva discuss issues of the entire department at both locations. Furthermore, LeCroy has a broadband network with Geneva, so engineers working on a project can lock their computers together with Netmeeting to work on the same document, share software code, and communicate by voice.

Miller says LeCroy is always using beta--or test--versions of software. "I suppose there is some risk associated with that, but the biggest risk associated with not being like that is being behind the leading edge."

LeCroy has kept its products on the leading edge. In fiscal 1998, research and development accounted for 15.7% of its revenues. "The only way that we can continue to increase sales is to make a better oscilloscope," says Lauterbach. "Otherwise people would go to our larger competitors because they have a more well-known name, more sales people, more of everything."

In October 1998, LeCroy introduced the model LC584AXL (XL for extra long). It reportedly has the world's largest acquisition memory--4 million samples of data acquisition memory per channel on each of four channels. Its processor is reportedly the world's most powerful one in an oscilloscope, a 192-MHz Motorola that is particularly adept at floating-point arithmetic. In addition, every LC oscilloscope comes standard with the ability to compute 42 basic pulse parameters, says Lauterbach, like the rise time of an edge, the negative undershoot at the bottom of the rising edge, the peak-to-peak voltage. "We can do math on an entire waveform and we can also do math on math," he adds. "If on channels 1 and 2 you have a current waveform and a voltage waveform, then on trace 3 you might show a waveform equal to the product of channel 1 and channel 2. That would be your instantaneous energy. On trace 4 you could integrate the instantaneous energy to get the total energy output at any point in time."

Often, math on math is what the engineer really needs so that he need not write his own analysis routine on a computer, Lauterbach says.

Quo Vadis? Where is the company going next? It plans to increase market share in Europe and the U.S., and it plans to get back into the Asian market as soon as possible. According to CEO Lutz Henckels, LeCroy will move into the rapidly growing LAN and WAN markets, which require capture and analysis of complex electronic data streams. Until LeCroy recently introduced NEWSLine, a LAN monitor, there had been no instrument that could characterize the network physical layer performance "live" while the network was operating, Lauterbach says.

In April 1998, LeCroy formed a market alliance with Anixter Inc., a $2.8 billion value-added provider of networking and cabling solutions that support business information and network infrastructure requirements. Anixter says it is looking forward to using NEWSLine to test LANs. In December 1997, LeCroy acquired Digitech Industries, Inc. It designs, develops and markets protocol analyzers for data communication and telecommunications. Henckels explains that its protocol analysis technology and WAN test solution products complement NEWSLine. So not only has LeCroy grown from a small company to an international one, but it has alliances and acquisitions. "It's always changing. I've been with Lecroy about 18 years now, and there's never a year the same as the year before," notes Mueller.