Electronic Design

Interview: Dr. James Truchard, President and CEO of National Instruments

At NI Week 2009 this past August, Editor-in-Chief Joe Desposito spoke with Dr. James Truchard, President and CEO of National Instruments. They talked about the economy, innovation, the LabVIEW platform and hot markets.

J. D.: Like almost every other public company, National Instruments has seen its stock price decline by more than half in the past year, but rebound strongly since early March. From your perspective, did this roller coaster ride truly reflect the business conditions at NI or did the business perform more strongly than the market gave it credit for?

Dr. T: The experience was much like when we were starting up the company. There was a lot more uncertainty; there were a lot more unknowns. We didn’t have a clear picture of where the economy was going. I spent more time tracking it and trying to anticipate certain things. I have not seen such uniformity in the down economy as with this situation. It’s the same across the globe, it’s the same in companies and industries, except for automotive, which is a lot worse.

At this point it does look like the economy may well have stabilized—at a low point—so then the next big question is, “Where to from here?” One of the big problems that I brought up in my presentation, on the slide called Innovation Interrupted (Editor’s Note: This is a reference to Dr. Truchard’s Keynote speech), is that in the U.S., certainly, we haven’t had enough innovative products that we could sell to the rest of the world. And over the last decade the U.S. consumer has been financing the global economy. Just in 2006 and 2007 alone, the U.S. consumer borrowed $700 billion dollars against their homes to buy cars, take vacations and so forth.

But that no longer exists. So some way or another we have to grow our way back from where we are. And there’s not a clear sign of who that’s going to be. Is it going to be emerging economies? It almost certainly will not be the U.S. consumer, who now is going to a higher rate of savings, which they hadn’t done in a decade or even longer. In some cases the savings rate had even gone negative. So for us, our approach is simply to provide new products that can expand our opportunity to make people more competitive, more able to innovate, as you saw with the KittyKat scanner on the stage. By the way, it’s not really a CAT scanner since it uses cones instead of axial tomography, which would be a CAT scan.

So innovation has to be there. That’s the thing we talked about: the grand challenges and how we’re working with the companies, the people, and the professors that are working on and solving these problems. We can point to any one of them, multiple examples. So we just see it as back to basics, back to an emphasis on good solid engineering. Doing the right thing, innovating. Solving the problems that we face, like energy.

I’ve been on the advisory board for UT (University of Texas) engineering and some years ago I encouraged them to start the energy institute. You can go down to Fry’s and buy a DVD player for $29. Some are on sale for that price. We can’t even make the box to put it in. So we better work on something that’s going up in price like oil, replacing oil—energy that’s going up, not down in price. We really have to focus on these things that we can get leverage, because right now we’re spending a lot of money overseas.

J. D.: During the past ten years, as long as I’ve been covering the company, NI’s revenues have grown steadily towards the $1B mark. 2009 looks like it will cause a hiccup on this path. What are your thoughts about the next couple of years and the company’s ability to reach and surpass that revenue mark.

Dr. T.: That’s certainly the plan we have, investing in automated test, in the use of computers for doing measurements. We now have a leadership position in that and see that our competitors appear to be falling away as we advance. In other words, as we advance, they seem to be moving backwards. So we’re seeing that as a good opportunity. Industrial embedded is relatively new, so we’re just establishing a good business there. In each case, it’s our goal to continue to grow these businesses as a growth path of the corporation.

J. D.: In the 2001 economic downturn, it’s my understanding that National Instruments did not resort to layoffs as a cost cutting measure. Is that true and was it true again for this recession? If so, how do you avoid layoffs when some other companies cannot?

Dr. T.: For layoffs, we were able to avoid them.

J. D.: So how do you manage that? Is it part of your corporate culture?

Dr. T.: It is company culture, but we also work hard to make savings without layoffs and are very effective. We made some projections and estimates of what we could do with savings and were able to achieve it. As we like to put it, this means one way or another affecting all of our stakeholders: the employees, suppliers, and our shareholders. Each one had to gut it in a little bit. For the employees, we had vacations we expect them to take. For accounting purposes that gave us some benefit. And a cut in pay of 5% was part of the process. For the suppliers, we’ve been negotiating some cost savings, as they have been forced to do with other customers, too. So we’ve been working with that. We got some savings from suppliers. That’s basically how we managed to put it together and maintain a slight profitability even under these circumstances. It’s a combination of looking to stakeholders for savings.

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