Dean Takahashi, a regular contributor to VentureBeat.com, posted yesterday a very interesting article over at the Industry Standard regarding Montalvo Systems failure and what it might mean for future x86 startups. We wrote about Sun’s acquisition of Montalvo Systems a couple of months ago, highlighting the more than $70 million dollars that the company was able to raise and the rather paltry sum for which it was eventually acquired. Dean’s postmortem gives us a concise history about how Memory Logix evolved from their initial synthesizable cores charter to eventually become Montalvo. We get a good look at some of the major players behind Montalvo including Vinod Dham, the co-founding partner of New Path Ventures, Mike Yamamura, Greg Favor, Peter Glaskowsky, Laurent Moll, and of course Peter Song who started Memory Logix.

It seems that from the start Montalvo had a hard time deciding on what to build. Ideas contemplated were: a processor incorporating a graphics chip, a partial x86 compatible chip only capable of running Linux, a non-x86 cell phone chip, and finally a four-core chip with asymmetric cores for the mobile space. The last one, being quite different from what AMD and Intel offered at that time, was probably what allowed the company to obtain the initial round of venture capital funding between the years of 2004 to 2006. However, it seems that around 2007 things started falling apart. The company was expanding rapidly and burning through cash very quickly while at the same time falling behind schedule. An interesting observation that Dean makes is that Bangalore, where the company hired a lot of talent, become such a hot area of recruitment that even there engineers were no longer cheap, further not helping the company. Soon, the company dropped the asymmetric core idea and decider on a simpler core with four identical cores. This might have been the major strategic mistake that the company made. Suddenly, the chip became indistinguishable from what the big guys would offer over the next few years. On the performance side it would have to compete against Intel’s latest Core 2 Duo processor while on the power side the recently introduced Intel Atom would have surely become a nail in Montalvo’s coffin.

Interestingly, Dean reveals that several investors were nevertheless willing to throw another $150 million dollars at the company to let them finish the initial chip and maybe a second version after that, but one of the major investors advised against it. Too bad in a way, since it would have been really interesting to see what the Montalvo team could have delivered – some small teams are capable or extraordinary achievement. On the business side of things, the lesson to be learned here is that when market conditions change, the product has to be modified to address the new circumstances, but one has to be really careful not to change it such that it looses the uniqueness and with it any advantage or niche that it was targeting.  Sun Tzu said that good warriors prevailed when it was easy to prevail because they knew themselves and properly assessed the situation, thus positioning themselves on ground where they would surely win. Montalvo on the other hand had a identity crisis right from the beginning, followed by poor product positioning in the end, thus severely diminishing any chances of victory that the company might have had – which explains why the money eventually dried up.
Ironically, just the other day Montalvo was granted its first patent, according to Peter Glaskowsky, titled Adaptive Computing Ensemble Microprocessor Architecture. Of course, given the recent acquisition of the company, the patent assignee is now Sun Microsystems.