National Instruments Corporation
National Instruments Corporation
Incorporated : 1976
Employees : 1,289
Sales : $200.7 million (1996)
Stock Exchanges: NASDAQ
SICs : 3826 Laboratory Analytical Instruments; 7372 Prepackaged Software
National Instruments Corporation is a leading developer of computer-based instrumentation hardware and software products used in a wide range of industries, spread across two large markets: test and measurement and industrial automation. This includes specialty interface cards for general commercial, industrial, and scientific applications.
Billing itself as “The Virtual Instrumentation Company,” National Instruments offers hundreds of products that serve primarily scientists and engineers involved in test and measurement applications and industrial automation systems. The company creates flexible application software and modular, multifunctional hardware that combines with industry-standard personal computers and workstations to create user-defined “virtual instruments,” providing productivity tools for scientists and engineers to do their experimentation, research and development, and manufacture of products. Some industries using virtual instrumentation systems include the automotive, biomedical, telecommunications, electronics, and aerospace industries. The company’s products are also used in the pharmaceutical, chemical, and food industries and the tools are used to aid in tracking factory operations and control equipment.
How It All Started, 1976-89
The company was founded in 1976 by President and Chairman Dr. James J. Truchard, a former managing director of the Applied Research Laboratories’ Acoustical Measurements Division at the University of Texas at Austin, and fellow engineers Jeffrey L. Kodosky and William Nowlin, and was incorporated in Texas in May of that year. The three were involved in dozens of projects ranging from basic research to applied products and developing systems for testing military equipment, primarily for the U.S. Navy. By the time they left the university, Truchard had worked on or been involved in systems on virtually every ship and submarine in the Navy.
The company was founded with the goal of creating “a company that could grow by doing very innovative work that could be widely used.” Citing frustrations at the research lab of “having projects that would be developed just to sit on the shelf,” Truchard “wanted products that could go out into the marketplace and leverage standard technology to be very effective in what they do.” Applying for a $10,000 loan from a local bank, the founders pooled their savings from their state teacher retirement funds and started the company in a room behind Truchard’s garage and sometimes adjourned to Kodosky’s kitchen. A 300-square-foot office space was eventually rented and Truchard hired a neighbor part-time as the company’s first non-founder employee.
The company’s first product was an interface that connected stand-alone test equipment to PDP-11 UNIBUS computers. Nowlin, serving as a director and secretary, and Truchard designed the hardware and Kodosky, serving as a director, wrote the software. Truchard doubled as the marketing director, writing the company’s press releases. The first product was shipped in 1977 and, by the early 1980s, the company was doing both custom instrumentation work and manufacturing off-the-shelf products. From 1977 to 1997, the company’s revenues grew steadily.
Kodosky was appointed vice-president of the company in 1978 and was promoted to vice-president>of research and development in 1980. In 1983, the fledgling company dropped its custom work and focused on building off-the-shelf GPIB products (inter-tool communication devices, similar to printer ports). The same year, the company introduced its first GPIB interface for the IBM personal computer (PC) and IBM selected the company as its supplier for the same. Realizing that an application software environment would be needed which engineers and scientists could utilize with GPIB interface products in instrumentation control applications, Truchard charged Kodosky with creating an intuitive software product for that purpose. After spending three years armed with 10 Macintosh computers, tons of junk food, no windows or clocks, and the occasional foraging trips to a local Middle Eastern restaurant, the development team created Laboratory Virtual Instrument Engineering Workbench, also known as LabVIEW, which was released in 1986 for use with Macintosh computers. In an article in the July 12, 1996 issue of Investor’s Business Daily, Truchard said, “with LabVIEW,” the company’s flagship application software, the company’s “goal was to do for scientists and engineers what the spreadsheet had done for financial analysis.”
The following year, National Instruments released LabWindows, which allowed scientists and engineers a set of tools which simplified the development of instrumentation applications using C and BASIC on DOS-based PCs. LabWindows provided programmers who preferred text-based languages a set of interactive code generation development tools, but let them continue programming with the methodology they had become familiar with.
In 1987, the company expanded its hardware line to include Macintosh NuBus data acquisition boards, coinciding with Apple Computer’s launch of the Macintosh II PC. Current Vice-President of Marketing Timothy R. Dehne joined the company in 1987 as an applications engineer. Also that year, the company opened its first international office in Tokyo. In 1989, the company began issuing a quarterly newsletter, Instrumentation Newsletter, with feature articles, new product information, user-solution case studies, and new instrumentation technology to educate current and prospective customers about the company’s products and technologies.
Impressive Growth During the 1990s
As the company entered the 1990s, it was growing by leaps and bounds. In 1990, NASA utilized a computer software program developed by the company to help trace fuel system leaks affecting space shuttle launches. Total revenues reached $44.7 million, with net income of $6 million. In 1991, the company achieved revenues of $59.5 million, with net income of $3 million. By 1992, the company had exhibited approximately 40 percent growth per year for the previous 10 years and revenues jumped to nearly $83 million.
By January 1993, the company’s products were being utilized in a wide range of industries. Major customers included such giant corporations as 3M, Apple Computer, AT&T, Boeing, Chrysler, Daimler Benz, E.I. DuPont, Eastman Kodak, Ford, General Electric, General Motors, IBM, Intel Corp., McDonnell Douglas, Motorola, and Proctor & Gamble; such research facilities as Lawrence Livermore National Labs, Los Alamos National Labs, and Sandia National Labs; Purdue University, the University of California, and the University of Texas; NASA; and a number of foreign companies.
That same year, the company purchased the rights to HiQ, a Macintosh-based, integrated graphical environment, numerical analysis, and data visualization software package which allowed the company to deliver all the software components needed for the scientific method. The company’s revenues that year ended up at $105.5 million, a 27 percent increase over the previous year, with a net income of $10.1 million.
In 1994 the company was reincorporated in Delaware. The company went public in March 1995 with an initial offering of three million shares of common stock that brought in $39.6 million. That year, the company added a 140,000-square-foot manufacturing and engineering facility to the existing 153,000 square feet of office space on 69 acres it owned in north Austin. The company also became ISO 9002 compliant. Revenues that year hit $164.9 million.
In 1996, the company introduced a total of 96 new products, bringing its total of new products released to more than 600, for testing in such diverse applications automotive cruise control, emissions and air bags; satellites; Patriot missiles; professionals’ golf swings; the U.S. rowing team’s form; space shuttle experiments; and a number of consumer and medical programs. The company’s products were also used to manufacture paper, Ben & Jerry’s ice cream, and to sort kiwi fruit.
National Instruments manufactures software and hardware products for personal computers (PCs) and workstations that scientists and engineers use to build their own specific instruments, known as “virtual instruments.” These user-defined systems are for test and measurement and industrial automation applications such as automated testing, laboratory automation, factory automation, physiological monitoring, numerical analysis and data visualization.
One product released in 1996 was in the Fieldbus hardware market. A group called Foundation Fieldbus was created with the mission of inventing standards which would allow different brands of industrial automation products to work with each other. Some of the companies involved in the group included Allen-Bradley Co., Fuji Electric Co., Honeywell Inc., Siemens Industrial Automation Inc., and Toshiba Group. The company released one of the first Fieldbus hardware technologies, which companies in the Foundation planned to incorporate into their products, allowing them to connect with other similarly equipped products. A second product unveiled in 1996 was called “image acquisition.” Designed for a potentially lucrative market, the hardware studied a picture of a product on an assembly line and automatically compared it to what the product should look like. The company’s largest competitor in this market was Natick, Massachusetts-based Cognex Corp. A third product released in 1996 was ComponentWorks, a software product designed to work in tandem with Microsoft’s Virtual Basic application development tools to compete with the company’s own Lab VIEW software.
September saw the launch of the company’s industrial automation software, called BridgeVIEW, which would help companies control heating and cooling systems, programmable logic controllers, pumps, valves, and other hardware used in manufacturing. BridgeVIEW, which competed against software from Irvine, California-based Wonderware Corp. and Germany-based Siemens AG, drew on technology already used in the company’s well-established LabVIEW “virtual instruments” software. The overall industrial automation market was believed to be worth about $20 billion in 1997. The man-machine interface part, in which BridgeVIEW competed, was worth $215 million. But it was considered one of the most promising segments of the market and analysts believed it could grow to $1 billion by the end of the 20th century.
Also in 1996, National Instruments acquired a number of new companies and/or products. Early in the year, the company purchased technology from France-based Graftek for image analysis and acquisition, which complemented the company’s already strong base of data acquisition products. In April, National Instruments purchased Georgetown Systems, Inc., a start-up company which was creating software to compete with National Instruments’ LabVIEW flagship software product and Irvine, California-based Wonderware Corp.’s software, for approximately $2 million. The company integrated Georgetown’s Windows-based Lookout software into its own. And late in the year, the company acquired the SQL Toolkit software from Boston, Massachusetts-based Ellipsis Products Inc., which would be used to integrate the company’s software tools into the corporate environment.
Poised for the Future
By July 1996, the company had expanded to 28 sales offices worldwide, adding facilities in Hong Kong, Japan, Singapore, and Taiwan. Forbes ranked National at number 53 on the magazine’s list of the Top 200 Small Companies in America. At the year’s end, the company had 2,057 employees, revenues for the year hit $200.7 million, and net income came in at $25.5 million. From 1992 to 1997, the company enjoyed an average annual growth rate of 29 percent. By mid-1997, the company was distributing its software and hardware products through a direct sales organization, OEMs, independent distributors, and systems integrators and had 46 sales offices in North America and 29 locations in 22 countries throughout the world.
That year, the company released version 4.1 of LabVIEW, which NASA used to monitor the Mars Pathfinder Rover and Motorola used on the world’s first satellite-based phone network, the Iridium Satellite Project. The company also released a new line of computer-based multimeters, oscilloscopes, and other instruments, a new line of PCI-based data acquisition boards for Windows NT/95/3.1, and Ver. 3.1 of the HiQ data visualization and report generation software for Windows NT/95. The company was also again named to Forbes magazine’s Top Small Companies list. With offices around the globe, and with new strategic alliances being forged regularly, National Instruments appeared in good position to continue growing by leaps and bounds.
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—Daryl F. Mallett