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Sitting in his office in Norwood, Mass., 20 miles south of Boston, Stata elaborated on this message: "I wanted to get across the sense that even as a company gets larger and more mature, it never really gets there. You become more professionally managed, only to find that you need to become more entrepreneurial and less formal. There's always another challenge around the corner."

For Analog, the immediate challenge was to learn how to work with a group of developing companies, harnessing their entrepreneurial energy without undermining or crushing the creative forces within them. It was a task that had stymied many large corporations in the past, as Stata was well aware. Analog had one distinct advantage, however: It had been a small, entrepreneurial company itself not so very long ago.

In many ways, the Analog experiment had its roots in the early history of the company -- going back to 1965, when Ray Stata teamed up with Matthew Lorber, his former roommate at Massachusetts Institute of Technology, to get into the electronics business. Their idea was to launch the company by producing components known as operational amplifiers (op-amps) -- devices used by military contractors, medical-equipment makers, research laboratories, and others to process signals that measure real world conditions, such as temperature and pressure, with a high degree of accuracy.

At the time, preassembled op-amps were in short supply. People who needed such components often wound up making their own. Stata and Lorber figured that they could use their off-the-shelf models as a wedge into the market, allowing them to form strong relationships with customers. "We saw an opportunity to create a very broad customer franchise and to build our name in a particular corner of technology," says Stata.

Given that strong market orientation, it was essential for Analog to have a highly skilled sales force, and Stata proceeded to hire trained engineers to call on prospective customers. Not only could these engineers explain the precise performance parameters of Analog's existing components, they were also knowledgeable enough to alert Analog to the changing needs of customers and to suggest new components for the company's product line.

Back in 1967 and '68, for example, John Harwood, one of Analog's first sales representatives, had a customer called Technicon Instruments Corp., in Tarrytown, N.Y., a maker of electronic medical equipment used in the clinical analysis of blood. In the course of making his sales calls, Harwood became aware of a problem Technicon's engineers were having in the design of an upcoming product. What they needed was a new component that didn't exist -- one that could convert readings of light into numbers. Harwood relayed the information to Stata. "I told him about my customer's projected requirements," says Harwood, who still sells for Analog in the New York area. "It was Ray who decided to commit the resources."

Over the years, this was a pattern that repeated itself again and again, and -- little by little -- Analog's product catalogs began to get thicker.

That same sensitivity to the changing market led to Analog's first acquisition, in 1969. At the time, the minicomputer revolution was gathering momentum, and Stata saw an urgent need for Analog to adjust its product line accordingly. "The same customers who were buying our op-amps needed the ability to translate analog signals into digital signals which computers could read," he recalls. Rather than develop the technology from within, he decided to spend about $1 million for a small company, Pastoriza Electronics Inc., that had pioneered in the development of analog-to-digital conversion devices.

That year brought another decision with even more far-reaching implications: the move into manufacturing integrated circuits. Again, Stata looked at changes in technology -- this time, the trend toward smaller and more complex electronic components. His conclusion was that Analog would have to become a player in the emerging market for silicon chips, or it would almost certainly pay a price in future growth. The capital investment would be in the millions of dollars, a huge bite for the company, which had annual sales of about $9 million at the time. But Stata considered the move so important that he was determined to raise the capital one way or another -- and eventually did so through an initial public offering.

To enter the semiconductor business, Analog took an unusual approach that, in some respects, foreshadowed its future experiment with Jupiter Systems and the other participants in the Monterey conference. Instead of developing the new capability from within or acquiring an existing company, Stata worked out a deal with a talented team of young engineers from another Massachusetts company. "They had the technology, and we gave them the capital to form a new company," Stata recalls. The new company was called Nova Devices Inc. It started out with initial equity of about $2 million -- and the use of Analog's aggressive marketing organization. In addition, Stata negotiated with Nova's founders for options to buy the rest of the business as it achieved success in an emerging new field.

"Our goal was to become a market leader," says Stata. "So we figured that the least risky approach was to get some of the best people in the world working on our team." The gamble paid off. Analog completed its purchase of Nova Devices in 1971. In 1973, its semiconductors represented about 25% of sales totaling $22 million.

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