Power Integrations, Inc. Company Interview: Balu Balakrishnan

• On 1:25 pm EDT, Tuesday September 22, 2009

67 WALL STREET, New York - September 22, 2009 - The Wall Street Transcript has just published its Alternative Energy/Clean Energy/Power Generation/Utilities Report offering a timely review of the sector to serious investors and industry executives. This 83 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Long Term Perspective on Alternative Energy Industry -- Leading Indicators for Alternative Energy Components Companies -- Mergers and Acquisitions in the Alternative Energy Industry -- Break Even Business Fundamentals for Carbon Free Energy Providers -- Development of Carbon Free Energy Production Infrastructure -- NAT GAS Act -- New Players in the Alternative Energy Industry -- Solar Power Cell Manufacturers Market Strategy -- Demand Response for Raw Materials for Solar Cell Production -- Alternative Energy Investment Opportunities -- Multiple Stock Winners in Carbon Free Production Industry -- Government Funding of Alternative Energy Power Providers -- Chinese Solar Energy Companies -- Alternative Energy Hedge Fund Investors -- Commodity Cycles -- Determinants of Market Valuations in the Alternative Energy Production Industry -- Carbon Emissions Statistics -- Energy Efficiency Statistics -- Innovations in Solar and Wind Power Generation -- Business Economics for Methane Based Power Generation -- Electric Vehicles Projections and Statistics-- Cap and Trade Projections and Statistics -- Development of Battery Technology -- Regulatory Environment Developments for Solar, Wind, and Alternative Energy -- Hybrid Vehicles Development and Sales Projections

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In the following brief excerpt from the 83 page report, Balu Balakrishnan, CEO of Power Integrations, Inc., discusses the company and the outlook for the sector and for investors.

TWST: Would you give us a brief historical sketch of the company, bringing us up to the present?

Mr. Balakrishnan: Power Integrations is 21 years old. The company was started in May 1988. It was based on a high-voltage silicon process technology that we developed. It took us about two to three years to make the technology commercially viable. It wasn't until 1994 that we had our first commercially viable product, the TOPSwitch, which we sell to this day. It's been a very successful product for us. Our high-voltage technology is very suitable for converting the high-voltage power that comes out of the AC wall outlet into the low-voltage power required by most electronics. This is primarily what we do. We use our high-voltage technology to convert the AC power that comes out of the wall into DC power. TOPSwitch was the first integrated solution to do that. All of the electronics in your house, like your cell phone, your cordless phone, your shavers, and all kinds of appliances and so forth, either have a power supply inside the product or, as in many cases, an external adapter that plugs into the wall. We essentially replace older ways of designing power supplies, such as discrete electronic components and big copper-and-iron transformers, with a fully integrated, silicon-based solution. The first product we introduced, TOPSwitch, integrates a large portion of the power supply. Since 1994 we have grown steadily. In fact, the only year in which we had negative growth was 2001, when the technology bubble burst. Even then, we had negative revenue growth of only 15%. In all other years, we've grown very nicely and consistently. We went public in 1997, and by 1999 we had exceeded $100 million in revenues. Last year our revenues were just below $200 million.

TWST: What have your growth rates been?

Mr. Balakrishnan: If you look at the last six or seven years, our revenue growth has averaged between 12% to 13% or so a year. But we've seen that accelerate over the past couple of years, thanks largely to energy efficiency, which is a story that's been developing for over a decade now. We introduced our second landmark product, called TinySwitch¨, in 1998. It was our first product incorporating what we call EcoSmart¨ Technology, which reduces energy consumption in electronic products, including appliances and consumer electronics. At that time, energy efficiency wasn't getting a lot of traction. No one cared about energy efficiency. We got lot of awards, and we were recognized by the president of the United States. I got invited to Washington, D.C., to meet with President Bush. In 2001, if you remember, we had the California energy crisis, and energy consumption came into the limelight. And so the EcoSmart Technology was recognized as a good solution to reducing energy consumption. So I got to meet with the president. We also got an award by Discover Magazine for the environmental benefits of our EcoSmart Technology. This was in 1999. It was very nice to have this type of recognition, but our revenue was not really driven by energy efficiency. Our revenues came more from replacing older technologies with more integrated, smaller and lighter technologies that also happened to be more energy efficient. Energy efficiency was the last thing on everybody's mind. Of course, this has changed in the last two years, as energy efficiency has been recognized as the fastest and most economical way to reduce carbon emissions. Improving energy efficiency doesn't cost anybody anything since our solution is no more expensive than older technologies, which can be very inefficient. So there is a tremendous push now by governments all over the world to make products more energy efficient because it is an instantaneous way to generate power, if you will. This has helped us tremendously. In fact, in 2007 our revenue growth accelerated to 18%. We were expecting to do even better in 2008 and grew 19% in the first half of the year. In the second half of the year, of course, we were impacted by the worldwide slowdown. We still grew, but not as rapidly as expected.

TWST: What was your growth rate in 2008?

Mr. Balakrishnan: Revenues grew 6% for the full year, as growth in the second half was much slower than the first half. In 2009, again thanks to increasing demand for energy efficiency, we are doing better than most semiconductor companies. We are definitely doing better than most of our peers in the analog industry. To our knowledge, in fact, we are the only company in the analog space that is expected to have Q3 2009 revenues higher than Q3 2008 revenues.

TWST: Is demand for your products coming from consumer demand for energy conservation products?

Mr. Balakrishnan: Yes, consumer awareness is becoming more of a factor, although initially it was driven by regulatory standards. Basically, governments around the world have realized this is low-hanging fruit, that is, a simple, cost-effective way to reduce carbon emissions. So they have implemented a number of standards for energy efficiency, and they are continuing to do so. This is forcing the manufacturers to redesign their products to be a lot more energy efficient. And because we offer ICs that will make power supplies much more energy efficient, we are getting a very large share of the redesign of these power supplies. But increasingly, we are seeing OEMs and consumers demand higher levels of efficiency, over and above what's required of them.

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