Late last week Intel announced it was to acquire game physics specialist Havok in a deal said to be worth $110m. With the middleware sector no stranger to troublesome consolidation, we spoke to Havok CEO David O'Meara to find out what the move means for the industryâ?¦
Firstly, can you recap to us how Intel and Havok have come together?
First of all, Havok's philosophy has always been at its heart to be publisher and platform independent. At the time of Criterion's acquisition, people would say what would happen to us - could EA step in, buy us too, and leave them with a problem? I had given them assurances both verbally and sometimes in writing to publishers that we would never go down that road. I have always wanted to make sure that we put that first.
At the same time we did have VCs, and of course at some point venture capitalists want to exit. Now there was no pressure on us to let them exit because Havok has done very well in nine years, growing at over 50 per cent per annum and being cash flow positive.
Given all that, I thought the time was right to move. We responded to Intel - we were not on the market for sale and never put ourselves out there - and Intel can guarantee our platform and publisher independence.
Plus, they align with my strategic vision, which is that some of the products we provide will become, if not ubiquitous, but a much broader market than they are in terms of who is using them and geographically. I didn't want Havok to end up like the Netscape of the Explorer war - I wanted us to be in a position to capitalise on scale.
So, they were the reasons. We weren't a company for sale and we were doing very well but it was a way of honoring our commitments to customers and at the same time being prepared for a broader market as it develops over two to three years.
We'll be an independent subsidiary of Intel, and the same terms apply as before, and same management, we'll still have all our freedoms.
We did it out of strength, more than anything else. And our view is that we want to become stronger and better - I believe in middleware and I think Intel doing this is a real endorsement.
You mentioned your strategy for the future. Does that have anything to do with an increase of Havok use on multi-core systems? A lot of people have speculated that this is the key reasoning for Intel to acquire Havok.
My own view - and it's my view on the future - is that the market is going to grow significantly and segment. One segmentation of the market is the one you talk of - that top notch, triple-A game requiring very powerful platforms. Unquestionably that is a market that will become more sophisticated and grow, and we are preparing for that.
We have seen, however, with things like the Wii another segmentation occurring towards the more casual-orientated games and innovative use of gaming.
I think in the next two to three years we'll see another segmentation via the mobile market and online markets.
Yes, multiprocessing is going to be a big part of that market growth but there will be lots of activity at the other, lower end of the market for physics and things like that. Look at Asia and China - the market will grow there specifically but those consumers won't be buying the super-powerful machines they will be buying lower powered devices.
With a middleware acquisition people assume that it's a strategic play by the company acquiring to control or divide the market. But it sounds like from your point of view Havok wants to harness what a bigger parent company can provide it - in this case access to a much wider market. Is that right?
Absolutely. In the press release about the acquisition I really mulled over the quote I gave and I said 'scale' - that wasn't a word I used lightly. I don't want Havok to lose out at all, and for us its definitely about being able to push out geographically and into lower-powered devices as well as sophisticated platforms.
From Intel's point of view, and when I've looked at them over the years, they put no barrier on us in terms of processor or platform - we'll be just as involved with AMD and Nvidia as we will Intel going forward, no question about that. And the bigger the market, the better things are - and we can fight for share once all the companies in the industry have helped grow it.
You mention the Nvidia and ATI's parent AMD there - you had partnerships with those previously; what does the acquisition mean for those deals?
Well we're platform independent, and still happy to continue working with Nvidia and AMD. There's no pressure from Intel on us to stop that. And I don't want Nvidia or AMD to work with anyone else - I want them to work with us!
And you also mentioned mobile there - will you be preparing Havok for mobile and handheld in future now that you're part of Intel?
Yes, but I'm not saying that it will happen right away - the market is growing and segmenting, we saw it with the Wii and you're starting to see it in mobile where over the next two to three years you'll see content on those devices using hardware acceleration. And it's obvious that in Asia, a region as I say we want to push into, they will be using different handsets too.
Although you say Havok is still independent, being owned by Intel must give you something extra - what is that?
I think it'll come in a variety of ways. If I'm right about the way the market is going, then Intel will help us alot with process. That will be really important as we scale up and go to other territories - all of which is something Intel is very good at. Intel is also thinks very long-term; we had VCs before, and they were great, but one thing about VCs is that they are never noted for thinking two to three years out. So it's that process support and long-term strategy which will help us - the things we need to do to scale up.
And Intel is known for huge spending in R&D - that's surely going to be a benefit as well.
Definitely. For the very sophisticated, cutting-edge stuff we need to be working with people that are thinking five to ten years out, not just one or two, so Intel will provide that, too.
On the point about scaling, will you be growing your presence around the world now you have Intel's backing?
Oh yes, absolutely. We've just opened a Japanese office, and you'll see a lot of activity from us in Asia.
Also, in the West, we obviously we have a significant share of certain genres on next-gen platforms, but there are other genres we need to increase our presence in, such as sport. And we will also be announcing new products next year which will be built on top of Physics to help support developers of the triple-A games.