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LEDA DESIGN - "COMPANY'S DEVELOPMENT STRATEGY IS CONNECTED TO ARMENIA"- SAYS VAHRAM MOURADIAN, PRESIDENT OF THE LEADING AMERICAN IT COMPANY

LEDA Design, Inc., engaged in design and development of IP blocks for digital, analog and mixed-signal Integrated Circuits, was established in USA in 1995, and the Armenian Branch was founded in 2000. Late in 2003 a decision was made to transfer the main activities of the company into Armenia. What are the reasons for that rather risky decision and what is the result of its application, we managed to clarify directly from the company's President Dr. Vahram Mouradian.

- Dr. Mouradian, please describe the transition period and difficulties connected with it.

- In November 2003 we decided to relocate our key engineering segment into Armenia, and at the present moment it has been implemented - engineering, marketing and production departments are located in Armenia right now. In the beginning of 2004 we entered a risky stage of operations, as this is the very first experience when a company like ours expands its activity in Armenia only. In January 2004, with the beginning of the transition period, LEDA Design's shareholders evaluated the task to be achieved and determined the deadline for successful completion of the transition to Armenia based operations using the existing manpower and engineering resources. In the first three months of the year the company experienced losses, but in the second quarter we succeeded in attracting engineering orders, and their performance brought profitability. Forecasts for the third quarter anticipate equal, if not better results compared to the second quarter. Taking into consideration these positive development trends, the company's shareholders have made decisions to effect additional investments. These investments will not only improve efficiency, but will provide the basis for further development of our business. In the near future we are planning to introduce new products on the world chip design market with new types of interfaces, memory blocks for ICs and EDA tools. Also, we are going to add IC testing in Armenia, a function which previously was performed in the US.

On a related subject, LEDA has a taken a very strong stance in the Armenian HR market against the practice of enticing employees from other companies to "steal" technologies. From this point of view Armenia has not yet spoiled its reputation, but the practice is becoming a problem. The practice has spread into Armenia among competing companies and it contradicts the principles of good business practices and healthy competition, especially in the context of such a narrow engineering market as the Armenian one. This kind of dishonorable behavior shown by some, both foreign and local companies, increases the cost of doing business in Armenia, making it less attractive for potential investors. LEDA is actively working to improve the situation, and we expect positive results.

In summary, however, I can confirm to you that Armenia is acknowledged as a reliable partner in the international IC design market. Regarding our plans for the future, our next task will be to firmly establish our reputation, which requires positive dynamics of production growth, development of new products, and expansion of supporting services.

- Actually, we can now consider the second stage in LEDA's development finished?

- The initial stage was raising the company itself, capable of develop products and meeting demand. The next stage was opening of the Armenian branch, and the transfer of the corporate operations into Armenia.

- Well, about the third one, what will be the next stage, to your mind?

- Our next step will be acquisition of strong brand recognition that will allow us to start trading the company's stock on international stock exchanges. For an American-Armenian enterprise, it will be a solid achievement.

- In the beginning of this year several employees of LEDA have been dismissed. Taking into consideration the recent positive changes, do you plan to restore the previous number of employees?

- Since the middle of July the number of LEDA employees has grown, first of all, due to hiring the graduates of our educational center. Moreover, we have increased salaries of many of our engineers. In the near future we expect to announce new job openings, as we continue to develop new products.

- Vast majority of the Armenia located IT-companies are branches of the foreign firms. How can you explain your not traditional decision to turn your branch into the Headquarters?

- First of all this decision is caused by my Armenian origin, next by my sincere belief in the potential of my team and the bright future of my home country. But the decision is still a risky one. Due to the absence of a local market, the most challenging task in Armenia is effective outbound sales. Another major obstacle for the conversion of the foreign branches into Armenian companies is the lack of qualified specialists. And it applies not only to marketing. The Armenian IT labor market is very limited. For example, you can count on your fingers the number of talented chip design engineers in Armenia. In order to expand existing businesses and to create new businesses there is no other way but to increase the number of engineers. The loss of just a couple of experienced professionals by any Armenian IT company or branch may lead to collapse. This problem will remain until efficient models of labor market improvements are implemented. We are working on it right now.

- Do you think it may be possible to smooth this problem by attracting specialists of the Armenian origin from abroad?

- In order to do it, it is necessary to enhance the living standards in Armenia, because salary is not the only decision factor for those specialists - people desire high living standards. Besides that, let's not forget about the competition - the salary levels of the Armenian specialists are getting close to the critical point, and compared to some countries already exceed the limit, which means any further increase will not allow the Armenian products to compete on the world markets because of high net cost. The only way out is to make up for the brain drain by training new specialists - and to educate two specialists to replace each one lost, until Armenia becomes a location of choice for highly qualified professionals. Otherwise stagnation is unavoidable.

- Some time ago LEDA Design had got plans to place orders with two Armenian plants: Scientific-Production Enterprise "Transistor" and "MARS" plant. Do you have any news related to these plans?

- We could not engage with "Transistor", as it was not possible to bridge the gap between our technologies and the manufacturing capacities of "Transistor", but we still maintain certain hopes with "Mars" in the field of placing manufacturing orders for some simple printed circuits boards. But these are plans for the future.

By Ruben Grdzelyan, ARMINFO, 2004