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Electronic Timing, Inc.

Electronic Timing, Inc. $($ETI$),$ is a small company founded

$15$ years ago by electronics engineers Tom Miller and Jessica

Kerr. ETI manufactures integrated circuits to capitalize on

the complex mixed$-$signal design technology and has recently

entered the market for frequency timing generators, or silicon

timing devices, which provide the timing signals or $$clocks$$

necessary to synchronize electronic systems. Its clock products

originally were used in PC video graphics applications, but the

market has subsequently expanded to include motherboards,

PC peripheral devices, and other digital consumer electronics,

such as digital television boxes and game consoles. ETI also

designs and markets custom application$-$specific integrated

circuits $($ASICs$)$ for industrial customers. The ASIC$$s design

combines analog and digital, or mixed$-$signal, technology. In

addition to Tom and Jessica, Nolan Pittman, who provided cap$-$

ital for the company, is the third primary owner. Each owns

$25$ percent of the $1$ million shares outstanding. The company

has several other individuals, including current employees,

who own the remaining shares.

Recently, the company designed a new computer mother$-$

board. The company$$s design is both more efficient and less

expensive to manufacture, and the ETI design is expected to

become standard in many personal computers. After investi$-$

gating the possibility of manufacturing the new motherboard,

ETI determined that the costs involved in building a new plant

would be prohibitive. The owners also decided that they were

unwilling to bring in another large outside owner. Instead, ETI

sold the design to an outside firm. The sale of the motherboard

design was completed for an aftertax payment of $$30$ million.