MCNC is selling its three cutting-edge technology research and development groups to the Research Triangle Institute International, the organizations disclosed Wednesday.
Financial terms were not disclosed.
“We haven’t nailed down what the actual number is,” said Dave Rizzo, chief executive officer of MCNC. He did describe the value of the deal as being in the “millions of dollars.”
The sale is part of an effort by MCNC to refocus its efforts on creating new companies and jobs in North Carolina, Rizzo told Local Tech Wire. As part of that plan, MCNC announced a new grant program of up to $500,000 a year for startup companies. These grants will be awarded through the MCNC Research and Development Institute.
“This is a tremendous benefit for North Carolina,” Rizzo said. “We keep all the research in North Carolina, all the researchers stay in North Carolina, we are able to fund these new grants, plus we unlock $40 million. I can’t find any bad news in that at all.”
The $40 million is the cash and cash equivalents MCNC’s RDI group has in its endowment. Earnings from that money will be enough to now fund MCNC programs “in perpetuity,” Rizzo said.
The sale does not affect either MCNC’s venture capital group or its networking organization, which is developing grid computer technology and maintains a statewide communications network that is used by the University of North Carolina system.
Sold to RTI are three groups:
RTI and MCNC said the employees of those groups would become RTI employees. RTI will lease the space where the groups currently work from MCNC.
Some layoffs expected
Rizzo said an estimated 60 people who work for MCNC would be directly affected by the deal.
Another 30 administrative personnel not directly involved in research will be placed in other jobs with either MCNC or RTI, Rizzo said. He added that “up to 10 people” would be laid off.
The research groups are involved in several programs for the US government and defense departments. Much of the work is secretive in nature but is known to apply to networking technology, signals encryption and electronic chip fabrication.
Rizzo said that the research revenues “didn’t cover the research costs. While that was not the primary driver for the sale, it was a consideration.”
MCNC’s research efforts have produced several spinouts in the past. One of those — Cronos Integrated Microsystems — was sold at the height of the high-tech boom in 2000 for some $750 million in stock. MCNC still owned a third of the venture, and money from that sale was eventually used to set up the endowments that now fund the organization’s activities. Other money also went to help fund the North Carolina Rural Internet Access Authority.
Rizzo said MCNC commercialization opportunities were “sort of serendipitous. You don’t know when they will really happen. We’ve been fortunate to have some.”
RTI said the three groups would be folded into its Science and Engineering Group.
“We are pleased to add these dedicated and talented researchers to our team,” said Victoria Haynes, president of RTI. “Their addition represents a logical marriage of two excellent research organizations with similar roots and missions.”
Focus on development
Rizzo, who said he approached Haynes with the idea of selling off the research group earlier this year, explained that the deal helps MCNC return to its original roots.
“First and foremost, the mission has an economic development flavor to it,” he said. “The basic strategic decision made here was to focus more on economic development initiatives. Rather than do the research ourselves and hope something good comes of it, we can invest across the state.
“One of the things we found was that it was hard to be proactive in the economic development field while also running basic research things.”
Rizzo took over as CEO of MCNC in June of 2002 and reorganized it into two groups — the Research Development Institute and the Grid Computing/Networking Group. Each has its own source of funding.
Rizzo said MCNC had the option of investing more money to grow the research group or to sell it.
“Our board felt this decision had more potential to help the state,” he said of the sale. “RTI has far more resources and will be able to grow it.”
MCNC: www.mcnc.org
RTI: www.rti.org
