The Six Five team discusses Coherent Q4FY24 Earnings
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Transcript:
Patrick Moorhead: Hey, Coherent announced their earnings, fourth quarter, fiscal ’24. First thing, I’m going to do is I’m going to start off with, if you’re not familiar with Coherent, who in the heck is Coherent? So think of broad-based materials, all the way to systems tech company. Okay? So all the way from materials that are used in high-tech, to racks of fiber optic connectors for hyperscalers, end-to-end. And markets are industrial markets, comms, electronics and instrumentation markets. Hey, everybody cares about AI, so think about optical transceivers, lasers, lasers, everybody. And even the materials for building AI semis, laser manufacturing systems, cooling and sensing.
Well why are we covering this company on here? Well, Jim Anderson, prior executive at AMD, and then CEO at Lattice Semiconductor is now the CEO of Coherent. The company is around $5 billion and has 26,000 employees, so a very sizable organization. And I’ll let you hit the earnings. What I wanted to do, what I thought was more interesting is just almost giving an introduction to the company, but also what Jim talked about on the call. New CEO, what do investors want to know about? What do you think? What are your first impressions at what’s going to change and what’s in it for me? So Jim reiterated the $60 billion SAM. Biggest growth opportunity, optical transceivers. He said he was also excited about NextGen telecom systems once we get the dipsy doodle up. Advanced displays like the latest OLED, semi cap, equipment, industrial automation, and of course, EVs. Can you get all the hottest buzzwords in there? I think we can.
Daniel Newman: Let’s go.
Patrick Moorhead: And he said he was focused on three things, very classic CEO culture, strategy and operations. He wants to simplify, he wants to speed everything up. Sounds very similar to Lattice, where I think they quadrupled the amount of new products coming out of the pipe at a much higher profit margin. He wants to rightsize the growth engines. That says pour more investment on things that are growing, stop investing and divest in lower performing businesses. And he said stay tuned, more at investor day. A lot on operations you talked about, but I’ll leave some oxygen for you.
Daniel Newman: Yeah, the playbook with Jim at Lattice, if he’s going to bring it over here, was really about building out that culture, building out strength for growth, and then expanding product portfolio. He did that very, very well. Very strategically too. Got the developers on board, went from that very low end to mid-tier. If you notice, there was a trend line for 11 or 12 quarters. But even through its rougher patches, margin expansion. So very focused on operational excellence, very much part of the ethos, and probably why he was identified to take this company by the helm. So one of the things, Pat, you covered a lot of the ground. And you and I are both first timers really digging into this. When the company did a double beat, it is down year-on-year, kind of like we talked about with Cisco with revenue, but I think it’s part of the shrinking that we saw in some different company spaces only for growth that’s coming up ahead.
It was very interesting to hear about how critical their technology is to so many others. It’s another, maybe think of that BASF commercial when I was a kid, “We don’t make most of the things you use, we make most of the things you use better.” Whether it’s giant semiconductor manufacturing machines or very specific materials that go into things like maybe a really smart watch that a lot of people use, this company has technology. And I think that’s going to be one of the things I’m going to be focusing a lot on as we start to inform and educate the market, is where does Coherent technology exist inside of things that you understand and know how to use? Things like materials are very hard for people to understand. So an area that they’re in silicon carbide, this is about thermals, for instance. So this is a company that’s doing materials for thermal.
So if you’ve heard a trend line, companies like Vertiv, where you’re hearing a lot about efficient AI, data center efficiencies and such not, that comes down to a number of different components. It’s systems that are used for cooling, for instance. They create more efficient designs. These more efficient designs mean lower power use. Companies like Coherent are in the mix with these particular types of technology, but this is everywhere. And their portfolio is so diverse, Pat, it really does cover, we say about the lasers, but you’ve got transceivers and you’ve got materials, and just up and down the stack. And they’re involved in so many different designs and manufacturing, that they have a really diversified portfolio, which I think makes them compelling.
You and I, this is going to be one that it’s going to take more education, it’s going to take more time, but we’ve seen this with the likes of Lattice and FPGAs. We spend time on it, we invest some effort and learn, and hopefully everybody out there can get some benefit from this. Pat, it’s an interesting company with some strong results. And now it’s got some strong proven leadership that we know knows how to get it done.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
