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19 Aug 2024
Jim Anderson aiming to streamline the sprawling photonics company; says research spending currently 'spread too thin'.
Coherent, the highly diversified photonics and silicon carbide materials company, has posted sales revenues of $1.31 billion for the financial quarter ending June 30, up 9 per cent on the same period last year.
However, it means that for the Pittsburgh-headquartered firm’s latest fiscal year, which also ended in June, total sales of $4.71 billion were down by a similar degree from last year’s $5.16 billion.
Lower restructuring costs in the latest annual period saw the firm’s pre-tax loss cut from $356 million to $148 million, but new CEO Jim Anderson told an investor conference call that he was already making changes to improve profit margins through operational streamlining, product pricing initiatives, and divestment of underperforming units.
R&D focus required
Paying tribute to predecessor Chuck Mattera, who transformed the much smaller II-VI operation into the now sprawling entity mainly through the acquisitions of first Finisar and then the original Coherent laser business, Anderson said:
“We have to move faster and be more agile. Speed is a competitive advantage. To this end, we've initiated changes to simplify our organizational structure, empower our leaders, streamline decision-making, accelerate execution, and ultimately, deliver our innovative products to market faster for our customers.
“Across our portfolio, we have strong growth engines that need the right level of investment to realize their full growth potential. However, we also have product lines and assets that are non-strategic and underperforming.”
As well as looking to improve gross margins, Anderson - who recently oversaw a successful turnaround at chip firm Lattice Semiconductors - is looking for a more focused approach to research and development.
“While innovation requires investment, those investments must be focused, efficient, and offer high return,” he observed.
“Today, our research and development investment is spread too thin. We will focus on the areas of greatest growth potential and eliminate investment in highly speculative projects that lack a strong business case.”
Coherent’s latest figures showed that although research spending declined somewhat in the past year, it still amounted to nearly half a billion dollars, and around 10 per cent of sales revenues.
AI datacom boom continues
In terms of current business, the company is - like rivals including Lumentum - experiencing a boom in demand for high-speed optical transceivers intended for AI-related data center deployments.
Revealing that datacom sales in the firm’s latest fiscal year were up nearly 60 per cent on 2023, Anderson said that Coherent had now delivered initial samples of its latest 1.6 Tb/s speed transceivers, with a production ramp expected to start in 2025.
The new CEO also reported solid demand for industrial excimer lasers used in organic LED display annealing applications - with the adoption of OLED technology in tablet and laptops, currently in its initial phase, expected to double demand in the long term.
And although he described general demand from industrial laser markets as “soft” in the near term, Anderson is expecting 2025 to be a “solid growth year” for the company overall.
For the September quarter, he and his executive team have forecast sales revenues of between $1.27 billion and $1.35 billion, which would represent a strong uptick on the figure of $1.05 billion delivered in September 2023.
• That outlook appeared to buoy investor sentiment, with Coherent’s stock price rising nearly 8 per cent following Anderson’s update. Currently trading at around $76.50, the firm’s market capitalization stands close to $11.5 billion.
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