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Coherent ends year on a low

13 Nov 2003

The US laser maker sees its own business suffer while trying to sort out its problem child, Lambda Physik.

Coherent has finished its fiscal year with a net loss of $46.5m and an admission that it faces a big challenge in turning around the fortunes of its ultraviolet laser subsidiary Lambda Physik.

More than half the annual loss was due to “disappointing” fourth quarter (Q4) performance which was reported yesterday. For the three months ended September 27, Coherent posted a net loss of $25.7m on sales of $101.5m. This compares with a net income of $6.4m on sales of $106.1m for the same period last year.

In a conference call with analysts yesterday, Helene Simonet, Coherent’s chief financial officer, attributed the poor Q4 performance to a decline in revenue from Lambda Physik and an erosion of the profit margin from Coherent’s electro-optics segment.

At Lambda, sales and incoming orders for Q4 2003 were both down by 29% compared to the same period last year. In a separate release, the German maker of excimer lasers reported a net loss of EURO15.7m for fiscal 2003.

“The challenge alone related to a short term turnaround at Lambda Physik is a great one and may well require significant decisions,” said Simonet.

Coherent is still seeking 75 000 Lambda shares to obtain the 95% ownership that it needs to initiate a squeeze-out resolution under German takeover law.

As for Coherent’s electro-optics business, although Q4 sales of $83.7m were 4% higher than Q4 2002 it has been has a hit by a 9% drop in its gross profit margin compared with Q3 2003.

According to Simonet, a post-mortem of the poor Q4 electro-optic performance highlighted a number of short falls including a negative product mix, unfavourable manufacturing variances, inventory write-offs and increased warranty costs due the failure of an externally purchased component.

“I can imagine how many of you were asking how this could have happened especially given the general predictability of our electro-optics business,” John Ambroseo, Coherent’s CEO told analysts. “The short answer is that we placed too many simultaneous demands on our management team. That list included an ERP implementation, multiple supply chain initiatives, and an inventory reduction program. Furthermore, I drew on several resources within our E-O segment to help assess and begin course corrections at Lambda Physik. The collective effect resulted in a loss of visibility in our business.”

Oliver Graydon is editor of Optics.org and Opto & Laser Europe magazine.

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