Coherent restructures to face the future

13 Nov 2008

Solar is the bright spot for the company as it aims to shed 5% of its workforce.

“We have taken action to ensure that Coherent weathers this downturn.”

John Ambroseo, CEO of Coherent, briefed investors on the company's response to current economic conditions when he presented its fourth-quarter results (see this week's Business Briefs).

"The macroeconomic situation continues to evolve and creates churn in the marketplace," Ambroseo said. "Customers are adopting a conservative posture and protecting their cash. We have taken a number of actions to ensure that Coherent weathers and emerges from this downturn in the best shape possible."

In line with comments from Newport, another company grappling with a decline in microelectronics sales, Coherent was able to point to promising growth in photovoltaic markets. The company's solar revenues almost doubled year over year, according to Ambroseo.

"Bookings for solar cell manufacturing remained strong in the fourth quarter," he said. "We are delighted by this trend, but lower energy prices and tight credit may slow investments for small, developing accounts. Nonetheless, higher conversion efficiencies and manufacturing yields are pushing down the breakeven point for solar power versus fossil fuels, and governments and individuals remain committed to clean, renewable energy. We maintain a positive outlook on this opportunity."

Coherent results indicated that the company experienced a rapid drop in revenues in late September, the result of lower bookings primarily in the microelectronics market. Total sales for the fourth quarter fell by 5.1% to $141.5 million. Gross profit of $55 million represented a slight decline from the equivalent quarter of 2007.

"The margin improvements from the divestiture of imaging optics and the discontinuation of scientific custom laser sales were more than offset by the negative impact of significantly lower volumes," commented Coherent CFO Helene Simonet.

The company has responded to the uncertain economic environment by announcing a global headcount reduction of approximately 5.5%. It stated that plans to exit its Auburn, California, plant by the end of March 2009 and the Munich, Germany, site by the end of June 2009 remained on schedule.

"These two projects are pivotal to our expansion plans. Ultimately, revenue and mix, not project execution, will determine our financial performance exiting fiscal 2010," said Ambroseo.