Coherent braced for tough times

06 Feb 2009

Restructuring will help, but the next quarters are still set to be difficult.

Coherent saw its net sales for the first quarter of fiscal 2009 decline 12.4% sequentially and 13.8% from the same quarter a year ago. The company posted sales of $124.4 million and a net loss of $14.7 million for the quarter, although the results were better than had been projected.

"Macroeconomics remains the dominant force in our business environment," commented CEO John Ambroseo speaking to analysts. "Coherent took early action to respond to this downturn, which in turn, supported our Q1 results. With end user demand under greater pressure, Coherent is maintaining its conservative posture. We have further reduced headcount and programme spending as well as announced the elimination of three additional sites."

Analysts agreed that the company would remain buffeted by the economy. "Considering the unhealthy state of the industrial and semiconductor markets, we do not see any near-term catalysts for Coherent," noted Mark Douglass of Longbow Research. "The next several quarters are expected to be extremely difficult for the company, although actions undertaken in 2008 and recent restructuring and re-footprinting actions should help the company weather the next financial year."

Within Coherent's four business areas, its scientific business was unchanged from the comparable periods, while the microelectronics, materials processing and OEM markets all experienced substantial declines in sales, reflecting the overall weakness in these markets.

In particular, materials processing revenues were $17.4 million, down a full 29% from Q1 2008. None the less, the sector remains a significant target for the future and a key long-term opportunity for the photonics market, according to Ambroseo. "While the slowdown in materials processing has been broad-based, we are seeing some pockets of strong activity," he noted. "For example, orders for non-metal drilling, mostly for filter production, are near record levels."

Coherent's activities to increase participation in materials processing include the Highlight 1000F fibre-delivered, direct-diode system introduced at Photonics West, that is scheduled to begin shipping in Q2 2009.

"Our end market diversity may seem like a burden in these times, but we have clearly benefited from sustainability in certain end markets," Ambroseo concluded. "We can not predict where or when the bottom of this cycle occurs, but we can and will take the necessary steps to ensure that our business execution and financial performance are commensurate with our position as a market leader."