8 April 2010


GigOptix grows 54% in 2009 to $14.8m, but margins hit by ChipX acquisition

For fourth-quarter 2009, GigOptix Inc of Palo Alto, CA, USA, which designs modulator and laser drivers and transimpedance amplifier (TIA) ICs based on III-V materials as well as polymer electro-optic modulators, has reported revenue of $3.1m, down 4% on $3.3m on a year ago. However, excluding the impact of the one-time revenue adjustment of $1.3m from a change in billing rates under government contracts, non-GAAP revenue would have been $4.4m, up 35%.   

On a non-GAAP basis, gross margin has fallen from 66% a year ago to 38%, reflecting the impact of acquiring analog and mixed-signal custom ASIC supplier ChipX Inc of Santa Clara, CA last November and its historical lower gross margin. Operating expenses have risen from $2.4m to $4.3m, due mainly to ChipX and a full quarter of expenses from the operations in Bothell, MA of polymer electro-optic modulator maker Lumera Corp (acquired on 9 December 2008). Net loss has risen from $0.1m to $2.8m.

Despite the industry slowdown, full-year 2009 revenue was $14.8m, up 54% on $9.7m in 2008 (which was more than triple 2007’s $3.2m), or $16.1m non-GAAP (up 67%). Shipments for optical telecoms rose 40%, reflecting increased market share. In addition, GigOptix sold its first polymer-based modulator products. 

On a non-GAAP basis, gross margin has fallen from 65% a year ago to 55%. Net loss has risen from $3.6m to $4.4m.

However, during 2009, total leased Bay Area office space (including ChipX) was halved from about 30,000ft2 to 15,000ft2, and headcount was cut from 115 to 85. Despite this, Q4/2009 operating expenses were still $7m, up on $4.2m a year ago. Nevertheless, during Q4, GigOptix’s cash position rose from $2.8m to $3.6m. 

“2009 and thus far in 2010 have been eventful periods in the history of GigOptix as we have continued to grow our revenues, made several differentiating breakthroughs with our technology, added top industry executives to our team, and continued to execute on our organic growth and acquisition strategy through the ChipX Inc transaction,” says chairman & CEO Dr Avi Katz.

The management team has been strengthened by adding senior personnel from leading semiconductor firms, including chief financial officer Ron Shelton (formerly CFO with Cirrus Logic and Alliance Semiconductor) and VP of global optical sales Jay de la Barre (formerly with Sierra Monolithics Inc, which is now part of Semtech).

The acquisition of ChipX has broadened GigOptix’s product portfolio with analog-mixed signal CMOS ASIC platform technology and products, boosting the firm’s presence in the military, aerospace and instrumentation markets, and providing qualified supplier status with key customers as well as cross-selling opportunities of GigOptix’s RF products.

Rapid consolidation of acquired businesses (and in particular their engineering groups) provides the ability to continuously grow product lines, GigOptix says. During 2009, more than ten new 10, 40 and 100Gb/s products were launched, which will contribute to revenue in 2010. 

“Since GigOptix’s inception in July 2007, our goal was to acquire enough complementary technologies in the high-speed optical communication market to be capable of offering our customers a meaningful one-stop shop of innovative technologies and products,” says Katz. “We have a strong product base with valuable intellectual property comprising every aspect of the optical communications value chain, including drivers, modulators, receivers, amplifiers and analog mixed-signal ASICs,” he adds. 

“Recently [on 23 March], we announced a significant alliance with Sanmina-SCI, to manufacture our proprietary polymer-based modulator, which has been evaluated to be stable at the industry-standard 85ºC for 25 years reliability conditions, for many 40Gb/s and 100Gb/s formats... These products are expected to be shipped for production starting late 2010,” Katz continues. “The polymer-based modulators have several meaningful advantages over current modulator technology and products, including expansion capability to speeds beyond 100Gb/s, a significantly smaller footprint, lower power consumption, and the fact that they are manufactured using standard CMOS fabrication technology, making them very cost competitive.”

Also, during Q4/2009, GigOptix:

  • delivered electro-optical (EO) polymer material to leading semiconductor and computer manufacturers as part of development efforts to facilitate the move from electrical to optical on-chip interconnects for high-speed CMOS circuits;   
  • entered pre-production (as well as a joint project targeting supercomputing) with the LX8400, a 40Gb/s DPSK polymer modulator (the polymer material was proven to be stable at the two extreme operating temperatures of 85ºC and 30K/–243ºC, respectively, for extended periods without performance degradation);
  • production released the GX3240, a high-gain, high-bandwidth limiting amplifier in a 3mm x 3mm QFN package for 40Gb/s DQPSK optical receivers and microwave applications;
  • began sampling 100Gb/s DP-QPSK drivers and 40Gb/s DPSK and DQPSK drivers and receiver amplifiers to leading telecom customers (for production in second-half 2010); and
  • introduced second-generation CX7800 hybrid ASIC technology in 65nm CMOS, which saves firms on average $500,000 in non-recurring engineering (NRE) and tooling costs per product derivative, GigOptix reckons.

“While our 2009 fourth quarter and annual financial results are reflective of a technology innovator in transition, we are optimistic about our growth trends for the first half of 2010 and beyond,” comments chief financial officer Ron Shelton. “In the fourth quarter we recorded a reserve of $1.3m against our government contracts revenue due to changes in estimated contract billing rates. While the reserve was recorded in the fourth quarter, and hence adversely impacted the total revenue and gross margins recorded in this quarter, it relates to revenue recognized throughout all four quarters of 2009. The company will work closely with the government agencies to arrive at a mutually satisfactory resolution of this adjustment, a process that in normal circumstances should have occurred at the beginning of 2009,” Shelton explains. “In addition, in the fourth quarter, we incurred several one-time charges related to our acquisition of ChipX, our continued efforts to cut costs and our commitment to exercising strong financial control over our business... these measures have put us in an excellent position to grow our business in 2010 as we strive towards achieving profitability in the near future,” he adds.

“We see solid indications of growth, fruits of our last two years of  consolidation, and traction in organically developing our products and our customers,” comments Katz. GigOptix expects revenue of $5–5.3m (90% from product shipments) for first-quarter 2010 (up 60–70% on Q4/2009), followed by growth of at least 10% sequentially for second-quarter 2010.

“As we continue to integrate operations, focus on cost reduction initiatives and increase sales of newer, higher-margin products, gross margins should trend higher than 50% during 2010 [compared to Q4/2009's 38%],” Katz believes.

See related item:

GigOptix gives update and outlook for 2010

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