Semtech Corporation
(NASDAQ: SMTC)
Mohan Maheswaran, CEO
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Corporate Profile:
Semtech Corporation is a leading supplier of high-quality analog and mixed-signal semiconductor products. We are dedicated to providing you with proprietary solutions and breakthrough technology in power management, circuit protection, timing and synchronization, touch interface, high-performance optical transport equipment (SerDes), high-reliability military products, low-power wireless RF, and digital sensor/signal conditioning ICs. Our products are used in some of the most innovative systems and in some of the fastest growing markets in the industry. These markets include Smartphones, LCD TVs, Notebook Computers, Wireless LAN Modems, Automatic Meter Reading, Ultra-Low Power Medical, Satellite Communication, Cellular Infrastructure, Optical Transport and Datacenters.
TRANSCRIPT:
WSR: Good day from Wall Street, this is WSR, senior analyst with the Wall Street Reporter, and joining us today is Mohan Maheswaran, the CEO and President of Semtech Corporation. The company trades on NASDAQ and their ticker symbol is SMTC. Semtech is a supplier of analog and mixed-signals semiconductors. Thanks for joining us today, Mohan.
Mohan Maheswaran: Thank you.
WSR: Great, now starting off, give us a brief history and overview of the company for our listeners who may be new to your story.
Mohan Maheswaran: Well Semtech has been around for over 50 years. I had joined the company five years ago and really was ready to turn around the company and to stimulate growth of the top lines. And the last three years of our five years have been record years for us in terms of revenue growth. So we are really starting to grow now.
We consider ourselves to be the fastest growing diversified analog company in the industry. We focus on some of the fastest-growing most exciting application markets. And our products are very, very high-end analog products. So we do very different things.
When there are problems in the industry to solve, wherever they may be, whether they are in wireless microwave communications, consumer applications, or industrial applications, Semtech focuses on trying to solve these problems for our customers and bring technology, and advanced innovation to those customers to solve problems, and that’s essentially what we do.
We’re based in California, headquartered in California. We have global operations all around the world including China, Japan and Europe. We have very strong financials as well. A very pristine balance sheet, great cash flow engine, and we are a profit machine for the company. We’ve enabled our earnings growth to really drive a lot of future potential for the company. We are investing a lot in R&D and new platforms for the future as well so we think we’re very well-positioned for the future.
WSR: Well, sounds good. And so talk to us about that experience from the transceiver platform regarding the SX1233?
Mohan Maheswaran: Yeah, so the Semtech you know, we have three focuses in the company. One is to develop products that enable bandwidth expansion. Second focus strategy for us is on energy harvesting, so to bring out application products that help applications where energy can be harvested in some shape or fashion. And then the third area of focus for the company is the miniaturization of electronics. We believe one of the trends in the industry is that electronics are going to get smaller and smaller.
With that reason, our new transceiver for wireless applications, essentially what we are really doing now is focusing on the energy harvesting segment. We’re trying to bring out transceivers. These are wireless receivers and transmitters that allow customers to build systems that communicate wirelessly at a very, very low power level. So essentially trying to save energy, energy in systems themselves and the infrastructure, energy in the consumer applications, energy in any industrial applications that might need to be communicating in some shape or form. So this is a very unique platform for us, very new platform for us.
We have a lot of different products including power management products where we have a very high efficiency technology. So again, we try to bring technology to customers who have specific problems in power area so that they can try to reduce the consumption of their system, the power consumption of their system. Or create systems that are smarter in some shape or form so they can have smarter lighting systems or smarter grid networking systems so that they can essentially use the smartness to reduce the power when they don’t need it.
A lot of systems that are out there today are what I call dumb systems in the sense that they’re either on or they’re off. A lot of the new technologies that Semtech’s bringing is enabling our customers to develop smarter systems so that they can bring some intelligence when the power need to be on, when does it need to be switched off, and those type of things. And that’s essentially what our ultra-low power transceivers do.
WSR: Certainly. What is it about the analog and the mixed signal chips that make it a growth market relative to the historical products that you’ve been involved with?
Mohan Maheswaran: Well, a lot of the challenges in the industry today are being solved by analog mixed signal problems. Certainly as bandwidths increase, as you go from a gigabit performance to 10 gigabit performance to 40 gigabit to 100 gigabit type of performance, the frequencies are much, much higher and therefore, these really are analog problems to solve and Semtech’s the leader in those high-performance areas.
Even as you go down to the other end of the scale where the frequencies are not that high but the requirements are for much lower power, again it’s really an analog problem to solve.
As you know, as the audience knows, the interfaces to so many of our systems today are through the human interface, by the hands or touch or through the ears, through the senses we have. Those human interfaces are essentially analog interfaces. That’s why the analog industry is still a great industry to be part of.
WSR: Certainly. What are the market dynamics regarding your Internet IC solutions and some of the uses and applications?
Mohan Maheswaran: Well the main thing that we are focused on with regards to the Internet is bandwidth expansion. What we try to do is to create products that can set in to the core infrastructure, so we’re helping our communications customers really drive more bandwidth. There’s more information going on the Internet, more voice, more video, more data being transmitted from one point to another.
And then we also are developing products and platforms that support our customers at the other end of the scales in applications that need the bandwidth. Things like smartphones and tablet PCs because we’re using a lot more video now, downloading movies, downloading videos. You just need more bandwidth. We are really at both ends of that chain. So we develop products for both the devices themselves like smartphones, and then devices for the core infrastructure in the core networks.
WSR: What would you say Mohan are some of the factors that make Semtech Corp. unique from some of the other players in the sector?
Mohan Maheswaran: Well we are unique in many different areas. We have a very diversified model. We don’t focus on one application market so we’re not exposed to just the computing sector or just the consumer sector. We have a very balanced business. We are an industrial company. We’re a communications company. We’re a consumer company and we’re a computing company.
We focus on fast-growing markets. That’s kind of our forte today. And we develop very, very high end products. I mean we don’t plan any commodity spaces. We’re not interested in talking about prices with customers unless they really have a need to drive down the price for their own system. It’s because we are not a commodity player. We bring value to those customers and that’s what we try to do.
The other thing that I think is a differentiator for us is we are focused on these three areas: the bandwidth expansion, energy harvesting, and the miniaturization of electronics. We’re very unique in that kind of strategy, and that I think is something that separates us from others.
The other thing is we have four product areas, four platform product areas: protection products, power management products, advanced communications and sensing, and microwave and high-reliability product areas. And those are four unique areas. There’s no competitor that competes against us in all of those areas so we have different competitors in each of the different application spaces we play in.
WSR: Well, good answer Mohan. Perhaps you could walk us through your background and experience and talk a little bit about the strength of the management team there?
Mohan Maheswaran: Yes certainly. I have over 25 years of experience in the semiconductor industry. I’ve worked for some of the biggest corporations in the industry including IBM and Texas Instruments and Hewlett-Packard and Nortel. I’ve also worked in startups and medium-sized companies. I have lived and worked in three different continents so I’m a very global individual.
We have a very strong management team. I would argue the best management team in the industry, a very diverse management team. We have executives from five different continents, eight different countries on the management team. In many ways, that’s a competitive for us. We do understand the customers. We understand the global nature of our business and I think that’s a very strong advantage for us.
WSR: Well good. And what are some of the goals, milestones, and objectives that the team is hoping to accomplish over the course of the next twelve months?
Mohan Maheswaran: When I joined the company five years ago, we set a target of achieving 500 million dollars of revenue and we’re very close to hitting that kind run right now. So what we’re really trying to do now is over the next few years, set a path to get to a billion dollars in the next five years.
And that’s going to be driven by more new platforms, more new product platforms. Lots more design wins, more customers, continued momentum in some of the new application spaces, and then obviously probably more acquisitions to accelerate our position in some of these target markets.
WSR: Certainly and with regards to those activities, what are some of the synergies that you’d look for?
Mohan Maheswaran: We typically look for companies that do similar type of very high complexity analog products, very difficult products to do. And then mark companies that are focused on fast-growing markets. So Sierra Monolithics which is one of the acquisitions we did last year is a good example of a company that has developed very, very complex analog products for the fast-growing 40 gig, 100 gig infrastructure market. We acquired them. We felt it was a very good fit for us. That’s the type of company that we like to go look at.
WSR: And when it comes to investors in the financial community, do you believe that the Semtech story, message, and ultimately the company’s upside potential are completely understood and appreciated by members of the financial community?
Mohan Maheswaran: Well, we’re starting to get our story out more now. As I mentioned when I joined the company, we were more of a turn-around company. Now, we have really turned around the company. And the company is the fastest-growing analog company out there. So there is a little bit more understanding.
Semtech is not a one-trick pony. I think that’s not fully understood yet. We play in many vertical markets with many different products. I think that’s not fully understood. And then we’re focused on these three macro-trends: bandwidth expansion, energy harvesting, and miniaturization of electronics. I think those things are not fully understood by the investor community. It’s improving.
And I think the other thing that the investment community is just beginning to realize is that there’s a huge untapped value here at Semtech that is just starting to be created. And so, the market in terms of the stock price and evaluation hasn’t really caught up with where we are today and from a revenue standpoint and a profitability standpoint. As we start to get more and more momentum, I think that’s going to change. So it’s a good opportunity for investors.
WSR: Certainly. And so once again joining us today is Mohan Maheswaran, the CEO and President for Semtech Corporation which trades on NASDAQ, Ticker symbol is SMTC, currently trading at 20.39 a share. Market cap is 1.27 billion.
Before we conclude Mohan, just to recap on some of your key points, why do you believe that investors should consider Semtech Corporation as a good long-term investment opportunity?
Mohan Maheswaran: Semtech has been outperforming the industry. We continue to outperform our industry peers. We generate very consistent earnings growth, far in excess of our revenue growth. I believe that we are today the fastest growing diversified analog company in the industry. We focused very much on fast-growing exciting application markets. And we have a very strong balance sheet. Our financials are pristine. We have no debt. We have a great cash flow engine. A profit machine that has been going on for many years.
So I think investors will truly want to invest in a company that’s creating value in the industry and growing in the industry, has a very strong financial performance. And then, is also focused on some of the most attractive segments in the marketplace, that drive bandwidth expansion, energy harvesting, and miniaturization of electronics.
Semtech is an ideal investment and I believe that we will continue to demonstrate that over in the years to come.
WSR: Well we certainly look forward to continue to track the company’s growth as well as report on your upcoming progress. I’d like to thank you for taking the time to join us today Mohan and update on our investors on Semtech.
Mohan Maheswaran: Thank you.