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spk01: Yeah, I think if we look at APS, we saw some strong pulls, a little bit of digestion, you know, into that ramp for that smartphone, North American smartphone manufacturer. I think we'll see a little bit of pullback, but largely due to some seasonality, you know, that's really strong pulls up into the launch and then a little bit of pullback. So that's protection. Protection should have a baseline component that's going to steadily improve from here. So we've seen some nice stability in the base numbers, especially as it relates to the proximity detection. And so we'll see that slowly strengthen. I kind of look at a 13-week booking average by product line, and it's just been steadily improving, not really snapping back, but just steady improvements as those inventories come off. And our channel partners kind of anticipate some of those production runs. So SIP is a little bit of a digestion, signal integrity is a little bit of digestion on a really strong data center number. You know, we could probably see some surprises to the upside, but I would, right now we're anticipating, you know, our revenue being a little bit softer on that channel inventory digestion for the initial launch. They usually like to validate the hardware and the numbers that they're saying and then they kind of resume an additional schedule so protection and sip both kind of moving a little bit sideways at this point but slightly down thanks so much Paul appreciate and the next question comes from the line of Rick Schaefer with Oppenheimer and company please proceed with your question
spk05: I guess my first question, if I could just, maybe a high level, and Paul, I was just hoping that you could share a little more about your strategic, you know, kind of vision for Centec and what the company you think it's going to look like or you expect it to look like, say, in, you know, three years from now. I mean, what role do modules in particular play long term and You know, the growth opportunities there, I mean, do they justify the associated margin pressure, or do you see a path to maybe improving those margins, you know, demonstrably sort of more to kind of classic, you know, fintech, you know, corporate average?
spk01: So that's a good question, and you're putting me on the spot, so I certainly appreciate that. So what do we look like three years from now? There's no doubt that, you know, our core competencies really does kind of come from components. And I do think that it makes sense to move into module products as long as you can pick up additional stacking margins. So to have To produce a module that essentially has component content that you produce does make sense. I've participated in businesses before where a lot of times you have to produce a reference design. In some cases, it just makes sense to go off and sell that reference design, commercialize it, manufacture, and sell it. you know, this gets a little bit more complicated and that's generally speaking from a semiconductor standpoint, it gets a little bit more complicated when you start talking about IoT because of the diversity of use cases, you end up having to pull a lot, a broad range of technologies through in order to produce an entire solution. If I had to be a module maker in and of itself, today, the business model would be very different, and I think my investor base would be very, very different. So does it justify in and of itself the margin pressure? I think the answer to that is no, but if we can pull together a bit more of a comprehensive IoT strategy in which it becomes an enabling component on higher margin sales, then yes, I think it's quite possible that that can happen. It doesn't necessarily mean that we have to own it, you know, for the entirety of that three-year, five-year play. But, you know, cellular backhaul is always going to be a part of an IoT strategy. And I do think that we have a rather large IoT opportunity in front of us that we need to kind of reimagine that strategy and how we're going to capture that. in the marketplace. So if we can combine it and it becomes a part of the story along with software, along with components, then I think it's perfectly fine, makes sense. In and of itself, no, it doesn't justify the margin pressure. And we would look, in the meantime, we would look to continue to capture the opportunity. I do think that there's tremendous upside opportunity associated with modules. In some cases, when you're engaging with utility companies, they'll want an LPWA solution, or they might gravitate towards a private network like LoRa solution. So having the opportunity to do both is an advantage as well, as long as you build together a bit more of a broader product offering or solution and story. So hopefully that gives you a little bit of a color without, you know, specifically nailing everything down after five months.
spk05: No, I appreciate that. There's a lot of color, Paul. And it actually is a great segue to my next question, which is, Laura, if you wouldn't mind, maybe get a little bit more on the order trend side, sort of order velocities, however you want to describe it. But I'm curious, it sounded like that business was starting to pick up. I believe it's Last call I think he talked about it being stable sort of around a hundred million or so a year I'm curious if that's still kind of where you see that business for the foreseeable And if you could talk at all about sort of your strategy, you know If you if you feel comfortable, you know talking about a strategy to grow that business Maybe even a sense of revenue funnel if you're sharing those kind of metrics Thanks.
spk01: So are you talking about Laura in particular? I
spk05: That was a Laura-specific question, yeah.
spk01: Yeah, so I kind of bill Laura as about a $100 million business, so thank you for that. Yeah, so I do think as we kind of look, there's a significant opportunity for components or semiconductor content in IoT. And it becomes, because of the diversity of use cases, it really becomes a multi-pronged strategy. You do have to have a software component. This is where we do have a rather mature cloud platform. We do have a rather mature, let's call it gateway software team as well. And so as we kind of look at that, there's an overall theme that I do think that there's an opportunity for us to capture, but we need to adopt this tenant of making private network deployment If we look at the connected end node, connected gateway numbers, those increased sequentially this past quarter. It further shows that there is a rather large opportunity and continued wave, even through a downturn. We're still seeing numbers from an end market standpoint that continue to migrate up. where people are wanting an alternative of connectivity for, let's say, low bandwidth, low power devices. And so that is still an opportunity that we believe in. However, I believe I've said this before, that we need to fill out the technology portfolio. Part of the reorganization that we're going through is to kind of group R&D competencies for us to take advantage of that. We're in the middle of formulating that strategy in order to capture that vision of what we see, making private network deployment very easy. And part of that story is certainly LoRa, along with a few other components in the technology portfolio. We're formulating that today, and we'll be working on that over the next couple of quarters, reorganizing around it. And then at the appropriate time, we'll be laying it out so that we can kind of talk about what that market opportunity looks like exactly. why we have a right to win that market opportunity and what that timeline looks like. In terms of overall opportunity, I know that it's been said that it's, you know, roughly, you know, we had a $1.1 billion pipeline in the past. You know, rather than qualifying that number, I'd say roughly today we're around $400 million, you know, on that LoRa-based pipeline. And we continue to work it. We continue to see the opportunity. use cases. We need to look for use cases that have a lot of commonality in solution, product solution, and then we need to start the work on delivering a standard solution to that end market rather than just simply a component.
spk08: And the next question comes from the line of Tristan Jarrah with Robert W. Baird. Please proceed with your question.
spk00: Hi, good afternoon. Just as a follow-up to your commentary on COI wireless, just looking at where we could see the revenue run rate before any type of synergies, including with LOA, it looks like your quarterly run rate right now is probably a bit below what it was two years ago before the big one-pup of last year. And you've talked about the October quarter being presumably a trough So is $100 million a quarter kind of a good base from which we should be basing assumptions before you build any cross-setting opportunities? And then if you could elaborate a little bit on the share shift within the different businesses for Sierra Wireless. Thank you.
spk01: Yes, I'll comment on the share shift. I don't think we've noted any share loss or share shift. If anything, we would expect to gain some share. in modules especially. If we look at the routers, that's pretty steady. The one piece, if you want to call Sierra Wireless a $400 million business, I said on the last earnings call, I believe after it recovered, I would put it right around 460. I still think that's probably a good number, although in the short term, I think your number is probably a little bit better. You know, so let's take the $400 million. Basically, $100 million of it is going to be pretty steady, very predictable. It's that connectivity business. It's recurring, great visibility. We're growing it. It's not going to be a barn burner in terms of growth rate, but it's just going to be steady pickup, good gross margin and contribution. So the routers, right now we've seen about a 30% pullback. I'd say that's largely industry-wide. I would expect that recovery to bounce back a little bit from that base, but certainly not be what it was the previous year. If you go back a little over a year, those numbers were a little bit elevated in a frosty buying season. And the modules, you know, that has fluctuated quite a bit. You know, we probably put it somewhere around 260 or so on a normalized basis. And with some potential upside, we look at it at about a 390, 370 million dollar upside opportunity in North America. But we don't expect to get 100 percent of that business. So we'll be pursuing that rather aggressively. It will take some time for us to realize that. And we would probably look to deliver those in, you know, two years out.
spk00: Great. Very useful. And then for my follow-up question, so you mentioned making private network adoption much easier as an opportunity for LOA. Is that really 100% of your focus on LOA right now as it sounds like the bulk of the inventory collection associated with Helium is behind? The feedback notably from the things conference is that there is basically much easier access to Loa implementation than just a few years ago and with a fairly clear path of kind of a one to two year ROI from customers who want to implement Loa. So could you expand a little bit on what you think is still holding at a revenue run rate that admittedly is lower than the prior management team was guiding for a few years ago, and any elaboration on where you see opportunities to improve the adoption?
spk01: Yeah, I will say this. I think the execution in Laura is pretty good, let's say below expectations that were set by prior management, but I still think, you know, Anytime you grow a business from zero to $100 million in four years in semiconductor land, that's usually pretty special. So it's a unique technology. Obviously, it's a technology that the market is there ready to adopt. When you start bringing together a large ecosystem set of partners that all have to work together to drive a solution, It definitely is going to slow down, but as we look at adoption, it continues to pick up. There's a little bit of a blip in there in terms of helium gateways that, you know, maybe was a contributor to the numbers being a little bit larger than what actual market adoption showed. So, during that frothy buying season, but I still look at it as good, steady adoption. Overall, the market needs something that's easy to implement. If we talk to customers that are looking for something that's LoRa-based, they're not necessarily in IoT. They're not necessarily somebody that has the breadth of R&D in order to implement something from womb to tomb. So this is where we have taken initiatives in the past in order to make LoRa easier to adopt. We are licensing the technology out in order to further that adoption. and will continue to evolve and deliver to the market tools necessary to speed up that adoption. But I do think that there's a couple of holes in the delivery of that solution that we could fortify in order to speed things up.
spk00: Great. Thank you very much.
spk08: And the next question comes from the line of Christopher Roland with Susquehanna. Please proceed.
spk06: Hi, guys. Just a quick follow-up. The amount of turns business you guys expect to get to guidance in the quarter, POS turns?
spk01: Yeah, the last quarter we were just over 50%. We're slightly less than that this quarter. It's not something that we'll be tracking and reporting on, but it's slightly better than it was last quarter.
spk06: Thanks so much.
spk08: And the next question comes from the line of Harsh Kumar with Piper Sandler. Please proceed with your question.
spk07: Yeah. Hey, guys. Thanks for sliding me in. Quick question, Mark. So in the analog space in the industry, we're seeing a variety of companies, basically all of them, start to guide down. I guess looking at your results, you're faring much better. My question to you is, why is that? Is that a function of data center offsetting a lot of your traditional analog businesses? Or is it because you started the correction early? Or is there something else going on that is perhaps helping you do better?
spk04: Yeah, it's both. I'll have Paul, you know, he provided a lot of color on the end markets and for data center. But it is, you know, we did start to guide down before our peers and that group. So I think that's another big portion of why we're guiding down from 200 to 190.
spk01: Yeah, I think I said it in a set of investor meetings one time. You know, the bane of our existence is an operations team that's really good. So when we got all the orders, our team had been able to secure the capacity and deliver on it. And I'm saying that, of course, tongue in cheek. They're a phenomenally efficient team. But we were able to secure that capacity and deliver it. As a result, we shipped it all and saw the correction a little bit early. As a result, we're seeing the rebound a little bit early, but we are getting helped out with a couple of key markets where we do have beachheads. One, surprisingly enough, is TVS, where we continue to innovate on the next generation interfaces. We got some of the best specs out there. And yes, you do kind of share this with competition over time, but right now we're the only guy who can deliver and we're seeing upside as a result. And AI is just a gift. It's a phenomenal SAM expansion.
spk07: So on that, on the AI stuff, can I ask you if your visibility is extremely solid? In other words, are you seeing orders just pile up and, you know, for multiple quarters visibility? Or is it a situation where, of course, you're hand to mouth, but the orders are coming in kind of spurts of a quarter?
spk01: Yeah, I wouldn't say the orders are piling up. The design ends are piling up, and we anticipate the orders piling up. We did see a nice bookings increase this quarter. So it's early on in that trend. It will strengthen this next year as it rolls out. But ECOC was a nice validation on a few fronts. I think you might have seen some of the press releases that we put out, but just had some amazing feedback that came back from that. are 200 gig single Lambda devices, very well received, very well positioned. And the industry does have a decision on which data center architectures they're going to implement. And every hyperscale has a tendency to be a little bit differently, but the bottom line is it really doesn't matter what direction they go, you know, retimed, direct, It's all going to add up to additional SAM and growth for us. Even, you know, it could be a bit more explosive if they choose a particular route. But overall, it's just a very nice, frothy environment. And so we would be starting the discussions in terms of capacity, securing the capacity for this next year. That would be happening today and then orders would follow.
spk07: And if I can ask one last one, do you think, Paul, that you're done cutting at this point in time? You've reached a pretty happy threshold, if you will?
spk01: I'd say, you know, my goal was I intimated that we probably had another $40 million to go. We did do that. You know, at this point, we pulled out $140 million out of the business. And that was done thoughtfully with historical evidence. budgeting exercise. So if you go back in time, you look at 2017, you look at what the budgets were, we're at those appropriate stages. And I think everything kind of comes down to just continual refinement and improvement at this juncture. I'm comfortable with the cuts that we made. Anything that we do will just be to refine and improve our chances for growth in the future. Thank you, Bob. Thanks, Mark.
spk07: Thank you.
spk08: And the next question comes from the line of Cody Acree with Benchmark. Please proceed with your question.
spk02: Yeah, thank you, guys, for taking my question. The next one, I guess, just a follow-up to Harsh's question. Paul, what other segments, I said you're reviewing today, that you believe are near the bubble to require less investment going forward?
spk01: So I'd say that I've got a practice or a cadence in my management that I've always implemented. I review everything on an annualized basis. So if we don't have good projects to invest in, we don't just assign budgeting to a business unit just because they had it before. So every project requires a justification. Every project would have an opportunity attached to it. At this point, I scrutinize everything on a regular basis. Obviously, I can look at market expansion in certain areas and certainly feel a lot more comfortable of the risk profile associated with that investment. But we would look to, as we kind of pull back OPEX overall, we'd look to re-fortify in the beachheads if those beachheads have some let's say some sunsetting attached to them, we would look to take those investments and put them in other areas that are a bit stiffer top line growth.
spk02: Thank you for that. And I guess, secondly, just if you can summarize the improving demand that you noted in the press release about your high-end consumer business and data center. How much of that is for near-term visibility for the current quarter, the next six months? And to what detail can you provide that's offsetting those two businesses? I think your guidance for both was flat to sequentially down.
spk01: Yeah, that is correct. You know, I'd say data center came in a bit higher in Q3 than we fully anticipated. When I speak to improving demand, I'm really not talking about revenue. I'm talking about in-market consumption. So, that'd be direct shipments plus POS. And so you just have to kind of qualify that. To me, that's the best measure of where our business is going, and it eliminates all the channel inventory noise. So when I say we have an improving demand, it's modest, sequential, improving demand that has been, for the most part, improving over the last four quarters. I'd look to see corresponding booking rates, 13-week trailing average booking rates that match that. And I'm seeing that correlation. So anything that I give you is not forecasted. It's in the rear view mirror. It's demand continually, sequentially improving demand that we've seen over the last four quarters at least. All right. Thank you very much.
spk08: And the next question comes from the line of Scott Searly with Roth MKM. Please proceed with your question.
spk03: Good afternoon. Thanks for taking my questions and sneaking me in. Nice job on the restructuring efforts. Hey, Paul, maybe go back to modules. It sounds like you don't necessarily need any sort of a formal exclusion list on CACTEL to win business because it seems like customers are diversifying away from that anyway. But I'm wondering, I don't think I heard any comments on that front. Is there an update on that front? And it sounds like based on the normalization of that business at around uh, 260 million or so, uh, you know, that you're basically running at less than half that rate right now. When would you expect normalization on that front? I think last quarter you talked about the middle of calendar 24. Is that what we should still be thinking about? So in the second half of 24, we're getting back to levels like that before you start to add on some incremental tactile business.
spk01: Yeah, I was trying to give you color in terms of what the calendar year is going to do for us. So if you do the math on that 260, I'm kind of tipping my hand on when I think that this is going to recover and I put it in second half. So this is after some feedback from customers, what we expect as well as some additional uptake from new design ends. You know, on the exclusion list front, no, we don't need Quechtel, Fibrecom to be officially excluded. In order to benefit from this, we are benefiting from it. We will continue to benefit from it. I think it has, even if the China Select Committee came out tomorrow and said, okay, everything's fine, we're not going to put them on the list, we're still going to benefit from this. There's been enough shift because of the overall tensions that exist with China and the U.S., especially around networking equipment, and it's been going on for years. So it's just now finally coming to a head where people are not willing to jeopardize their company's business on the basis of using a particular supplier that might be 10 cents cheaper. It just doesn't make any sense. So we're getting a lot of pickup, not to mention we have good relationships with Qualcomm. I come with those relationships. because of the previous work done in compute. And so we're leveraging that in order to pick up very heavily on those leads. And I should mention that we also sell quite a few Sony chipsets with the LPWA modules as well. Have a fantastic relationship there.
spk03: Great. And lastly, maybe to just wrap up on the lower front, you know, thanks for calibrating. Sounds like the annualized run rate now is down at about $100 million. I'm wondering what the growth rate on that business looks like and what the composition of that is today in terms of sales outside of China. I know that's where a lot of design activity has been going, but I'm wondering how that's building at this point in time. And lastly, just on the asset sale front, I know you guys are reluctant to do anything essentially under pressure of the balance sheet. But now that you've solved the covenant issues for the immediate future, you know, are there some assets now that you're starting to reevaluate that may not be part of the long-term Semtech? Thanks.
spk01: Okay. Yeah, on Laura, I will say, you know, We will probably still report very strong China-based number just because of where manufacturing typically is. But if I look at where that revenue originates, we're seeing quite a bit of adoption outside of APAC in particular. And so what would the growth rate be? I definitely expect it to be on the order of 10 to 15% in the near term. We could see some acceleration of that. as a couple of technology pieces come together and it becomes a little bit easier to implement, but we've seen steady adoption in infrastructure applications, especially outside China. We do have some China-based wins as well, but Europe definitely seeing some nice adoption there as well. So 10 to 15%, I think is the long-term, our long-term growth rate that we would probably target for that. And we can adjust that as time goes on. In terms of balance sheet, we are definitely hyper-focused on getting the leverage ratio down. We will continue to be. I won't comment on any particular asset sale, but I'll just say that all cards are on the table in terms of driving that leverage ratio down to the benefit of our shareholders.
spk03: Great. Thank you.
spk08: There are no further questions at this time, and I'd like to turn the floor back over to management for any closing comments.
spk01: Thank you for joining and have a good day.
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