LEDs & Lighting
Media Group:

Those lousy laser company margins

By Tom Hausken
Ever really looked at the margins earned by laser companies? And then looked at margins for companies like Cisco or Google? It's enough to make you weep.

Industrial laser company margins are modest but steady. The net profit margins for the industrial laser companies aren't too bad. Since 2006, gross margins on annual sales for Coherent , IPG Photonics , Newport , and Rofin are mainly in the 40-50% range. Operating margins range from single digits to 30-some percent. The net profit margins are mostly single digits to low teens (Coherent, Newport, and Rofin), while IPG is running lately at about 23%. Trumpf , which sells much more in machine tools than it does merchant lasers, used to have about 9-10% net profit margin, but suffered in the downturn and has recovered in the last fiscal year to 6.7%.

All in all, that's decent It's the telecom component suppliers that are really hurting.

Telecom supplier margins been mostly underwater until only recently. For Finisar , JDS Uniphase , Oclaro , and Opnext, the gross margins are lower, but it's the operating margins and net profit margins that are in the tank. Like, pretty much negative values for annual revenues since 2006. There's some improvement in the last year or so, with positive operating and net profit margins.

Now I know that these numbers are fraught with "yes, buts." These companies are generating cash flow, but their official, GAAP, unadulterated income statements show losses. And a company like JDSU is in multiple businesses. I'm lumping everything together.

Meanwhile, the customers reap the benefits. Now look at the customers. Cisco has gross margins in the 60% range, and net profit margins around 15-20%. That's net. EMC's net margin is running 12% this year. Juniper is 13%. The carriers aren't doing too badly either. AT&T is consistently in the teens and Verizon is in the single digits. And get this: Google's net margin is a running a whopping 27%!

So we know who is getting the margins. It's not the components companies. Nor is it Alcatel-Lucent or Ciena, who have had consistently negative margins too. It's the router and storage companies like Cisco and EMC, and the equipment users like Google and AT&T.

The component suppliers may finally be in positive territory for good. I hope so. It's not right that the customers get margins while the components companies don't.

Connect with Strategies Unlimited


Strategies Spotlight

STRATEGIES UNLIMITED FORECASTS GLOBAL HB LED MARKET TO EXCEED $26 BILLION BY 2018

04/14/2014 Mountain View, CA / April 11, 2014 — Strategies Unlimited has released its annual market research report, The Worldwide Market for LEDs: Market Review and Fo...

STRATEGIES UNLIMITED FORECASTS LASER MARKET TO EXCEED $11 BILLION BY 2017

02/04/2014 Mountain View, CA / January 31, 2014 —Strategies Unlimited has now released its annual market research report, The Worldwide Market for Lasers.  Th...

Strategically Blogging

Lighting as a Service

04/15/2014 This new interesting idea has been floating around recently, the idea of having lighting as a service business model. The gist of the idea is that manuf...

Our Expertise

Providing market research reports, analysis, and custom studies to world leaders in:






 

About Strategies Unlimited

Strategies Unlimited is the world leader in market research in photonic devices and beyond.  We produce highly detailed market reports, custom studies and provide consulting services.

Learn more about Strategies Unlimited by clicking on the links below.