On 2015-09-30 POET Technologies‘ new management team held an operational update call. Here is the transcript. It has been established in a community initiative of passionate POET Technologies shareholders from the audio recording of the event.
Zusammenfassung auf Deutsch: Am 2015-09-30 führte das neue POET-Technologies-Managementteam eine Audiokonferenz durch, um über die aktuellen Aktivitäten des Unternehmens zu informieren. Dieses Dokument enthält die Mitschrift. Sie entstand als Gemeinschaftsinitiative passionierter POET-Technologies-Aktionäre aus der Audioaufzeichnung der Verstaltung.
- Deutschsprachige Leser finden hier eine automatische Google-Übersetzung dieses Beitrags. Sie ist zwar alles andere als perfekt, aber besser als nichts.
- Suresh Venkatesan, POET Technologies, Chief Executive Officer
- Subhash Deshmukh, POET Technologies, Chief Operating Officer
- Peter Copetti, POET Technologies, Executive Co-Chairman
- Ajit Manocha, POET Technologies, Executive Co-Chairman
- Geoff Taylor, POET Technologies, Chief Scientific Advisor
The numbers at the start of each paragraph denote the position in the audio, i.e. minutes:seconds.
00:00 – Good afternoon, ladies and gentlemen! Welcome to the POET Technologies operational update call. And now, we’ll turn the call to Subhash Deshmukh, chief operating officer of POET Technologies.
00:14 – Subhash Deshmukh: Thank you and welcome to the POET Technologies operations update call. With us today are Suresh Venkatesan, our CEO, Peter Copetti and Ajit Manocha, our executive co-chairmen, and Geoff Taylor, our chief scientist. Peter, Suresh, Geoff, and myself are live from our lab at the University of Connecticut, and Ajit is on the phone in California.
00:38 – At the outset, we ask you to refer to the news release we disseminated after today’s close of market, highlighting portions of this operations update.
00:48 – Before we begin, please let me note that during today’s call managers will provide „forward-looking information“ (within the meaning of the applicable Canadian securities laws) and „forward -looking statements“ (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) and the company is relying on the protections of the safe-harbor created thereby.
01:11 – Many factors could affect our current expectations and could cause actual results to differ materially. The forward-looking statements and information are based on a number of assumptions and are subject to various risks and uncertainties, including those described in the company’s filings with the U.S. Securities and Exchange Commission and the applicable Canadian securities regulators, many of which are difficult to predict and generally beyond the control of the Company.
01:38 – Although the company believes that the expectations reflected in the forward-looking information or statements are reasonable, prospective investors in the company’s securities should not place undue reliance on forward-looking statements because the company can provide no assurance that such expectations will prove to be correct. Forward-looking information and statements contained in this presentation are as of the date of this conference call and webcast. The full text of the safe-harbor is incorporated in our press release that was published ahead of this call.
02:13 – An audio replay of this conference call can be accessed toll free in the United States and Canada at 877-407-8031 and internationally at 201-612-7415. The replay will be available starting three hours after the call and remain in effect for one week. The required conference ID number is 13616913.
02:43 – And now I will turn the call over to Peter Copetti, Executive Co-chairman of the board of directors of POET Technologies.
02:53 – Peter Copetti: Thanks, Subhash. On behalf of the entire board I want to relay how impressed we are by the decisive actions that Suresh and the new team have already taken right out of the gate. They have galvanized this company and put it on path to realize the full potential of our powerful platform.
03:13 – When I took the challenge of Interim CEO, my mission was to achieve three major milestones: Make this company strong enough to maximize the opportunity in front of us, architect the structure that accelerates our lab to fab to monetization glide path, and recruit a world-class leadership team.
03:34 – I am happy to announce that we are entering Q4 2015 having achieved all the above objectives. Of course, this is an operations update, not an earnings call, we expect to begin having those later next year. But please allow me to update a few metrics nevertheless.
03:55 – First, we have the financial strength. We start tomorrow‘s new quarter with a significantly strengthened balance sheet, with $20.5 million in cash and small operational liabilities. We expect this cash to fund about eight quarters of development expenses, which leads us beyond the point of demonstrating working prototypes and we expect to begin generating revenue before that. We also expect to have the financial muscle to be selectively opportunistic in strengthening this company further.
04:30 – We believe we would meet the requirements necessary to apply for a full-fledged NASDAQ listing today if we decided it is most beneficial for the company and its shareholders to do so, subject to meeting minimum share price requirements. We intend to keep you appraised on developments in this regard.
04:53 – The strength of our balance sheet allows us the flexibility to exploit various opportunities that might present themselves, including M&A, tuck-in acquisition and numerous other ways to build this company on our own terms. That is, we fully intend to operate as a stand-alone company.
05:13 – Secondly, we have the structure; we are ahead of our plan on consolidating our Toronto-Connecticut-San José footprint and bringing the bulk of our operations to Silicon Valley. We expect to complete the consolidation in Q1 of 2016. It’s clear why we ought to be in the world capital of technology. We expect to incur de minimis one time charges for this move.
05:41 – Third, and certainly not the least, we have the team. The leadership additions that we have announced over the past months speak to that. We started with Mr. Ajit Manocha who agreed to team with me in the executive co-chairman role at the end of last year. We both handle POET’s business and industry partnership, use our collective industry knowledge to guide the company’s vision and direction and help manage the company finances. Ajit came to us from Globalfoundries where he served as CEO. He is very well-known in the industry and particularly at potential tier-one customers. He has been with several heralded companies. Names like AT&T, Bell Labs, Phillips and Spansion and he has led more than 20 successful M&A transactions. Ajit looked at this company and he looked at the POET technology and he quickly saw the potential of what this company could become. He agreed to sign-on and he has been instrumental in attracting the tremendous operational executives and board members, who I believe can elevate this company to a platinum tier. Let’s turn to Ajit now for a few words about the vision we have for this company.
06:56 – Ajit Manocha: Thank you, Peter, for your kind words. We are indeed a dynamic duo. This company is about to rollout an unrivalled optoelectronic device and process platform that enables low power, minimized size and component cost for smart optical components. From the most sophisticated extreme environment satellite applications to the most everyday consumer appliances, the world is increasingly dependant on optical components. [noise] … presented optical module-on-a-chip process with integrated digital, high-speed analog and optical devices on the same a chip, trying to be the next industry standard for their fabrications. Specifically applied to short and very short range, short reach optical transceivers for example, we believe our process could enable up to a 10X reduction in power consumption, component cost, and form factor.
07:59 – Put another way, we could make what’s on a wafer up to ten times cheaper, smaller, and more energy efficient. And we believe we are the only company that can achieve this level of disruption across all three axes of cost, power, and form factor.
08:18 – Our initial market focus is data communications, one of the high-growth sectors in the world right now. Over time, our platform may well extend to smart products ranging from high-reliability defense, aerospace and energy applications to consumer devices.
08:37 – Today we begin the transition from a development company to a commercial enterprise. And leading our operational team is Dr. Suresh Venkatesan, a good friend, a long-time colleague, and one of the most respected semiconductor executives in the Silicon Valley. Suresh joined us in June from Globalfoundries where as senior vice president of technology development he was responsible for the company’s technology research and development. His two and a half decades of experience also includes the successful tenure at Freescale Semiconductors. Suresh is exactly the strong leader that POET needs today. We believe that our shareholders are going to be mightily impressed by the company’s performance, and soon. And now I will turn the call over to Suresh Venkatesan, CEO of POET Technologies. Suresh, the floor is yours.
09:30 – Suresh Venkatesan: Thanks, Ajit, and thanks to everyone for joining us today. As the new team we wanted to have this brief call to introduce ourselves to you now that the summer is over. We intend to have an ongoing dialog with our shareholders. We expect to see a number of you very soon and you can expect a more pro-active stance from us in terms of communications with our investors, both old and new. We greatly appreciate your support for this company, and we believe that we’re going about to accomplish significant things together, and soon.
10:04 – Over the last few years, this company has done some extraordinary things, both technologically under Geoff and financially under Peter. We now have the strength, both in product development and on the unencumbered balance sheet to be able to monetize this. And we fully intend to convert this company’s demonstrable technology into product leadership, starting in calendar 2016.
10:30 – As Ajit pointed out, we have developed a revolutionary optoelectronics process platform that eases the management of data at the speed of light and similar to the cost of copper. While over time we expect the POET platform to enable a wide range of next-generation optoelectronic products, right now we are focused squarely on our initial market entry: data communications, one of the highest-growth sectors in the industry right now.
11:00 – Social networking, cloud-based computing and mobility have changed the world around us. Companies like Uber and Airbnb have fundamentally altered business models as we know them today. Location-based services are exploding, and I am certain a vast number of you have watched your favorite Game of Thrones episode on your phones or tablets. All this has amounted to the need to manage big data, and this has put tremendous pressure on the speed and power requirements of data centers. The market is demanding a disruption, and POET is poised to deliver it. We have already taken our first internal and external actions designed to put this company on a path of tight focus and substantial growth.
11:44 – In our next update, which we intend to have right after the end of the calendar year, I plan to give you a more granular view of how we intend to turn POET Technologies into a high-growth platform for the next generation of optical products and how we intend to begin achieving it in the first half of the next calendar year.
12:03 – After joining the company in June, Subhash and I have spent a considerable amount of time taking stock of the technology, the operations, and the business model of the company. We established three priorities at the outset.
12:18 – Priority one is the consolidation of operations and transition of our technology to commercial foundries. With insignificant one-time charges, we expect to complete the shift of the bulk of our operations to Silicon Valley from Toronto and Connecticut in Q1 of 2016, inclusive of the people and the lab. We have already secured an excellent office lab based in San José to serve as headquarters and a base for growth.
12:48 – And as far as the lab-to-fab transition goes, we are on plan to complete this activity by the end of this year. In place are signed MoUs with two epitaxial wafer vendors who are among the world’s premier providers of epitaxial wafers. We expect to start receiving six-inch epitaxial wafers from these vendors starting October. The initial results are in and we expect to be able to complete the first phase of the transfer over the next month. The transfer is also underway of our proprietary VCSEL fabrication process to our commercial foundry partner, with first VCSEL and transistor results expected in Q1 2016 and integrated VCSEL and detector components in the second quarter of 2016.
13:36 – Priority two is to refine the business model and chart a new go to market strategy. We believe that it is imperative that the company converts its technology leadership into product leadership. Now what do I mean by that? The current business model for the company is tied solely to technology licensing, and the operations of the company from milestones to hired skills have largely reflected that.
14:02 – For process and device intellectual property, this is a very difficult business model to gain entry with into the market. The burden of proof is always on the process and device, and any potential licensee will want to see these processes and devices working reliably in end-market segments. Thus in order to establish and promote a licensing model, it first becomes imperative to showcase the capabilities of the technology platform in a real product, use in real applications, and solving real problems for customers.
14:36 – To that end, we are pivoting the business model of this company from a purely licensing model to one that has its underpinnings and products, augmented with judicious licensing. POET as a platform has a broad application space, and while we initially will be focused on short-reach data communications, we expect licensing to play a role in potential adjacencies in the medium term.
15:01 – Priority three is to continue to carefully manage and leverage our strong balance sheet. We will be opportunistic about adding technology, channel, and sales muscle to the company and be in a position to apply for a fully-fledged NASDAQ listing application when we feel it is in the best interest of the company and its shareholders.
15:24 – While we are still refining our revenue model, we believe it will be a combination of product sales and licensing, of organic growth and acquisition, and of direct and indirect sales. You can expect us to focus first on productizing proprietary technology that has the potential to become an industry standard, and secondarily on licensing non-core solutions that can provide a steady stream of ancillary revenue. And you can expect us to penetrate and radiate within both enterprise customers and strategic partners. Indeed you can also expect us to go to market primarily with partners, both in sales and manufacturing.
16:07 – As we said at the outset, today we’re giving you a general overview of our operational initiative. We are not ready yet to get into granular details, but you can count on comprehensive details in the next update as we start executing up for the plans outlined today.
16:22 – Let’s now talk about some of our milestones, both current and future, as we embark on this new direction for the company. Subhash and I had to make some conscious choices and decisions in aligning our milestones on a go-forward basis, to be consistent with our go to market approach and product play.
16:43 – It became clear early to both of us that this company has the opportunity to be truly world-class, and that required a very tight focus and a lab facility that cannot only validate the physics involved, but also scale up to produce commercially viable results. Rather than spend precious capital dollars upgrading the capabilities of an existing facility, we decided to accelerate our transition to commercial sources for both epitaxial wafers and manufacturing. We have re-established a focus for the company based on the demonstrated sources of sustained competitive differentiations, we believe the POET platform offers in the integrated opto-electronics space.
17:30 – Specifically we believe we are the only platform in the world that can integrate monolithically both electronic and optical functions like lasers and detectors and we are re-aligning some of our development plans and milestones accordingly. In addition to accelerating the lab-to-fab transition we discussed above, we focused our activities in the lab on three critical components that are essential to creating a successful product. I would like to call on Geoff now, our Chief Scientist, to comment on the significant and critical milestones achieved this past quarter – Geoff.
18:11 – Geoff Taylor: Thank you, Suresh. These are exciting times for the company, as we start applying our cumulative knowledge and IP to real product demonstrations. Indeed, we are now poised to deliver to the market our vision of low-cost and low-power optical interconnects.
18:29 – There are three critical devices that form the basis of our initial prototypes: the n-HFET, VCSELs – that’s Vertical Cavity Surface Emitting Lasers – and detectors, fabricated on the same epitaxial growth. We have previously demonstrated and announced world-class n-HFETs, through our partnership with BAE. I would like to announce some significant milestones achieved this past quarter on the VCSELs and detectors.
18:58 – First, we have recently in this quarter successfully demonstrated functional 980 nanometer (nm) VCSELs utilizing the POET epitaxy and POET process at the UConn labs. Improvements in epitaxial quality have shown a three-times improvement in critical performance parameters of the VCSEL, and we expect to maintain that improvement trajectory over the next quarter through further improvements in epitaxy and processing in order to achieve commercially acceptable specifications.
19:30 – Even more important is our first demonstration of small-signal modulation of our unique Digital Opto-Electronic Switch – acronymed DOES – lasers. We have achieved modulation frequencies presently of up to 8 GHz which readily enables 10 gigabits per second (Gbps) operation of the transceiver products. As we improve the VCSEL characteristics over the coming quarter we expect to further improve our small-signal frequencies’ response as well.
20:05 – Secondly, and this is a significant change for us, the VCSEL transceiver market today is centered at 850 nm wavelength. The quickest path to validation and adoption of any new technology is to prove its benefits in existing sockets. To that end, we had now focused our internal activities this quarter to assess the scalability of our platform to the 850 nm wavelength. We had demonstrated that critical pieces of the POET IP are scalable to 850 nm. And this is really good news, because it enables the company to participate in the large existing market at 850 nm. While we will be developing both 980 nm and 850 nm platforms in parallel, we will now be shifting our short-term focus to realize 850 nm.
21:01 – And finally, a critical case of any optical transceiver link is the detector on the receiving end. We had demonstrated basic DC functionality of the POET detector this quarter with extremely encouraging sensitivities. The POET detector is unique in that it integrates transimpedance amplifier, commonly called the TIA, within the detector, thereby enabling significant system power and cost savings. Over the next quarter we will be developing and validating our large-signal modulation capabilities of both our laser and our detector. I am pleased with the progress the team has demonstrated and we are building all the proof-points necessary to provide the market with a disruption it demands. – Suresh.
21:49 – Suresh Venkatesan: Thank you, Geoff. Instrumental in making much of this happen is Dr. Subhash Deshmukh, our Chief Operating Officer. Subhash came to us from Applied Materials, where he served most recently as Vice President of Emerging Technologies and Products, and previously as General Manager of the Dielectric Etch Products Division. Subhash served as Vice President and General Manager of the Plasma Products Business Unit, as well as Vice President of Business Development at Varian, which was acquired by Applied Materials. Let’s hear briefly from Subhash.
22:24 – Subhash Deshmukh: Thanks, Suresh. It is tremendously exciting to be part of the executive team at POET. When I worked at Applied Materials, a key part of my role was looking at new business opportunities in the “More than Moore” area. Moore’s empirical law of course applies to the continuous scaling of functionality, and it is best implemented through the continuous scaling of dimensions on a silicon chip. This has and continues to yield unprecedented improvements in the computational efficiency.
22:54 – However, consider this: Even though a single computation can now be completed at fractions of picojoules of energy, transmitting or communicating this piece of information over traditional copper interconnects can easily consume upwards of 100 times that energy. So while computational efficiency and functional integration have seen unprecedented progress over 50 years of Moore’s Law, we now face significant interconnect challenges and bottlenecks. How do we efficiently get all this data off a chip and transport it with low energy?
23:29 – Optics can dramatically lower power, and this is where POET comes in. POET participates squarely in the continued progression of Moore’s Law by enabling silicon chips to significantly lower their power consumption by adopting optical technologies. POET is part of the “More than Moore” family of technologies, working to augment the traditional scaling of silicon to provide power scaling that silicon alone cannot achieve. This really motivated and excited me to join this venture.
24:04 – A few words on the operations. The transfer of technology from a lab to commercial epitaxial vendors is progressing well. Anytime one transfers technology from a research environment to a manufacturable and scalable infrastructure, there are things that have to be changed in the process and this takes a few learning cycles to dial in. We started the transfer in August and we expect to complete the first transfer of the epitaxial stack in October. We are encouraged with the early positive results we have seen from external epitaxial wafer providers and this is beginning to validate the scalability of the developed processes and IP.
24:46 – We are often asked about our relationship with BAE, especially since we have not talked about them in some time. BAE has been a great partner to POET over a number of years. We transferred the n-FET process flow to BAE last year and were able to demonstrate excellent p-HEMT devices and characteristics at BAE on six-inch wafers. However, BAE lacks capability for VCSEL manufacturing that the POET platform categorically needs. When we joined the company, we actually started an evaluation of alternative partners that would have these capabilities in a foundry manufacturing environment. We therefore announced our initial foundry partnership with a commercial VCSEL foundry as they had the three things we were looking for:
- Six-inch processing
- VCSEL-fabricating experience
- Electronics experience through their own MMIC business.
25:48 – Our specific milestones over the next few quarters are:
- In the fourth quarter of 2015, initiate wafer start at our foundry partner and establish a source of commercial epitaxy.
- In the first quarter of 2016, demonstrate first fully externally processed wafers for both VCSEL and FET functionality.
- In the second quarter of 2016, demonstrate integrated 10 Gbps transmit-and-receive component that incorporates the FETs, VCSELs, and the detectors integrated together.
- In the fourth quarter of 2016, provide functional prototypes to the market.
26:29 – With that, I’ll turn it back to Suresh.
26:33 – Suresh Venkatesan: Thanks, Subhash. – Again, I plan to give chapter and verse in our next update. But for now, I’ll offer two words: expect results! We are doing a top-to-bottom review here. As you’ve heard for some time, this company has a wealth of IP that can be productized for a great number of markets. But we have to start somewhere if we are going to be a high-profitability market leader, a platform of choice for smart optical components. And we have decided to start in the data communications market. We chose data communications for a few reasons, but it really boils down to the fact that it is a large growing market with an acute pain point that we feel that only POET can address promptly.
27:17 – The POET platform implements its VCSELs and detectors in a very unique way. The innovations in POET enable monolithic integration of single-chip transceivers in very small form factors and at lower power than competing technologies, effectively creating a module on a chip. The reduction in component count, form factor, and power are critical requirements to transition optical communications to the board and eventually to the chip level. POET’s vision is to proliferate the use of its integrated digital lasers in various market applications, eventually enabling chip-to-chip optical communications.
27:59 – Simply put, POET’s vision is to enable the performance of light at the cost of copper – through innovation and integration. We don’t believe there is any optical solution thus far that has been cost competitive at copper interconnects. The POET platform could change that and thus create a discontinuity in traditional learning curves and create a market disruption. Our initial product definition is underway, even as we continue to optimize the underlying technology and initiate the transfer to a foundry. Again, our next update will have more granularity. Between now and then, you’ll see more proof points from us.
28:38 – But for now as shareholders ourselves, we think of POET as having four distinct attributes:
- Having envisioned and foreseen the market’s requirements for low-cost and low-power optical components, POET has developed highly differentiated and defensible IP, optimized by a balanced product and licensing business model.
- POET is a newly emerging market entrant that is strategically architecting a partner and customer base that has the scale, breadth, and influence to impose an industry standard.
- POET is led by a highly credentialed management and board with a track record of generating profitable growth.
- And POET is tightly-focused solver of the hardest most important problems in the competitive landscape. The largest of the data centers and OEMs are demanding new solutions to break traditional cost and power curves, and POET is positioning itself with the right answer.
Questions and Answers
29:36 – Suresh Venkatesan: A couple of additional notes before we go to Q&A.
29:39 – First, when we announced that we were scheduling this call, we have received a great many investor requests that we cover a wide range of topics. We believe that we have addressed the majority of them in our remarks and we expect to cover several more in the Q&A to follow in just a moment.
29:56 – Of course security laws and regulations preclude us from addressing subjects relating to the trading and value of the stock, as well as topics that may be construed as non-public information. So if your question was not specifically addressed, please understand that legal and regulatory considerations may have simply prevented it. Please also rest assured that we intend to have more of these updates in the future.
30:21 – Second, we would like to assure you that we were resolved to be closer to investors. This is particularly important as we progress towards a NASDAQ listing application. A number of you have expressed interest in being even more supportive of the company. We are appreciative of you confidence and we are going to take you up on this. We are looking to have a truly platinum shareholder base with thoughtful, domain-knowledgeable investors, what Silicon Valley often calls smart money. So you can expect more from us, more updates, more investor communications, and more material developments in the public domain. Again, we are grateful for the support you have shown this company and I am personally thankful for your trust and confidence.
31:07 – Now we opened it up to questions. As you can imagine we’ve received a lot of them. And we’ve done some condensing to make sure that we address as many as possible, noting that several of the questions were addressed in the main body of the presentation today.
31:22 – Now Subhash will read the questions out, and I’ll try to answer them in the best possibly way.
31:29 – Question: What will be the focus of POET’s first product? Who will be the first customer?
31:36 – Answer: While it’s too early to talk about direct customers, the explosive growth of data centers and data communications are driving demand for optical data communication links. Power consumption and link costs in data centers is perhaps the market’s most acute pain point. The uniqueness of the POET technology platform lies in its ability to integrate optical components along with their control electronics. So we believe that POET’s disruptiveness is optimized in the in the form of VCSEL-based monolithic single-chip optical transceivers. There is no such product in the market today. All VCSEL transceivers in the market today are comprised of a minimum of four individual chips in individual packages assembled together in a module.
32:21 – POET’s VCSEL transceivers are designed to cut the number of components by a factor of four resulting in disruptive decreases in cost, power and size. We expect the first devices to be completed in Q1 2016 and component-level functionality in Q2 2016. And as Subhash mentioned we’ll have prototypes in potential customers’ hands in Q4 2016. We have had discussions with several partners and are confident we can establish our first relationships in second half of 2016. The rate limiting step is our ability to demonstrate commercially viable performance out of our technology from commercially accepted foundry sources. We would expect to provide customer and engineering samples in the back half of the year. The critical metric is the ability to corner design wins with OEM and component manufacturers. The path to revenue generation goes through first providing engineering samples of the product. So that it can then be validated in customer systems.
33:28 – Question: What is the value of producing VCSEL on a six-inch wafer? How will your VCSEL product be superior to the current market?
33:37 – Answer: This is primarily about minimizing costs. 6” wafers establish a lower manufacturing cost base for our technology. Large wafer sizes are not necessarily required in the R&D phase, but they are clearly the right choice for manufacturing to drive a lower cost structure in a high-volume market segment. 6” manufacturing equipment also provides better manufacturing capabilities than older 3” or 4” equipment.
34:04 – The POET VCSEL itself is differentiated from a conventional VCSEL in three ways. The epitaxial thickness on the POET stack is substantially lower than commercially available VCSELs, thus lowering our cost structure. The integrated laser driver gives us the ability to integrate electronics with the VCSEL, reduces the bill of materials for a typical VCSEL product, and, third, our VCSELs emit light in a single mode we call single-mode lasing. And this extends the data reach in the data communications link. So we have three distinct advantages over the current market for VCSEL transceivers.
34:48 – Question: Is the POET VCSEL complete and ready to be commercialized?
34:52 – Answer: We are on plan to commercialize the POET VCSEL in 2016. We have made significant progress in the development of the POET VCSEL, and in the quarter ending today, we recorded a 3X improvement in laser output power. And we are on a trajectory to another sizable improvement within the next quarter, as we transition our fabrication to external sources. We expect to announce core integration of the VCSEL with electronics in the second quarter 2016, which will then set the stage for prototypes to be designed.
35:24 – Question: Is revenue dependent on continued innovation of the POET VCSEL? Is more lab work required? Will Anadigics be conducting lab work?
35:35 – Answer: Continued innovation is the key to success and growth in this industry. Innovation is indeed a prerequisite for revenue, always. With the current state of our technology we expect to demonstrate prototypes in 2016. All the functionality and the principles of operation of the POET VCSEL have been established and demonstrated at UConn lab. Improvements in epitaxial material quality have already shown a factor of three improvement in VCSEL performance.
36:04 – Our next step is to transition both the epitaxial wafer and the VCSEL fabrication process to foundries, and complete the continuous improvement activities there, to realize commercial-grade products. There is more development to be done to continue to improve the performance of the VCSELs, and also start evaluating its large-signal modulation capabilities. This work will be done at the foundry.
36:29 – Question: What about the announced engagement with Synopsys?
36:36 – Answer: While the VCSEL is the central theme of our first product, we still need the electronic devices to achieve true monolithic integration. To that end, understanding the behavior and modeling of our devices remains critical and thus our engagement with Synopsys continues.
36:53 – Question: Is POET, the organisation, ready for commercialization?
36:58 – Answer: We expect to begin commercialization in 2016. POET is in the process of transitioning into a more product-centric organization, with the successful transfer of the base process technology to foundries, for initial focus on VCSEL-based transceiver links.
37:14 – We are hiring talents in area, even while we complete the technology development activities at the foundry. The positions we’re hiring for are indicated on the POET website and it is expected that these personnel will all be hired in San José.
37:29 – Additionally we are moving ahead as an independent company. We are proactive in pursuing partnerships to accelerate our entry into the market. Our team, IP and strong unencumbered balance sheet are substantial assets in attracting partners.
37:47 – Question: What is Dr. Taylor’s role going forward? Why did he step off the board?
37:55 – Answer: Dr. Taylor continues to be our Chief Scientific Advisor and is engaged in all the day-to-day activities and decisions related to our technology development activities. He is also putting together the parts and whitepapers relative to adjacent market segments that we want to access to this technology platform. Geoff will be engaged both in the short-term actions of transitioning the technology out of the lab and driving definitions of the early products, as well as in establishing the long-term roadmap for the company. His stepping off the board was intended to provide him more time to focus on the technology itself, and shaping the strategic direction of this company.
38:34 – Question: What will the first product cost to go into production? What is the expected monthly burn rate?
38:42 – Answer: In steady-state we would expect our yearly burn rate to be about $8 million. This provides us with enough cash on hand to get to the first set of prototypes and well beyond. Our expectation is that we can defray some of our ongoing expenses to strategic partnerships and potential investments over the next 18 months.
39:02 – Question: What kind of revenues, profits and margins do you anticipate from your first product?
39:09 – Answer: We are not providing revenue guidance at this stage of our development. We are still going through the market and product requirements document and estimating the overall market size and our serviceable and addressable segments therein. The total size of the optical transceiver market is projected to be over $5 billion by 2017.
39:29 – POET brings a significant cost and power disruption to this market, and could change the typical trajectory of technology adoption. We would then expect in the mid-term a large opportunity for growth, in the very short reach segment of this market.
39:45 – Question: What are the sources of revenue expected to be? NRE, licensing, profit sharing?
39:53 – Answer: We would expect initially the sources of revenue to be NRE and sales of engineering samples. Successful demonstration of the technology capabilities could open the door for licensing opportunities as well.
40:06 – Question: What is your revenue or profit sharing agreement with Anadigics?
40:12 – Answer: We cannot disclose the details of the contract we have with Anadigics, but the projective spend at Anadigics is included in the total spend estimate we have projected for the company. Our current contract is setup to be a purely foundry services agreement today.
40:29 – Question: We understand that the new management team has a new operational plan they wish to execute. However, what were the reasons for not announcing the 50 GHz VCSEL and 100 nm ring oscillator technology milestones that were promised to the shareholders?
40:48 – Answer: As a new management team we spent a considerable amount of time taking stock of the technology, its operations and establishing a go-to-market plan. We then looked how the resources within the company were being deployed. And we had to make some conscious choices and decisions in aligning our milestones on a go-forward basis to be consistent with our go-to-market approach and product play. It became clear early to both of us that the existing milestones for the company simply did not provide enough focus to be world-class in any one area. Moreover, we had to deal with the realities of an aging lab facility which, while capable of validating the physics, was inadequate for scaling up to produce commercially viable results. Given this, we decided that the right strategy was:
- Accelerate the transfer of technology and development out of the lab.
- Focus on building commercially meaningful VCSEL and detectors.
- Leverage the existing development and validation of the n-FET.
We believe this provides the quickest path to demonstrating groundbreaking prototypes.
42:03 – Question: When will POET’s website be updated?
42:08 – Answer: We intend to start updating the content of the website soon and over time add new content to the website including a new corporate presentation, and also including potentially new video clips, as necessary.
42:22 – Question: Who is POET’s primary competition? And what edge does POET have over them?
42:29 – Answer: As you can imagine, the space of optical communications is pretty crowded. As the acute need for higher speed data transport builds and the cost and power pain points surface, several companies with historic fiber optic presence and new companies pushing the limits of copper innovate to provide solutions. So competition is a good thing and highlight that there is a genuine problem to be solved.
42:56 – The idea of optical integration has been a holy grail for some time and the POET platform has reached the crucial phase in its evolution. The company’s source of sustained competitive differentiation rests in its ability to squarely address the cost issue through monolithic integration of optical and electronic components. We don’t believe there is a single company out there that can say “We can provide you the performance of light at the cost of copper.”
43:29 – Question: What would be the logical order of devices that POET would expect to achieve market penetration in?
43:35 – Answer: Our priority is to create single-chip monolithic optical transceivers for the short and very short reach data communications market, starting with 10 Gbps transceivers and then scaling up to 25 Gbps per channel transceivers.
43:52 – Subhash Deshmukh: Unfortunately our time is up. That is all the time for questions. Suresh?
43:59 – Suresh Venkatesan: I would like to re-iterate that we have received many other questions that, as I have stated previously, based on regulatory constraints we cannot respond to all these questions. This concludes our call today. Thank you for joining us and thanks again for your support. I look forward to meeting and talking with you soon.
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