LSCC

Lattice Semiconductor Corporation (LSCC)

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Lattice Semiconductor (LSCC)

Morgan Stanley's 2012 Technology, Media & Telecom Conference Call

February 27, 2012 7:15 pm EST

Executives

Darin G. Billerbeck – President and Chief Executive Officer

Joe Bedewi – Corporate Vice President and Chief Financial Officer

Analysts

Sanjay Devgan – Morgan Stanley

Presentation

Sanjay Devgan – Morgan Stanley

Okay, thank you guys, I have to thank you everyone for coming today, for those of you that don’t know me, my name is Sanjay Devgan, I am a member of the Semiconductor Equity Research Team here at Morgan Stanley. It’s my pleasure to have the management team from Lattice Semiconductor with us today. To my left is Darin Billerbeck, the CEO and to his left is Joe Bedewi, the Chief Financial Officer. I think Darin is going to start this off with some high level overview of the company, and then we’ll jump into Q&A.

Darin G. Billerbeck

Okay, thanks, Sanjay, and thanks everybody for joining us here today. So the company has got a very interesting last year or so, that we’ve gone through a lot, I came in last November, November of 2010 and there was a lot to be done. So the company had suffered from about a decade where, let’s call it meandering and not necessarily having the right tools for the job, since, we come in, we’ve restructured most of the company, in fact, all of our restructuring would be substantially completed by the end of, well most of that was done by the end of last December, that’s about a quarter less of operations.

And you may say, so what have we accomplished? What are the end results? The results for the year speaks for themselves, we grew a little faster than our peers and the groups Xilinx and Altera where we grew about 7%, they grew somewhere between 5% and 6%, I think for Altera and Xilinx was probably flattish, but I think the key is, we did a lot, while we had a lot of balls in the air, and a lot of people will say, we try to change the tires of the company while it was still rolling.

R&D has been completely restructured, so the base of R&D is now out of San Jose, with a low cost geography in the Philippines, the Philippines didn’t exist and it was the group of people that we hired actually bought a group of R&D experts that we had hired and developed in the 1990, so they were part of an Intel organization that we essentially picked up after many years and when Intel closed down those factories, we potentially picked up that capability, that site now is about 70 or so head, gone from about zero to 70, if we’re just about 4:1 ratio of R&D resources compared to what we had. The good news is that is pretty done our latest project which was ECP4, which is our 6 gig SERDES product for the comps market capped out late last year and first of it comes out in another few weeks.

So we expect to have samples in the first half of this year on that product that’s really our highest performance, highest low-density products, so a lot of good things happened in R&D.

At the same time, we restructured operations – all of our operations out of the U.S. and into the Philippines or into our Subcon so we have, what we would call air traffic control for a logistics and planning in the U.S. over [New Oregon] and then everything else was in the Philippines or Subcon and a little bit in Singapore, so the operations has been also restructured, Joe and his team also outsourced IT, we were challenged pretty significantly in our manufacturing systems, our operational Systems, R&D systems.

We are probably five or six years behind in technology and when we finally came to grip someone who is going to take this shore of IT, it was probably more than we wanted to afford and was easier and cheaper to have an outsourced model, so that’s been done. And then finally, we restructured the executive team, we did that early on after we completed our strategic long range plan and that team essentially now has about 50% to 60% new people on it, all very aggressive with the capacity to change the culture and capacity to run very quickly.

So a lot has been done. Our strategy is done. Our product line business plan has been done. Our annual operating plan has been completed. Obviously it’s not the greatest environment in Q1. Q1 is going to be a challenge, but there are some good signs, I think from the comps market as opposed in Q4. In Q4 we saw a lot of the comps market push out some stuff, which just zeroed out. I think it took a lot of people by surprise, everybody in the FPGA market certainly by surprise. Q1 is right where I think a lot of people expected it, being a little uncertain, a little cloudy, but people are now starting to rebook at least in the comps market and we are feeling a lot more comfortable about how we are seeing things from an environment.

We still don’t know what the year is going to look like. I don’t think anybody really does with (inaudible) and everything else [going], I think there will be some uncertainty for some time. But all in all, that was a challenging year for sure. I moved up to Portland. I’m still cold that you guys can see that San Francisco hasn’t helped me get any warmer. But in a nutshell a very challenging year, very rewarding, a lot of great people, places, changes, have a long way to go on the culture, but we are making some good progress. So, and I am happy to be here by the way. Thank you for inviting us.

Read the rest of this transcript for free on seekingalpha.com