|Shares Out. (in M):||140||P/E||0||0|
|Market Cap (in $M):||2,560||P/FCF||0||0|
|Net Debt (in $M):||100||EBIT||0||0|
In current markets, where we may be in a late stage cycle, we view Lattice Semiconductor as a decent business available at a reasonable price. We believe that the underlying value of the company is not evident to the casual observer but will get clearer in coming years as reflected in the company’s P/L. We feel confident that the company’s turnaround under the watch of a new and motivated CEO will be successful, and that an investment in shares today can generate satisfactory returns over a three to five-year period. The following reasons bolster our belief:
The company has regained focus after a prolonged transition period while selling itself to Canyon Bridge.
High margin business with sticky customer base.
Secular tailwind in 5G infrastructure build and Edge AI.
Limited competition. The industry’s major players, Xilinx and Intel (Altera), focused on the data path and large/hyper-scale computing leaving the control path for Lattice to dominate.
New management. The company brought in an industry veteran who has revamped the entire executive team in just months after taking over, focused on its core markets and eliminating previous distractions.
The transformation has already boosted the stock price, although we believe the transformation is in its early stages and will continue for several years into the future.
For over 35 years, the company has focused on programmable logic devices (PLDs). Since the acquisition of SiliconBlue in 2011, Lattice has differentiated its offerings in the marketplace with its ultra-low power and ultra-small field programmable gate array (FPGA) solutions. Under the new leadership of Jim Anderson, the company has re-focused the business entirely on FPGA solutions and has divested non-core assets from the company’s Silicon Image acquisition.
Below is a slide from Lattice’s recent analyst day presentation that illustrates how it differentiates itself from Xilinx and Intel’s FPGA portfolio. While the competition focuses on data path with a much larger TAM, Lattice focuses on the control path where low power, small-size, and reliability are essential ingredients to succeed. The company has solid customer relationships with over 9,000 customers developed over several decades. A smaller TAM and stickier customer base are the reasons why Lattice can maintain its lead over its competition.