Zacks Small Cap Research – POET: With Cash at $40 Million, POET looks Beyond Providing Samples to Major New Customers and Prepares for Production. – Technologist

By Lisa Thompson

NASDAQ:POET

READ THE FULL POET RESEARCH REPORT

POET Inks Deal With Mitsubishi to Design and Market 1.6T and 3.2T Engines Together

On Sept. 19th, POET (NASDAQ:POET) announced a deal with Mitsubishi Electric to co-develop integrated optical engine chipsets for 3.2T pluggable transceivers. Mitsubishi Electric will contribute its 400G Electro-absorption Modulator Integrated Lasers (EMLs). POET will integrate the EMLs along with drivers, optical waveguides, and other key functional building blocks to produce 1.6T and 3.2T optical engine chipsets. They aim to complete the 1.6T and 3.2T optical engine chipsets in early 2025 and demonstrate them during the first half of that year, with sample engines expected to be available in the second half of 2025. Mitsubishi has a large market share in lasers and could even be the biggest player, rivaled only by Lumentum and perhaps Broadcom. Also importantly, this is a major deal with a company outside of China.

We believe this is the first company addressing 3.2T speeds, and POET’s solution might be one of the few to reach that speed. Mitsubishi is also the first to announce 400G lasers, showing POET is now working with the cutting-edge supplier. While some Silicon Photonic-based solutions are being used for DR8 applications, EML laser solutions dominate the transceiver market at 800G. POET made the switch to EMLs a while back, abandoning its attempt to use 56GBaud DML lasers from Lumentum to serve this application. POET has qualified its 800G receive engine and is about to sample its 800G transmit engines. Two of each of these produce a 1.6T transceiver, while 8 engine chiplets (4 transmit and 4 receive) can easily fit into a standard pluggable transceiver housing. Using Mitsubishi’s new 400G lasers (operating at 200G per lane) the number of lasers in a 1.6T module can be reduced by half to four and to eight in a 3.2T pluggable module.

Due to this announcement, POET is now getting inbound calls from several module makers who want to learn more. With POET working with Mitsubishi, marketing should be much easier going forward, and Mitsubishi may even take the lead in selling, particularly to its existing customers. POET believes that Mitsubishi has already been going around to its customers and is excited to show the technology.

POET Reorganizes to Cut Costs and Optimize Operations and R&D

On Aug. 29th, POET announced a reorganization. It will be shutting down its Allentown, PA, location by March 2025 and moving its functions to its Shenzhen and Singapore locations, saving the company between $1.8 and $2 million a year. It will also allow them to be close to almost all its major customers, which are located in China, Taiwan, and other Asia Pacific countries. The engineering organization in Singapore will be led by Dr. Mo Jinyu, Senior Vice President, and the new product and component engineering teams will report to her. Those teams will take the optical engine and module products from prototype design to initial manufacturing functions that benefit from tight integration and geographic proximity. Critical product design and architecture, key customer relationships, global marketing and sales, and intellectual property management will remain in Silicon Valley while finance, investor relations, and other administrative functions are staying in Toronto. This restructuring may also change the focus of the joint venture while POET moves to establish assembly and test capabilities outside of China to satisfy AI customers who want to source outside of China. Even the largest of the module suppliers are establishing operations outside of China to meet this customer need.

With its recent financing, POET has about $40 million in the bank and is burning about $1.3 million a month creating a runway of about seven quarters. By the end of 2025, it expects the cash burn to increase to about $5 million a quarter as it adds middle management to support operations, including production. Due to its successes, the company is now in an envious position where it can choose high-quality institutions for its cap table going forward. It may even be able to attract strategic investors from its partners.

Other News During the Quarter

On June 26, 2024, POET announced that it won the “Best Optical AI Solution” award in the seventh annual AI Breakthrough Awards program conducted by AI Breakthrough for its optical interposer. This year’s program attracted more than 5,000 nominations from over 20 countries. Recently, the Company announced that it had won the prestigious Gold Medal Merit Award as the Technology “AI Innovator of the Year”.

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