Coherent: The Mousetrap, the Debt, and the Reckoning
What’s in This Article
This article presents a deep research analysis of Coherent Inc. (COHR) following its FY25Q3 earnings and ongoing post-merger transformation. It evaluates why the company’s original acquisition thesis—anchored in laser leadership—has failed to deliver strategic returns, and why networking and silicon carbide (SiC) are emerging as more viable pillars of growth. The analysis dissects revenue trends, debt overhang, and operational execution under new CEO Jim Anderson. It also provides a forward-looking framework for evaluating the company’s potential divestitures, segment prioritization, and capital reallocation as it navigates a new phase in the AI-driven infrastructure cycle.
The Mousetrap, the Debt, and the Reckoning
Lasers: The Premise That Didn’t Deliver
Networking: The Accidental Growth Engine
Materials and SiC: A Sleeping Giant Awakens
Table 1: Coherent Quarterly Revenue by Segment ($M)
Chart 1: Coherent Share Price (5-Year View)
A Debt-Fueled Identity Crisis
A CEO’s $100 Million Mandate
Strategic Path Forward: Break, Rebuild, Lead
Investor Takeaway: Reclaiming the Narrative
Introduction
Ralph Waldo Emerson once wrote in 1882, “If you build a better mousetrap, the world will beat a path to your door.” It’s a phrase that resonates through the decades—and one investors held close when II-VI announced it would acquire Coherent (COHR) on February 12, 2021. A bidding war ensued, with Lumentum (LITE) and MKS Instruments (MKSI) offering competing visions of integration and value. II-VI ultimately won—but in doing so, it inherited more than just assets. It inherited a thesis it has struggled to validate.
Prior to the acquisition I had been positive on II-V, primarily because of it gallium arsenide (GaAs) business, which was one of the first sectors I started analyzing when I started The Information Network in September 1985, because of my report on Silicon Carbide (SiC) entitled “Power Semiconductors: Markets, Materials and Technologies.” The promise of a new kind of vertically integrated optoelectronics giant had substance—on paper.
But the Coherent acquisition, which closed on July 1, 2022, marked the beginning of a much more complicated story. Since then, I have published analysis on both sides of the company’s evolution. My June 26, 2023 report (entitled “Coherent: Benefiting From Migration To Ethernet Switching Attached To AI/ML”) documented early wins in the networking segment. Yet, in a companion piece just weeks earlier (“Coherent: Short-Term Macro Headwinds Have Been Outweighing Silicon Carbide Tailwinds”), I detailed the very real structural drag of the laser division. The promise of diversified synergy has given way to financial tension—and the investor question is no longer about upside, but direction.