Two years ago, I wrote about Jim Anderson's first anniversary as the CEO of Lattice Semiconductor. Anderson joined Lattice after a lengthy career as a semiconductor executive, including stints at AMD and Intel. A lot has changed at Lattice Semiconductor since then, so I thought it would be an excellent time to analyze Jim Anderson's performance as CEO once again. During my days as a "big tech" executive, I remember receiving many performance evaluations from CEOs, so it's always fun to be on the other side of the coin.
Lattice Semiconductor may not be the company that every consumer knows and follows closely, but the company is important to the industry and I have been researching it for the last 36 months. The company has seen quite the financial and product transformation; I would argue much of that results from the new team led by Jim Anderson versus a sector play. Lattice focuses on low power programmable leadership, and it took a reinvented product roadmap and strategy to achieve this goal.
In 2018 when Jim Anderson stepped in as Lattice's CEO, the company needed to focus more on its core markets. That meant doubling down in critical markets like AI, 5G, edge, data center, robotics, and security and creating full-stack solutions to address these markets. Lattice got to work quickly on the hardware and software side. It launched multiple families of new low power FPGAs, including CrossLink-NX, Certus-NX, Mach-NX, and CertusPro-NX - in addition to new application-specific software solution stacks for embedded vision and security - in less than a two-year window. The real point of differentiation here is that Lattice’s Nexus-based FPGAs are up to 4x more power-efficient than competitive offerings. I did not perform these tests myself but believe they are accurate. Jim Anderson positioned the company's wheelhouse to be devices that are extremely power efficient. And I also appreciate that he got aggressive on competitive positioning.
In 2019, after a year in the hot seat, he laid out a new business strategy that would be the metric we should use to judge Lattice over the next two years. Driving product leadership and delivering shareholder value were two categories that the company set its sights on back in 2019. From a product perspective, the company wanted to speed up its product cadence, rebuild competitiveness, release new software solutions, execute product launch milestones on time, and enable faster customer time to market.
Under the revamped leadership team, Lattice built the company's strongest product portfolio I have ever seen from the company. It also did it at 3x the pace of previous launches. Lattice has also focused on building complete solution stacks that include hardware and software instead of focusing on silicon alone. The complete solution stack strategy allows the company to focus on fewer product lines while creating more robust end-to-end solutions that are more valuable to customers and, in turn, more profitable. It also accelerates time to market as customers have to do less work to adopt Lattice technology into their designs, and removes potential FPGA versus ASIC or controller objections, which I consider its real competition.
Looking back at Lattice's 2019 metrics in 2021, the results are definitive. The company executed nearly all of those promises and has some great financial results and competitive products to show for it. Jim made sure his famous "say-do ratio" remained virtually intact.
I am an industry analyst and not a financial analyst, so I usually leave financial work for financial analysts. I am more focused on the product strategy that helped the company achieve good financial results. I have said it for years, and it remains true, you can't judge a company solely on financial results. But financial growth is a good indicator of short-term success and confidence in longer-term company strategy. It takes a lot of operational discipline to deliver good results that drive significant shareholder value. Of course, investors care deeply about profitability, cash flow, and EPS. Jim Anderson and the team have strengthened Lattice’s competitiveness in the market and done exceptionally well strengthening the balance sheet. Let's look at where Lattice was when Jim Anderson took over and the results he has helped produce since then.
On August 27th, 2018, the day before Anderson was appointed CEO, Lattice's stock was sitting at $7.55. Three years later, the stock is sitting at $63.43. Those price changes represent a 740% increase in just over three years. Not too shabby in my book. Several other financial metrics help paint the whole picture. To name a couple, Lattice now has a $1 EPS run rate and a gross margin increase of 500 bps since 2018.
I attended Lattice's 2021 Analyst Day, where the company laid out its new products and increased financial guidance. You can read the full writeup here. In its most recent financial results, Lattice turned 25% YoY revenue growth, 29.1% operating profit, and double-digit YoY growth in the comms, computing, industrial and automotive markets. Looking more long-term, Lattice Semiconductor wants to target double-digit revenue growth, get gross margins to >65%, keep OPEX to 35%, and achieve an operating profit target of >30%. These goals are ambitious, but I have learned that Jim Anderson and the team are willing to put in the work to make them a reality. I believe Anderson is also conservative on the financials.
I don't mean to beat a dead horse with the financials, but Lattice's performance has been impressive over the last three years. I know that these results aren't due to a singular figure, but the business execution that led to these results happened with Jim Anderson at the helm. Lattice Semiconductor is ready for more growth, and the company should strike while the iron is hot.
When Lattice hired Jim Anderson as CEO in 2018, I was very optimistic that Lattice would be better off for it. Three years later, I can definitively say that the company made the right decision. A strengthened product portfolio, deeper customer relationships, and a complete uphill swing of the company’s financials are all significant indicators that Jim Anderson was the right person for the job. I understand that my analysis of Anderson's performance is exceptionally positive, but I have been hard-pressed to find many reasons to criticize his performance. I am sure some will find ways to disagree.
Based on the first three years of his tenure, I believe the future of Lattice Semiconductor looks bright under the leadership of Jim Anderson. The company is positioned well to continue its product leadership in low-power programmable FPGAs and as it forays into the higher-performance FPGA segment, it will challenge Intel’s Altera group and Xilinx even more as those competitors are focused on the highest-performance, highest power FPGAs. Much work will have to happen to continue at the pace set in Jim Anderson's first three years, but I think Anderson and the team are up to the task. I am eager to see what Lattice Semiconductor can accomplish if the company continues to execute.
Note: Moor Insights & Strategy writers and editors may have contributed to this article.