So again, it’s something that we’re focused on. We think we’ll be positioned well when our customers want to ramp up those technologies.
Operator: Thank you. And our next question coming from the line of David Williams with the Benchmark Company. Your line is open.
David Williams: Hey, good morning. And let me add my congratulations on the closing of Wolfspeed acquisition there. I guess my first question has just been around that acquisition, has there been anything, any surprises, either positive or negative that you’ve come across? And maybe just kind of touch on what you’ve done in terms of integrating that into the business? Thanks.
Steve Daly: Sure. I would say that no, there was really no surprises. We spent from — well, we spent a fair amount of time in due diligence to get to know the people, the staff, the organization, the infrastructure and had just a great engagement with the Wolfspeed team. So sort of post-close, there was no real surprises. As I highlighted in the script, most companies will acquire a company and then integrate after closing, we had set up a planning process to allow us to execute that integration the day after we closed, essentially. And I have to really thank the Wolfspeed team as well as our team for working so well together. I will say that the customers and the industry seems to be very receptive of this change. They now recognize that given MACOM is very focused on RF and microwave that it’s a perfect fit.
And a lot of the things that were on the drawing board for next-generation processes or products we can now together implement as a priority. So I think the customers will benefit from that. But I would say, generally speaking, no surprises. There’s certainly a lot of heavy lifting that we need to do, as Jack and I have talked about. The team, the management, the production workers or application staff are amazing. They have a very strong footprint across Europe with their sales and applications team. They are stronger than that we had. So we’re really excited about that. Very strong team in China and some great manufacturing capabilities, not only in North Carolina, but also in California where their Morgan Hill facility has essentially a state-of-the-art assembly factory.
David Williams: Great color there. Thank you. And then maybe, Jack, you talked about the flexibility in the model on the expense side. Can you kind of maybe talk about what your expectations are as you kind of go through and get this fully ramped and you make the — you find the synergies that you’ve expected? And just how should we think about the expense side? Thank you.
Jack Kober: Thanks, David, and I’m assuming you’re referring to the operating expense side. So as we closed out the December quarter, that was only a partial quarter from an operating expense point of view. So as we look forward, we’ll obviously have a full quarter’s worth of operating expense with the acquired business. But I think one of the things to look to in terms of how we manage the business, right? We want to make sure we’re also leveraging many of the costs that we are currently incurring from a MACOM point of view. So certain of that was already factored into the, we’ll call it, the acquisition model as we played this out. So a lot of that work was done upfront indoor or prior to closing. So from an overall expense perspective, we think we’ve got a pretty good handle in terms of where we’re at today.
Similar to what we’ve worked through with MACOM from an operating expense perspective, we want to make sure we’re going to continue to refine things and better leverage our overall operating expenses as we go forward. So I think if you look at the guide that we’ve put out there and some of the other directional information, you can see that we’ll probably be making some pretty good progress from where that business was historically from an overall operating expense perspective. But I think we’re feeling pretty good in terms of where we’re at now and look to obviously build upon that as we go forward.
Operator: Thank you. And our next question coming from the line of Srini Pajjuri with Raymond James. Your line is open.
Srini Pajjuri: Thank you. Good morning, guys. Thanks for squeezing me in. My question is on the Data Center first question. Steve, you talked about some lumpiness in the near term. I’m just trying to understand the mix of your business in terms of lower speed versus higher speed. Obviously, the higher speed the market itself is growing nicely. But at the same time, to what extent the lower speed weakness, I’m trying to understand to what extent this is cyclical versus something structural? And where do you see that lower speed and a business bottoming per year?
Steve Daly: So I think it’s — when we talked about the lower speeds, we do think that there is — there will be a couple more years of 100-gig per lane demand for what I would call our traditional 100G SR4 AOCs and some of the 100G DR1, things like that. So we think there’s still a good amount of legacy business out there, and there will continue to be demand there. But what we definitely are starting to see is as the next-generation switches come out, people want to run at the higher data rates, 400 and 800-gig, some are jumping right to 800. And so what we see today is the vast majority of our revenue is at the 400 or 800-gig PAM4 applications. And these are typically short reach. So you’re talking about less than 100 meters could be less than 500 meters.
And then the other thing I’ll highlight just sort of related to that is some of the trends with metro long haul because we also see a similar thing there. Now we do lump metro long haul into telecom, but we definitely see that the 32 gigabaud products will also in the next year or two, start to ramp down as people bring up 64 gigabaud, which is rough 400-gig is the majority of that. And they’re starting — some are actually starting at 130 gigabaud. So you see this data rate migration to the higher speeds. I think it’s slow and gradual. I actually think since the run rates of our lower data rate revenue is so low and the growth of the higher data rates is so high, I think the worst is behind us, as it relates to having a step down because of, let’s say, a 25-gig platform going end of life.
Srini Pajjuri: Got it, thanks for that. And then my next question is about your I&D business, Steve. I mean, obviously on the investment community side, I think we understand how to kind of think about the industrial business fairly well. The difference is more program-based and company-specific. So as you kind of take a look out to the next 12 to 18 months, can you talk about what your — how you’re thinking about your defense business growth? Are there any new programs that are kicking in? I mean just from a modeling standpoint, what is the organic growth rate for this business that the way you guys think about it?
Steve Daly: Yes. I would say that if we can achieve high single-digit growth rates on a CAGR basis, that would be great. I think the last three or four years, it’s been about 18%. So we’ve been making a lot of great moves with capturing programs, being more aggressive cross-selling some of our capabilities into the defense market. Most of our defense business historically has been RF and microwave-related at the chip or package level. And part of our strategy has been to slightly go up the value chain and build multifunction assemblies for customers using all of our chips, and that strategy is working quite well. And then, of course, with Wolfspeed, a significant portion of the Wolfspeed business is for defense and primarily for transmitters and radar systems.
