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IPG Photonics' Management Presents At Barclays Capital Global Technology, Media And Telecommunications Conference (Transcript)

We have a very nicely leveraged business model. We sell our product to OEMs and end users who when they qualify our lasers for using their systems results in multiple units being sold on a going forward basis. The company really is truly global with over 2000 employees and major manufacturing facilities around the world. We really are very proud of the fact that we are the leader and most profitable company not only in the fiber laser market, but the most profitable company in the entire laser sector altogether.

The laser market is significant. We currently are really focused on selling products into the laser source, so the laser source is the engine that drives the laser systems. That market is about $3.8 billion and I've got a slide to breakdown for you provides more information to that. The laser market is growing at about 7% to 9% per year. The estimates are it will grow at about two times GDP and that’s really a reflection of the fact that lasers are becoming more and more widely deployed in different application, in particular the ease-of-use and cost of the devices comes down and fiber is driving most of the changes.

The fiber market grew about 27% from 2006 to 2011 and then last year at almost 60% as we started to rapidly penetrate into applications like cutting or significant growth in welding applications in the automotive industry. The company has many competitive advantages. A couple of the more significant ones are that we are very deeply vertically integrated. So, we don’t just produce the laser that we have a very deep venture of optical components that we manufacture internally, very deep skill sets, know-how processes, invest in manufacturing and capacity in many of those optical components.

The IP portfolio is very deep. It encompasses not only our semiconductor diodes and the way that we package them, but a lot of the optical components for the use to combine the light from the diodes into the optical fibers. And the vertical integration surrounds the optical components and then the final manufacturing of the laser is what helps us to drive the stellar margins that we have. In 2011, our average gross margin was just about 54%, Q1 of this year, it was approaching 57%.

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