Q4 2023 Maxlinear Inc Earnings Call
Participants
Kishore Seendripu; Co-Founder, Chairman, CEO & President; MaxLinear, Inc.
Steven G. Litchfield; CFO & Chief Corporate Strategy Officer; MaxLinear, Inc.
Ananda Prosad Baruah; MD; Loop Capital Markets LLC, Research Division
Christopher Adam Jackson Rolland; Senior Analyst; Susquehanna Financial Group, LLLP, Research Division
Nathaniel Quinn Bolton; Senior Analyst; Needham & Company, LLC, Research Division
Richard Cutts Shannon; Senior Research Analyst; Craig-Hallum Capital Group LLC, Research Division
Suji Desilva; MD & Senior Research Analyst; ROTH MKM Partners, LLC, Research Division
Timothy Paul Savageaux; MD & Senior Research Analyst; Northland Capital Markets, Research Division
Tore Egil Svanberg; MD; Stifel, Nicolaus & Company, Incorporated, Research Division
Unidentified Analyst
Presentation
Operator
Greetings, and welcome to the MaxLinear Fourth Quarter and Fiscal 2023 Earnings Call. (Operator Instructions). As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Steve Litchfield, CFO and Chief Corporate Strategy Officer. Thank you, Steve. You may begin.
Steven G. Litchfield
Thank you, Paul. Good afternoon, everyone, and thank you for joining us today on today's conference call to discuss MaxLinear's Fourth quarter 2023 financial results. With me today is Dr. Kishore Seendripu, CEO.
After our prepared comments, we will take questions. Our comments today include forward-looking statements within the meaning of applicable security laws including statements relating to our guidance for the first quarter of 2024, including revenue, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, GAAP and non-GAAP interest and other expense and GAAP and non-GAAP diluted share count.
In addition, we will make forward-looking statements relating to trends, opportunities, execution of our business plan and potential growth and uncertainties in various product and geographic markets, including, without limitation, statements concerning future financial and operating results, opportunities for revenue and market share across our target markets, the effect of seasonality and expected production ramps and timing for the launches of new products, our design win pipeline, demand for and adoption of certain technologies, our serviceable available market, expected customer inventory rationalization, expected incentive programs, the effects of cost reduction measures and product announcements.
These forward-looking statements involve substantial risks and uncertainties, including risks outlined in our Risk Factors section of our recent SEC filings, including our Form 10-K for the year ended December 31, 2023, which we filed today. Any forward-looking statements are made as of today and MaxLinear has no obligation to update or revise any forward-looking statements. The fourth quarter 2023 and fiscal 2023 earnings release is available in the Investor Relations section of our website at maxlinear.com.
In addition, we report certain historical financial metrics, including, but not limited to, gross margin, operating margin, operating expenses and interest and other expense on both GAAP and non-GAAP basis. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in the press release available on our website. We do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future changes including stock-based compensation and its related tax effects, as well as potential impairments.
Non-GAAP financial measures discussed today are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures. We are providing this information because management believes it is useful to investors as it reflects how management measures our business.
Lastly, this call is also being webcast, and a replay will be available on our website for two weeks. And now let me turn the call over to Dr. Kishore Seendripu, CEO of MaxLinear.
Kishore Seendripu
Thank you, Steve, and good afternoon, everyone. In Q4, our revenues were $125.4 million, and non-GAAP gross margin was 61.4%. Our infrastructure end market continues to be the main highlight, growing 30% in fiscal 2023. Entering 2024, we are very optimistic about our infrastructure business and believe that it is firmly poised to grow to an annualized revenue run rate of several hundred million dollars over the next three years or so.
Underpinning our optimism and growth convictions for our entire business is a successful launch of several new innovative products across infrastructure and connectivity and a robust and growing customer design win pipeline for them. We expect these new high-value product cycles to drive revenue growth and encompassing high-speed optical data center interconnects, wireless (inaudible) networks, enterprise storage accelerators, enterprise ethernet and multi-gigabit PON broadband access and WiFi connectivity.
In the high speed optical data center infrastructure market, we are increasingly bullish and expect to generate tens of millions of dollars in revenue this year for our 5-nanometer CMOS Keystone 800-gigabit PAM4 DSP family. Early stage revenues have already begun and new production ramps later in the second half of the year will drive more meaningful run rate growth in 2025.
The ongoing adoption of AI in the cloud is providing a strong catalyst for the transition to 800 gigabit and beyond speeds.
In this high barrier to entry market, our investment in innovation over several years, has enabled us to differentiate with the highly competitive and broad portfolio of PAM4 DSPs, which invariably have the best-in-class power consumption and performance across optical transceiver, active optical cables and active electrical cables.
In wireless infrastructure, despite current slowdown in telco 5G wireless access infrastructure spend, there's an expanding global rollout of new millimeter wave and microwave and hybrid backhaul technologies to upgrade wireless transport links from gigabit speeds to tens of gigabits per second data rates. As the only full system solution provider of modems and RF transceivers, we will greatly benefit from the significantly increased silicon content per platform in these new links. We also expect strong customer demand as part of a multiyear upgrade cycle entering 2025.
Additionally, at Mobile World Congress in February end, we'll have new and unique product announcements addressing 5G access remote radio units for both massive MIMO and macro base station solutions. We expect our growing portfolio of wireless backhaul and access infrastructure products to drive significant revenue expansion in the near to long term.
Within our infrastructure revenues, an exciting new growth driver is our Panther III Series hardware storage accelerators for the enterprise all-flash array and hybrid storage enterprise appliance systems. With increasing deployments of higher-speed low-latency NVMe SSD drives, legacy software-based data compression technology using extremely expensive and power-hungry high Qualcomm CPUs is no longer viable. The scalability and flexibility of the Panther III DPU architecture allows us to deliver 12:1 data reduction, a full suite of security, low power and CapEx cost reduction while providing ultra-reliable data protection.
We are in production ramp with the Tier 1 leading enterprise storage appliance [maker] and expect additional customer product ramps later this year. We expect revenues to double in 2024 with continued strong growth in 2025 and beyond.
In Ethernet connectivity with the recent launch of our new Octal 2.5-gigabit Ethernet PHY and switch products, we have expanded our addressable market by $300 million to include both the enterprise and small and medium business switch markets in addition to our traditional gateway and [outer] markets.
Customers are expected to upgrade today's more than 2 billion copper, 1 gigabit Ethernet ports to 2.5 gigabit ethernet speeds over time using existing standard CAT5 cabling. We are seeing exciting design win activity for our solution, including a Tier 1 North American enterprise OEM customer that is expected to ramp to production in the mid-2024.
As we look ahead, we believe our Ethernet business could reach $100 million over the next 18 to 24 months.
Turning to broadband. We continue to gain traction in the fiber PON market with new design wins driving our growth. As many of you know, in 2023, we began ramping our single-chip integrated fiber PON and 10 gigabit processor gateway and connectivity solutions with the major Tier 1 North American service provider. In 2024, we expect to begin ramping a new opportunity with the second major Tier 1 North American service provider. This further validates and establishes MaxLinear's competitive positioning in the fiber PON market. In 2023, our PON revenue was approximately $50 million. We expect to be able to more than double our PON revenues over the next two years.
In connectivity, embodies a major milestone, our WiFi 7 solution was both certified and selected by the WiFi Alliance as 1 of only 4 certified test bed devices for WiFi 7 interoperability and compliance. Our Wave 700 single-chip tri-band WiFi 7 device is an industry first and represents a major step forward for power efficiency, performance and reduce latency. Even as WiFi 6 and 6E are reaching peak adoption, WiFi 7 is beginning to launch this year in client side mobile phones and PCs. We expect service providers to follow soon with their initial rollout later this year with adoption peaking in 2 to 3 years. For MaxLinear, WiFi 7 has the exciting potential to drive significant ASP growth and higher attach rates in our broadband access platforms versus previous generations.
Circumspectly speaking, 2024 is likely to be the start of an exciting period of new product growth and opportunity for MaxLinear. We also expect market headwinds of the past year in broadband and connectivity to likely become tailwinds when customer inventory rationalization winds down. Most importantly, the investments we made in product innovations across our portfolio are beginning to bear fruit and are opening up new and significant revenue opportunities that we expect will drive our growth for many years to come.
With that, let me now turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer. Steve?
Steven G. Litchfield
Thank you, Kishore. Total revenue for the fourth quarter was $125.4 million, down 8% versus Q3 and down 57% year-over-year. Broadband revenue for the fourth quarter was $34 million, flat versus Q3 and down 66% year-over-year. Connectivity revenue for the fourth quarter was $19 million, up 26% sequentially and down 82% year-over-year.
As expected, Infrastructure revenue for the fourth quarter was down substantially. Revenue for the fourth quarter for this end market was $32 million, down 37% versus the prior quarter and flat year-over-year. But grew 30% for fiscal year 2023 as a result of solid demand and growing market opportunity.
Lastly, our industrial and multi-market revenue was $41 million in Q4, up 13% sequentially and down 25% year-over-year. GAAP and non-GAAP gross margin for the fourth quarter were approximately 54.7% and 61.4% of revenue. The delta between GAAP and non-GAAP gross margin in the fourth quarter was primarily driven by $8.3 million of acquisition-related intangible asset amortization.
Fourth quarter GAAP operating expenses were $110.3 million, including stock-based compensation and performance-based equity accruals of $19.5 million combined. Restructuring costs of $10.6 million related to our Q4 workforce reduction and acquisition of integration costs of $1.8 million. Non-GAAP operating expenses in Q4 were $75.7 million, up $0.6 million versus Q3. We expect to see the benefit of our cost reductions starting in Q1 and throughout FY '24.
Non-GAAP operating margin for Q4 2023 was 1%. GAAP interest and other expense during the quarter was $0.9 million. Non-GAAP interest and other expense during the quarter was $0.8 million. In Q4, cash flow used in operating activities was $16.6 million. We exited Q4 of 2023 with approximately $188 million in cash, cash equivalents and restricted cash. Our days sales outstanding for the fourth quarter was approximately 124 days, up from the previous quarter due to shipment linearity. Our gross inventory turns were 1.4, slightly up from Q3 levels.
This concludes the discussion of our Q4 financial results. With that, let's turn to our guidance for Q1 of 2024.
We currently expect revenue in the first quarter of 2024 to be between $85 million and $105 million. Looking at Q1 by end market, we expect all 4 end markets to be down quarter-over-quarter. We expect first quarter GAAP gross margin to be approximately 50.0% to 54.0% and non-GAAP gross margin to be in the range of 59.5% and 62.5% of revenue. Gross margin continues to be stable despite lower unit volumes with the range being driven by a combination of near-term product, customer and end market mix.
We expect Q1 2024 GAAP operating expenses to be in the range of $115 million to $125 million. We expect Q1 2024 non-GAAP operating expenses to be in the range of $72 million to $78 million. We expect our Q1 GAAP and non-GAAP interest and other expense to be in the range of $1 million to $2 million. We expect our Q1 GAAP and non-GAAP diluted share count to be approximately 82.3 million each.
In closing, we are excited about our market position and growth drivers for 2024. The product innovations that will drive our success in optical WiFi, fiber broadband access gateways, Ethernet and wireless infrastructure are all in market today and gaining customer traction. As always, we will continue our strong focus on operational efficiency, fiscal discipline and shareholder value as we position ourselves for an exciting future.
With that, I'd like to open the call for questions. Paul?
Question and Answer Session
Operator
(Operator Instructions) Our first question is from Tore Svanberg with Stifel.
Tore Egil Svanberg
My first question is -- so it looks like some of your businesses, especially broadband connectivity started stabilizing this quarter. It does sound like you're expecting another step down. So could you just talk a little bit about the dynamics there because it's a little bit counterintuitive that they would stabilize, but then take another step down.
Steven G. Litchfield
Sure, Tore, I'll start and Kishore might want to add a little bit. But -- so first of all, yes, so look, we've been talking about this. I think we've seen inventory in the channel improve. And so we're seeing some modest improvements. We spoke last quarter about some seasonality and just the simple fact that there is still inventory in the channel and expect it to be for the first half of this year.
So we are getting through it, I think the bigger problem is in the broadband and connectivity side. As we've talked about a little bit, our infrastructure business is going extremely well. We don't have big inventory overhang in the channel. Industrial is a little bit mixed. In certain areas where things are going well, I wouldn't say there's a massive amount of inventory, but you're also hearing rumblings of some things slowing down in industrial and multi-market.
Tore Egil Svanberg
Very good. And if we now sort of assume that this is a $400 million business, at least if you take Q1, that's the run rate of the business. And I know that you guys segment by 4 business units or segments. But if we think about that $400 million, how much of that is kind of cyclical versus secular now? Because you clearly have a lot of secular stuff that's growing. You would have some great new design wins and optical and so on and so forth.
So just trying to understand, if we look at that baseline of, let's say, $100 million a quarter of $400 million in run rate, how much of that would be "cyclical" versus more secular? I don't know if there's any way you can talk about that.
Steven G. Litchfield
I don't know that I can break that out. And I -- honestly, Tore, I think I would go back to reiterate -- I mean we see the problems and where we're seeing the market declines, the inventory in the channel is around broadband and connectivity. These other markets are doing reasonably well. We're managing -- I mean there's a little bit of a softness on the industrial side, but I would -- you're seeing really good performance on the infrastructure side, and that's where we've got lots of new products.
Kishore spoke quite a bit in his portion about some of the newer products and infrastructure, which are all new product revenues that are in the market. In some cases, already have some revenues. And in other cases, they are design wins that are expected to turn into revenues. And so we certainly expect to come out of this thing stronger, a much better company, and we've got some exciting new products to do that with.
Kishore Seendripu
It's also true in the broadband and connectivity side, right? We talked about our offerings in the new PON product lines and the WiFi 7 connectivity. So what you're seeing right now is really at a place on the broadband connectivity, that's at the bottom it's all noise right now in terms of what's happening on the bookings and the inventory and so on.
So once we recover, we expect that the new product cycles and the new products that we have announced and we have launched will actually pick up the growth even on the broadband and connectivity side. So I wouldn't discount that there is -- it's a tale of two cities, broadband and connectivity and then the other ones that are growing nicely. I think there are growth vectors even in the broadband and connectivity side as well as all the strong product launches that are happening on the infrastructure side.
Operator
Our next question is from Quinn Bolton with Needham & Company.
Nathaniel Quinn Bolton
First one to just ask, what do you guys hearing kind of from end customers about the effects of the infrastructure bill and matching funds, some of the folks in the broadband space like Harmonic and Calix, I think, have said they're expecting a very weak first half of calendar '24 as a lot of these folks are holding off to try to put as much of their CapEx into the back half of the year, maybe even next year where they get one-for-one matching dollars. And so it feels like there's a bit of a shift in CapEx spending to future quarters.
Do you guys have any thoughts on that? Are you seeing it? And I assume that, that activity is probably exacerbating the inventory burn here in the near term if nobody is spending a lot on the CapEx side?
Steven G. Litchfield
I think the way, Quinn, I would answer the question. So obviously, we're aware of some of the commentary around some of the infrastructure bill and the projected subsidies that kind of come along with that. I think we, look, at the end of the day, we're kind of going through this inventory correction. A lot of that's driven -- is impacted by near-term or shorter-term demand that's clearly been, I'd say, slower than expected, and so it's kind of dragging as far as getting through this inventory.
I think what's exciting for us is that we continue to see more telcos build out. I mean they have been aggressive on the CapEx spending. Some of the second tier, third tier, some of those guys are kind of waiting on subsidies. And so that -- it indeed may push 2, 3 quarters. And I don't think that's entirely surprising, but it definitely doesn't help the recovery.
Kishore Seendripu
The way we look at it is like what is the order pattern and when it resurrects itself and how is the inventory burning, the inventory levels are going down. We are beginning to see make progress and see some bookings start to increase. That has actually been positive.
So obviously, the bookings are not necessarily due for Q1 or Q2, they spread over the entire year because the lead times are now well established. So I really don't think that we can map directly from the statements at some of these players you mentioned and extrapolate to that our activities. I think what changes in our -- what happens in our direction is really about when that inventory really depletes and the orders return to some normalcy.
Nathaniel Quinn Bolton
I guess if that activity is happening, it obviously makes for an extended bottom, which I think you're going through now, but I would think at some point the snapback be pretty steep if guys are just holding off waiting for matching funds. But I guess right now, I assume lead times are fairly short, and you don't have evidence or strong order activity that would suggest you start to see a stronger recovery at some point, whether it's Q2 or Q3, it sounds like visibility in broadband and connectivity is still pretty low. Is that right?
Kishore Seendripu
Yes. I think the short-term visibility is one thing, but really, it has to come back strong when the rationalization happens, as we mentioned. And because there will be nothing in the channel to ship basically, right? That's the extremity of the behavior of the vendors. So you're absolutely right. And I mean, that sets up a stage for a nice -- I don't like to talk -- on a tailwind for 2025, if you will, right? Where we get back to being where we legitimately think we are from a company perspective.
Nathaniel Quinn Bolton
And then I just wanted to ask on the infrastructure side. I know you guys, for a quarter or 2, have been talking about your Ethernet design wins in the enterprise and SMB space. But I think if I heard the prepared script, right, you're talking about a business that could reach $100 million over the next 18 to 24 months. I just wanted to clarify that you see that level of activity in the Ethernet to that because that was -- that's certainly, if that's right, that was a lot bigger than what I was thinking in terms of your Ethernet opportunity, especially in that kind of time frame.
Kishore Seendripu
Absolutely. With the products that we are pointing to very large ASP devices, we have a unique offering, there's no competing offering in that space, in that class of product. And we have good design win pipeline that points to the revenues reaching in that order. Obviously, the revenue includes certain gateway router revenues as well, but a substantial portion is also going to be infrastructure, infrastructure, basically enterprise Ethernet which is the more exciting part because it provides a nice foundation but a long-term revenue cycle.
Operator
Our next question is from Suji Desilva with ROTH MKM. David is your line on mute?
Unidentified Analyst
It's David. Can you hear me?
Steven G. Litchfield
Yes, go ahead, David.
Unidentified Analyst
Sorry, it sounded like you called Suji. So just a couple of quick questions here. But Steve, you guys are going to be down 62% year-on-year at the midpoint of the guidance here. How quickly can we expect to see some of these new products and wins really begin to ramp? And what do you think that contribution will be for this year from the new product side, maybe?
Steven G. Litchfield
Well, so yes, you're right. These are big annual declines. I think as inventory corrects, and I think this is why a lot of investors, et cetera, kind of pointing to 2025. We've talked a lot about 2025 so you can kind of see some, some normalcy in the business, if you will.
But we've talked a lot about what those growth drivers are. I mean whether they be optical our Ethernet business that Kishore just spoke of, our storage accelerators, which we spent a little bit of time talking about our WiFi business, our PON business, we've been seeing nice growth. We will continue to see growth in all those areas. But naturally, it's not as visible with some of the inventory headwinds that we have. And so you'll see a lot more of that will be delivered in 2025. But a lot of them are in the market, and you will see growth. I mean optical is a great example where you will see growth this year from our optical business, and -- but it will be much more meaningful in 2025.
Unidentified Analyst
And I guess if you kind of look across your [disty], your direct customers, is there any way to size of magnitude of the excesses that are still out there? And I know that the burn rate is also challenging. But just trying to understand how much is out there? And then any way to kind of parse out what the end demand softness relative to what is just inventory excesses that need to be digested there?
Steven G. Litchfield
Look, I mean, I think we -- I think I said it a little earlier, but I mean, really, that first half of the year is certainly still we've got inventory headwinds as that bleeds into Q3. I don't know, possibly. But I also think that we'll start to get back to revenue growth as well, even though not the entirety of this inventory is completely clean out of the channel.
Operator
Our next question is from Suji Desilva with ROTH MKM.
Suji Desilva
So I know, Steve, you guided the 1Q to decline sequentially across all the segments. I'm wondering if you could give us kind of which ones you might expect to decline more or less just a ranking would help.
Steven G. Litchfield
Yes. I mean we're not going to rank them, and all of them are down. I mean, we're the -- if I think a little bit of color, I mean, infrastructure, as we've talked about, the wireless infrastructure business was super strong, kind of the first 3 quarters, and we had talked about kind of a 2 to 3 quarter lull there as that ramps back up. And so that's kind of going as planned. Optical business is doing exceptionally well. We're seeing some accelerated orders there. So that's pretty exciting. But again, that's very back-end loaded.
So first half of the year, we kind of grind higher, and we'll definitely see it pick up quite a bit in Q3 and Q4. The broadband business and connectivity business, for that matter, I mean, down in Q1. And I think it will still struggle in Q2. I won't give you a direction, but then we'll -- as that inventory clears, we'll start to see some improvements. Industrial multi-markets held up extremely well, but there's some crosscurrents out there that we definitely expect to see that down in Q1. And then hopefully kind of bounce along the bottom as you get through some inventory and then grow out of that in the back half of the year.
Suji Desilva
And then my other question is on the channel inventory, just some follow-ups from before, prior questions. It just sounds like maybe Kishore, according to your comments that some of the guys are looking to take inventory below typical levels, maybe kind of lean it out. Is that -- was that what you're implying in terms of what the posture is of the channel and the customers right now? I just want to make sure I heard that clearly.
Kishore Seendripu
Absolutely correct. The [bias] is to [order] correction. So the question is, how much inventory is naturally [Nexis]. And we've been talking about in the last earnings call, I said that maybe we ended at 6 months of it left. Now if they go, they lean a little harder on it, then some bleeding happens into Q3, as Steve mentioned. But we have enough growth drivers here, especially the infrastructure. They were -- optical revenues did not exist, practically zero in Q4 and now we have said that we should see tens of millions of revenues in 2024. That means that we've got to be a healthy growth happening in Q1 and we expect that momentum to continue. And then we got some other production ramps happening, and that could be a very nice growth driver.
So basically, there's a lot of motion going on. But if you look at my prepared remarks, right, the real big growth opportunities are in terms of product cycle commencements are in optical, right? And then we have -- once the telco [softening] sort of recovers, but still on the backhaul, we expect in the latter of the year to revenue to pick up.
And then we have our storage accelerators that were barely any last year. Now they're going to be a pretty strong driver. And then you have Ethernet connectivity and some new design win ramps that will start in the PON side. So I think I've listed out in the prepared remarks in a sequence of importance, I think that should provide you color. That's a very healthy product cycle ramp, commence, been happening now that should stand good stead for a few years to come.
Operator
Our next question is from Christopher Rolland with Susquehanna.
Christopher Adam Jackson Rolland
So your commentary, I guess, around PAM4 ramping in mid-'24 and then more next year. Can you talk about DSPs versus selling into AECs, transceivers, AOCs, these kind of special programs that you talked about. Tell us kind of where these are going and then if you could, what is your value prop? are you guys faster? Are you lower power? Are you competing from a cost dynamic? How are you differentiating in this market to gain traction?
Kishore Seendripu
Thanks, Chris. Yes, you're absolutely right. The optical is turning a corner here. We've got a few other -- few more calls that are in the last phases, hopefully, we get through that expeditiously. But like I said earlier, right, this year, we're doing the teens to $30-odd million of revenue. In optical we will be in a very good place next year. And so we are feeling increasingly bullish. Like I said, that the value proposition is very, very clear, right? It is -- we are the only 5-nanometer, production-ready, 800-gigabit PAM4 DSP in the market and even for 400-gigabit PAM4.
So naturally, the advantages that [accrue] we did are lower power. And cost excellence comes from multiple factors. One is higher levels of integration, but integrated laser drivers and lower power reduces the bill of material cost of the customers' modules. Obviously, performance is a given and that can be traded off for power. So that is the only way to enter this market because we have been -- these are second generation of investments and differentiation is what drives our position vis-a-vis incumbents who have been shipping for a while in this marketplace.
So having said that, currently, the revenues we're speaking about are optical transceivers, and that is easily the biggest part of the market. The next part of the market will be active optical cables. As I've said before, the active electrical cables we expect in 3 years from now to about 10% of the market.
So -- and whether the active electrical cables are purely 100 gigabit phenomenon or they even move into the 200 gigabit per [land] solutions that remains to be seen. But as we speak today, active electrical cable is the smallest piece of the market. And in 3 years from now, we expect it to be about 8% to 10% of the overall PAM4 DSP market.
And there is not much differentiation between the various markets as far as DSP is concerned. But there are differentiations with respect to the laser drivers and such other analog components for power efficiency between active optical cables and active electrical cables. I hope that gives you sufficient color.
Christopher Adam Jackson Rolland
Yes. Perhaps as a second one. MaxLinear probably has the largest peak to trough of all of our covered companies, you've -- from peak to now trough, I think you've lost 2/3 of that peak revenue.
So I'd love to know just longer term off of this, call it, 95 for March. What do you think is a more normalized run rate for you guys total company over time? And what do you think your undershipping demand right now, sell-in versus sell-through, including customer inventories? How do you view that, is it $50 million? Is it significantly higher than that on a quarterly basis? How do you view that?
Kishore Seendripu
Chris, let me take up the question, then maybe Steve, you can add more color here. Firstly, I think you're referring to the 2/3 effects from the peak specifically to the broadband business and connectivity business.
Christopher Adam Jackson Rolland
All businesses, but you were at 280 in June of '22, and you're down to 95.
Kishore Seendripu
Yes. So that is on a quarterly base annualized, right? Obviously, we expect growth to happen towards the second half of this year. And this is our expectation is to be a [transient] phenomenon. Number one, on -- just as we are undershipping demand quite extremely right now, certain parts of the business, then the flip side is also true that we overship demand during the pandemic period, and that's the reason we are here. So I think the answer would be somewhere in between, right? Naturally, logically assuming the product portfolio has not changed, okay?
So the legacy portfolio, as you saw maybe in 2023 mid, let's call it, is I'm just going to do the math here, 1.1 to 700, somewhere in between, right? That's approximately an [$8 billion to a $9 billion] business. Now looking forward, we got all these new product cycle drivers infrastructure being one of the most interesting months.
And other -- and then recovery in the -- and growth in PON business, which is very, very little small fraction of that particular revenues looking back, what we talked about, you should see the company get back to the $1 billion range in the next 2 to 3 years or so, 3 years or so, which will be true assuming that we are predicting inventory drag down phenomenon being extreme, as Quinn pointed out, and that there should be a swift recovery once people say, hey, we need to get back to doing business much more in a healthy manner.
So I think that -- we run businesses on a longer cycle basis. We do care about quarterly cadence and improvement. And in that context of things, we're building a fantastic portfolio here to smooth out the quarterly cycle growth looking forward.
Explaining the past, there's only one elephant in the room, and we go about it at 1,000x in the last 3 quarters, which is the inventory hangover event. There's no fundamental problem in the product portfolio, no share losses. In fact, they're adding more robust and market expansive products to our portfolio. So I think you should feel rest assure that execution is going very well from a development and product launch perspective.
Christopher Adam Jackson Rolland
Do you guys hazard a guess on how the difference between sell-in and sell-through for March?
Kishore Seendripu
I wouldn't hazard a guess, but the selling phenomenon [sell-through] phenomenon is a gain and inventory pile up, right? That's a natural sequence. But to the extent that we are tracking the sell-through right now, it's pretty healthy. which only means that we are undershipping demand quite significantly. So the inventory is burning down.
Operator
Our next question is from Tim Savageaux with Northland Capital Markets.
Timothy Paul Savageaux
First question on PON. I think you mentioned -- did you mention $50 million in revenue for '23?
Kishore Seendripu
Yes.
Timothy Paul Savageaux
Yes. Okay. And so I imagine that mix looked a lot different at the beginning of the year than the end and it looks like that accounts for 1/4 of the revenue. Would you expect in your Q1 guide for PON to be greater than cable, if you will, begin to find it that way for the first time ever. And would you expect that to be the case for the whole of '24? And if so, maybe by what order of magnitude will PON be greater than 50% of broadband revenue? And then I've a follow-up.
Steven G. Litchfield
Yes. So Tim, I mean, we talked about in the prepared remarks about that $50 million, so we've grown nicely, right? Two years ago, we were doing less than $10 million. So two years, we've grown this to $50 million even in a rough market environment, I acknowledge your point about the timing of it, certainly, the last quarter or so has been tougher.
But I guess I would highlight that we've had a big North America telco ramping last year. So that's exciting. More to come. I mean we're confident that we can double this business over the next two years. That market also has inventory in the channel. And so we've got to get some through some inventory headwinds. A lot of this product is new product as well. So that will naturally roll out this year and in the back half of this year, particularly and kind of gives us confidence in exiting, call it, [exiting '25], around that $100 million target that we highlighted.
Timothy Paul Savageaux
It seems like it should be more than half in '24, but I'll leave that be.
Steven G. Litchfield
We didn't want to say how much it would be in '24.
Timothy Paul Savageaux
I realize you didn't. I wish you would have.
Steven G. Litchfield
I see your point.
Timothy Paul Savageaux
On infrastructure, good growth year this year, obviously driven by wireless. And you're obviously facing some tough comps from the first half of the last year I think in microwave. So I assume you think infrastructure will continue to grow. My question was going to be, what can growth accelerate? And I think that might be a challenge on a percentage basis coming off [$30 million]. But you grew $40 million in absolute dollars in '23. Can you do that again in '24?
Kishore Seendripu
It depends a lot on a whole bunch wireless hold back in the first half of this year because whatever wireless is giving up, so to speak, in the softness that we are seeing in the telco infrastructure spend, optically will be picking up the slack. The data center businesses.
So I really think it's a mix of factors between optical, wireless being the 2 big ones, Ethernet and storage accelerators will definitely be new growth drivers. So I'm hopeful it's positive relative to last year, but it's on a what I call a steep edge. So it could really do better, but we expect definitely flat or better come back to a '23.
Timothy Paul Savageaux
And last question for me is, to the extent that, that makes infrastructure your largest segment in '24, which likely to be the case. What are the implications there for gross margins? And do you expect some mix-related uplift in margins as a result of that? And that's it for me.
Steven G. Litchfield
So you're absolutely right in identifying that infrastructure is higher gross margins. And so as infrastructure becomes a bigger part of the portfolio and continues to grow, yes, we will see gross margins improve. I think, as I think about gross margin puts and takes in 2024, I mean, look, we're going to see some challenges in the first half of the year for sure as we kind of work through with the lower revenue numbers, some modest pricing pressures. I mean, typically, that's not a big portion of our business, but in these downturns, it can be a little tougher.
All that being said, very confident that as infrastructure grows as a percentage of the business that we will certainly see movement back towards that kind of mid 60 points that we've highlighted.
Operator
Our next question is from Ananda Baruah with Loop Capital.
Ananda Prosad Baruah
I guess the first one, Kishore is -- and Steve as well, any context you can provide -- this is really on the 400-G and 800-G solution. Any context you can provide on where you are with qualifications? And I guess anything you can provide on how it is you think about your qualification -- like, I guess, really the TAM, your TAM opportunity, qualification TAM opportunity, kind of over the long term, in that business? And then I have a quick follow-up also.
Kishore Seendripu
So you're referring to the optical PAM4 data center business. Really speaking, we talked about, all reports indicate with some level of uncertainty and award is all AI phenomenon does in terms of exploring the market to be bigger. They expect in 3 years from now, the business is about 40 million units or so of DSP transceivers being sold, which is PAM4 DSPs and that's about -- anyway, let's assume over $1.5 billion of addressable silicon.
We plan all our activities around 20% to 25% market share of the business. But that entire business is composed of 2 components. One is the -- like you see 200-gig, 400-gig PAM4 DSPs and 800-gig PAM4 DSPs. Our expectation is 60% of that business, let's call it, close to $1 billion of addressable SAM in 3 years from now. And we plan that a good victory would be for us to have 20% of the business, 20% to 25% of the business in the first phase.
So I think from that, you can extrapolate that the design win pipeline should from a bottom-up basis, should be aligned to the top line expectations, give or take a year. So you're looking at that -- ultimately, how big can our optical business be. And in this current generation of product offerings, we expect it to be anywhere between $150 million to $300 million of revenue, right?
Ananda Prosad Baruah
That's a lot of really good context, Kishore. Yes. No, that's awesome. I appreciate that. I'll do follow-ups on the call back in that regard. Let me just ask you real quick. How is linearity during the quarter, the December quarter? And I guess, you're a month in here, you gave guidance. And is there a meaningful shift in linear? I mean, I guess it really is the guidance a product of what you saw entering this quarter? Or was there some evidence of softening through the end of the December quarter? And that's it for me.
Steven G. Litchfield
Yes, Ananda. So I don't think we were surprised by the quarter. We knew that it would be somewhat back-end loaded. We had a fair amount of backlog going into the quarter. And there's certainly some uncertainty around that. I don't think that it deteriorated throughout the quarter by any means. It felt kind of as expected.
Clearly, Q1 was down probably a little more than where we thought it would be, but I also think it's kind of prudent given the kind of the outlook in the industry, and we get through this inventory downturn. So yes, I mean, linearity in the quarter was tough. I think the things that we look to, I mean, what are those new demand drivers? What are the bookings looking like we're seeing some decent improvements there. People are getting through the inventory. And so those are the encouraging signs that we see and even speaking to the first ever month of the year, as we start to see those signs improve.
Operator
Our next question is from Tore Svanberg with Stifel.
Tore Egil Svanberg
Yes. I just had a few sort of housekeeping ones. So maybe on that last topic in the DSO, obviously, very backend loaded quarter. But is that also a function just of the really short lead times? And is there a chance that maybe customers even now, given the short lead times that this quarter can never assume a profile, meaning they will order a lot at the end of the quarter?
Steven G. Litchfield
I definitely think that's the case. I mean, [the Steven] speaks to Kishore's comment about how the industry overreacts. We've seen customers come in with expedites. And so what happens during these times is, in some cases, they've got a lot of inventory out there, but yet, they don't have the right inventory. And that's what I think what we've seen in a lot of cases, over a lot of industries, a lot of customers and rather than order it ahead of time and proper lead times. They're waiting to the end, hoping that they get product at the last minute. So I wouldn't be surprised that we continue to see that in the current quarter.
Tore Egil Svanberg
And Steve, on the OpEx initiatives that you've done, it doesn't sound like there will be a big impact in Q1. So should we assume that this will have more of an impact then in Q2 and beyond?
Steven G. Litchfield
So yes, so we -- as I talked about in the previous call, we did take some actions on the OpEx front. They were fairly meaningful offsetting kind of existing spend. We also had a number of NRE dollars that we had that were contra R&D expenses, and they will be declining next year. So the actual cut, it was fairly sizable. But I think that's what you would typically see from MaxLinear during these downturns. We're definitely dialing back the spend. I do expect OpEx to come down throughout the year.
Keep in mind, Q1 also has payroll taxes, bonuses, things like that, that get rolled into the first quarter of the year. So it's always a little bit higher. We also have more restructuring costs that will -- are not expected to come out until the end of Q1 or the mid part of Q1. And so yes, I certainly see further benefits from actions already taken.
Tore Egil Svanberg
And just so I know the sort of the newer product ramps. So if I sort of caught this correctly, I think you said the PAM4 DSP business being -- could potentially be between mid-teens and $30 million this year. Did I hear that right?
Steven G. Litchfield
I think that's -- we don't have an official guide. That is exactly what Kishore said. I think that's in the ballpark of our expectations.
Tore Egil Svanberg
And Panther III, I think you expect that business to double. Would Panther III be sort of similar numbers like optical DSP or smaller?
Kishore Seendripu
In the range.
Operator
Our next question is from Richard Shannon with Craig-Hallum.
Richard Cutts Shannon
I guess I'll ask a question on the fiber business. You talked about it being, I think, $50 million last year, doubling within a couple of years here. And talk about a second kind of Tier 1 operator in the U.S. ramping up here. To what degree are the 2 major North American operators you talked about kind of driving that business to doubling in a couple of years? Is it concentrated or not? And just -- so it's mostly a North American kind of customer base? Do you expect to expand geographically within that as well?
Steven G. Litchfield
So we talked a lot about the North America folks. I mean they're definitely newer adopters. They're also working on WiFi 7, so even future platforms we're already working on. We do have certainly plenty of opportunities in Europe as well as those guys kind of transition out of DSL into fiber. So we have a number of opportunities there.
The other -- those one or two customers aren't the only ones. We also have some Tier 2 guys in North America that are driving revenues and have been driving revenues, and I would expect that to continue this year and into 2025.
Richard Cutts Shannon
Follow-up on the topic of DSP here in context, and I think it's been asked by a couple of other people here earlier today about the goal of getting to a 20% share in this business over time. As you've gone through the qualifications and I think you've mentioned some still ongoing here for ramping later this year and over next year.
Are we on that track, Kishore, or your kind of your expectation of getting to that 20% share goal within a few years? Feeling pretty good about that. I still think some things to go. Maybe just kind of comment on how well that's coming into play.
Kishore Seendripu
Well, yes. I mean, we said for the first time initial early-stage revenues are bigger now. And then we said there are new ramps in the second half. Those are the ones pending the calls happening. If both were to pay out, then the numbers will work out and those ramps alone should get you into the ballpark in the 3-year window we talked about.
So getting to the 20% has got some noise around it in terms of sometimes it really is the end customer ramp slower rather than whether we get that share or not is our expectations. So if we hit our this year's numbers in vicinity of the numbers I spoke about I think that's the reality that's going to play out.
Operator
There are no further questions at this time. I'd like to hand the floor back over to Kishore Seendripu for any closing comments.
Kishore Seendripu
So thank you. In closing, I would like to say we are excited about our market position and new product cycle growth drivers that beginning to happen in 2024, and we expect those launches to continue to 2025. The product innovation that will drive our success in optical WiFi, fiber broadband access, gateway Ethernet-wired infrastructure, they're all in the market today and are being fueled by our customer traction and design win momentum.
As always, we will continue to focus strongly on our operational efficiency, fiscal discipline and creating shareholder value. as we position ourselves for an exciting future as these products really reach their full potential in the marketplace.
With that, this quarter we'll be participating in the Susquehanna Technology Conference in New York on 29th February, the JMP Technology Conference in San Francisco on March 4, the Loop Capital Conference in New York on March 12, the ROTH Capital Growth Conference in Dana Point on March 18. Thank you all for joining us today and look forward to speaking with you again soon.
Operator
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
