Is Finisar's Boost Related to Google's Fiber Network Announcement?

Includes: FNSR, GOOG
by: Bruce Krasting

Finisar Corporation (NASDAQ:FNSR) makes the subsystems and components for fiber optic communications applications (high tech switches). The company posted solid three month numbers on Tuesday evening. The top line grew to a record $166mm in the most recent period. Sales were up 14% quarter over quarter and 32% year over year. Gross margins are in the low 30% range. With that margin all they need to do is grow the top line and the bottom line is going to come.

The stock opened up 10% and then began a bit of a fade. But as the day chart shows, it came back strong after mid day, shortly after Google (NASDAQ:GOOG) made its announcement regarding a fiber optic broadband investment that it is going to make.

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There are few details on the Google effort. The company said they were going to build an experimental fiber network that will target several cities and up to 500,000 people. They indicated the project would start soon. It will take years to measure success in this for Google, but it is certain that something quite big is about to happen in the world of fiber networks. Google does not do ‘small’ things. I doubt this is an ‘experiment’. This is just a first step.

I asked Finisar for a comment on the Google development. Companies can’t give out information. That said, the response I got from Finisar’s CFO Steve Workman was quite interesting. You can draw your own conclusions from his words:

I don’t believe we have ever confirmed that we sell to Google or not. But either way, more bandwidth ultimately generates more demand for our products. And the large server farms that are built by the likes of Google, Microsoft and Amazon for cloud computing and storage generates demand as well. For a good read on this topic you might try The Big Switch written by Nicholas Carr.

Steve Workman

Disclosure: No position