Kirk Lindstrom

Communications Small Caps: Ever a Risky Ride

Thanks for the list of high risk stocks.

You wrote:

"Finisar (FNSR) $0.63 and Powerwave (PWAV) $ 1.27 are similar financially only. Both are almost breaking even and increasing annual revenues, but have a large amount of debt and negative BV;"

Finisar has a positive book value according to both Reuters and Yahoo! while Powerwave shows a negative book value.

www.reuters.com/financ...

finance.yahoo.com/q/ks...

A large debt load not always bad, especially if you used the money to buy a revenue generating factory at dimes on the dollar during the downturn. Finisar has used its financial strength to acquire growth assets and it sold a slow growth asset to JDSU to help finance it.

Outsourced Manufacturing Will Have Little Impact on Optical Suppliers' Operating Margins

You wrote:

"The optical components industry is still having trouble ridding itself of its science fair culture, and this is reflected in the nonsensical argument that outsourcing somehow puts intellectual property at risk. If this were really the case, the entire datacom and semiconductor industries would have been done in by copycats. "

This may not be true. The IP for Altera (ALTR) or even Intel (INTC) which is going to license and outsource some of its low power, low cost chips, is different than than the IP of Finisar (FNSR).

Much of the IP at Finisar is "how to" that once let out of the bag, is impossible to get back. When I worked at HP fiber optics in the 1980s and 1990s I came up with a manufacturing trick to get good yield on optical transceivers with a couple more db sensitivity than the competition. We never patented the idea because it would be impossible to enforce. We kept it secret and didn't even publish internal papers for internal conferences.

I believe Intel will keep its leading edge chip technology in-house. But it will license its low power, low cost Atom processors to TSMC so others can embed the processor in SOICs and pay Intel a licensing fee.

Finally, I read that many of the component vendors from China have parts to sell in the US but they are having trouble getting them qualified. Knowing how to put the pieces together to make a RELIABLE module is valuable IP, why share it with your competitors which is what you will need to do to get qualified... since what you teach your "partner" will be used to qualify your competition's parts build by the same people.

What Will It Take for Finisar to Reach the High End of Revenue Guidance?

Andrew
You were long Finisar a year ago (Finisar was about $4) and last month according to the article disclosures. Now you show no position. Did you give up on Finisar or did they forget to show you as long? Given your conclusion and the low PE and PEG for FNSR, I'd think you would be adding to positions here.

Thanks for your excellent analysis.
Kirk

Fiber Optics Market: Benefiting from the Online Video Trend

Good article
Boring chart www.investorhives.com/...
I'm long since buying between $1.01 to $1.99 but this long, slow period and all this video demand has me considering adding even more. I thought a good correction would give a better price but it seems to be holding up well.
Kirk out

Finisar Corp.'s New Convertible Notes Come At Shareholders' Expense

Good analysis of the news from Finisar
I put a link to it in our Finisar Discussion Fourm
Thanks