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Dec. 9, 2014, 1:52 PM
- Verizon CFO Fran Shammo has promised his company will continue growing wireless capex (albeit while cutting wireline capex) to keep up with data traffic growth. Small cells and smart antennas were mentioned as areas of interest.
- The remarks have been well-received by investors in telecom equipment and component/chip vendors, many of whom have been hit hard by soft North American and (to an extent) European spending. The Nasdaq is up 0.3%.
- Gainers: JDSU +3.6%. FNSR +3.1%. CYNI +10.1%. INFN +2.8%. CIEN +1.9%. AMCC +3.7%. PMCS +3.7%. ZHNE +3%. OCLR +5.4%. AFOP +2.8%. ADTN +2.5%. UBNT +2.2%. XXIA +1.7%. CALX +3.5%. EZCH +2.9%. SONS +2.4%. Sonus is also benefiting from a bullish Wedbush coverage launch.
- The group was pummeled in November after AT&T set a 2015 capex budget of $18B, down from 2014's $21B.
Dec. 5, 2014, 10:34 AM
- Cyan's (NYSE:CYNI) $50M offering offering of convertible senior notes due 2019 carries an interest rate of 8%, and comes with warrants to buy 11.25M shares. The company has an option to issue another $10M worth of notes and related warrants within 13 days of the issuance date.
- The notes feature a conversion price of $2.44/share, and the warrants an exercise price of $3.62/share. Cyan closed at $2.07 yesterday, and was at $2.45 before announcing the offering on Wednesday morning.
- Net proceeds are expected to total $46.6M.
Dec. 3, 2014, 12:11 PM
Nov. 20, 2014, 1:38 PM
- Optical networking hardware vendors and their component suppliers are turning in a good day. The gains come a day after component vendor Oplink announced it's being acquired by Koch Industries for $445M, and will be managed by connector maker Molex (a Koch subsidiary).
- RBC thinks Koch's entrance into the slumping component industry could trigger further consolidation. "Current fab utilization rates remain low ... with optical component vendors unable to charge a premium for their innovation. Gross margins are currently weighed by competitive pressures with optical component makers willing to cut pricing to account for high fixed costs."
- The firm believes Finisar (FNSR +1%) could be a buyer, and JDS Uniphase (JDSU +1.5%) and Oclaro (OCLR +7.1%) sellers. JDS, set to spin off its component unit, is facing activist pressure to put the business on sale.
- Meanwhile, Ciena (CIEN +2.8%) announced this morning it's partnering with Avaya to offer an enterprise solution that pairs its optical networking and integrated optical/Ethernet gear with Avaya's Ethernet switches. Like peers, Ciena is trying to lower its dependence on pressured carrier capex budgets.
- Other gainers: AFOP +3.7%. NPTN +3.3%. ADTN +2.7%. INFN +1.9%.
Nov. 13, 2014, 3:28 PM
- Though Cisco is higher after beating FQ1 estimates and issuing soft FQ2 guidance, many telecom equipment and component/chip names are going in the opposite direction.
- At issue: Cisco reported a 10% Y/Y drop in service provider orders (-18% in the U.S.), while stating on its CC (transcript) it "saw dramatically reduced spend at several large U.S. service providers." The networking giant also suggested demand will remain weak during the next couple of quarters.
- The remarks came just a few days after AT&T set a 2015 capex budget of $18B (down from 2014's $21B), prompting a Monday selloff in equipment vendors and their suppliers.
- Today's decliners: ALU -3.8%. CIEN -2.8%. JDSU -3.1%. FNSR -3.7%. JNPR -1.7%. INFN -3.8%. RKUS -3.4%. ZHNE -3.2%. AMCC -4.1%. CALX -2.7%. CYNI -1.8%. ADTN -3.5%. ALLT -2.4%. FN -1.9%.
Nov. 10, 2014, 9:51 AM
- Declaring its Project VIP network expansion effort ahead of schedule, AT&T has set a 2015 capex budget of $18B, down from 2014's $21B and below a prior forecast of $20B. The figure is equal to only 13% of AT&T's 2015 revenue consensus.
- Telecom equipment and optical component makers, many of whom have already felt the effects of AT&T's subdued 2014 wireline capex, are off in early trading. CSCO -1.4%. ALU -4.8%. CIEN -6.6%. ADTN -7.8%. JNPR -2.5%. RKUS -2.1%. SONS -2.9%. FNSR -2.9%. JDSU -1.1%. RKUS -2.1%. XXIA -2%. FFIV -1.6%. ERIC -1.7%.
- Cisco delivers its FQ1 report on Wednesday. The networking giant reported an 11% Y/Y FQ4 drop in service provider orders, thanks to both weak demand and share loss.
Oct. 24, 2014, 12:32 PM
- Though Ericsson (ERIC -3%) beat Q3 estimates, the mobile infrastructure giant stated North American business activity "slowed down during the quarter as operators currently focus on cash flow optimization." It added North American spending patterns make it tough to judge near-term demand.
- Ericsson's North American sales fell 3% Y/Y to $1.93B, partly offsetting strong growth in China, India (+56%), the Middle East (+38%), and other emerging markets. Top-line figures were boosted some by M&A.
- AT&T and Verizon have been taking cautious approaches to capex, and Sprint (though investing heavily in 4G following the SoftBank deal) has been looking to cut costs under new CEO Marcelo Claure. The U.S. and Japan have been ahead of many other developed markets in ramping 4G coverage.
- Juniper (JNPR -6.3%) offered light Q4 guidance two weeks after delivering a Q3 warning, and reported its service provider sales were down 6% Y/Y due to soft demand from Asia-Pac, EMEA, and (especially) U.S. carriers.
- When the world's #2 carrier router vendor was asked on the CC (transcript) about 2015 sales, CEO Shaygan Keradpir admitted Juniper has poor near-term visibility, and that a rebound could take time. "Because we think these cycles typically take 2 to 4 quarters ... our planning assumption is that growth will return in the second half of 2015."
- Nokia and Infinera recently offered more positive numbers/commentary. Bulls have argued strong data/video traffic growth will lift capex. Bears have argued soft (if not negative) carrier revenue growth will continue pressuring spending.
- Decliners: ALU -1.6%. JDSU -2%. INFN -3.1%. CIEN -2.5%. CALX -2.5%. FNSR -1.8%. ADTN -1.5%. The Nasdaq is up 0.4%.
Oct. 22, 2014, 5:38 PM
- Infinera (NASDAQ:INFN) guided on its Q3 CC for Q4 revenue of $175M-$185M, above a $160.4M consensus.
- The outlook serves as a breath of fresh for the telecom equipment industry, given its recent issues. Infinera bulls have argued for some time the company's strong 100G optical exposure would allow it to outperform.
- Rival Ciena (NYSE:CIEN) is ticking higher in response.
- Infinera's Q3 results, PR
Oct. 15, 2014, 4:07 PM
- In an encouraging sign for beaten-down telecom equipment and chip/component stocks, Adtran (ADTN +5.7%) managed to rally even though it guided on its Q3 CC (transcript) for a low-to-mid teens Q/Q revenue drop. Consensus (doesn't appear to have fully accounted for Adtran's Q3 warning) was for revenue to drop 2% to $154.9M in Q4.
- Adtran attributed much of its Q3 weakness to "a decline in Europe as a large project there had a seasonal slowdown." Enterprise softness also took a toll.
- The company "[expects] to see an upturn in this business" in 2015, but European sales are expected to remain soft in Q4. Other equipment vendors, such as Juniper (JNPR +2%) and Ciena (CIEN +2.7%), have provided weak guidance blamed on U.S. wireline capex; AT&T is generally seen as a big culprit.
- In addition to Juniper and Ciena, many other industry names have closed with healthy gains. PKT +6.3%. INFN +3.4%. ZHNE +6.7%. ALLT +5.2%. AFOP +4.5%. AMCC +12.5%. CYNI +4%. CALX +3.3%. FNSR +3.1%. UBNT +4.2%. OPLK +3.4%. RKUS +3.3%.
Oct. 10, 2014, 10:58 AM
- Telecom equipment makers and their chip/component suppliers are seeing more pain after Juniper (JNPR -7.5%) and Procera (PKT -32%) issued Q3 warnings (I, II), the latest bad earnings news for an industry that has seen plenty due to soft wireline capex. A few enterprise-focused networking vendors are also having a rough day.
- Cisco (CSCO -3.1%) has fallen below $23.50, and Alcatel-Lucent (ALU -4.3%) below $2.50. Other decliners: CIEN -4.7%. JDSU -4.6%. FFIV -5.3%. ANET -7%. RKUS -5.7%. SONS -4.4%. INFN -2.4%. CYNI -3.5%. AMCC -10%. PMCS -3.4%. NPTN -7.7%.
- Analysts are defending Juniper, arguing (in remarks that also have implications for peers) bad news has been priced in and that telecom capex is likely to improve in 2015. Bulls have argued Web/mobile traffic growth and SDN/NFV investments will ultimately boost capex, in spite of industry service revenue pressures.
- The Nasdaq as a whole is down 1.2%. Chip stocks are off sharply following Microchip's warning and prediction of an industry correction.
- Yesterday: Telecom equipment stocks slump as capex worries persist
Oct. 9, 2014, 11:34 AM
- Alcatel-Lucent (ALU -9%) is headlining a group of telecom equipment vendors selling off this morning, as worries about weak telecom capex remain following plenty of bad earnings news. Alcatel's declines come in spite of an upgrade to Buy from Craig-Hallum.
- Morgan Stanley has cut its Q3 and Q4 Juniper (JNPR -1%) estimates due to expectations of weak AT&T capex. Jefferies reported in June AT&T had slashed its wireline capex, and Ciena (CIEN -3.7%) stated in September AT&T was responsible for its soft Oct. quarter guidance.
- Ma Bell has slashed wireline capex ahead of the full launch of its huge Domain 2.0 SDN/NFV initiative. However, like Ciena, Morgan Stanley asserts Domain 2.0 remains a long-term positive for spending. MKM has argued it's a positive for Ciena and several other firms, but a negative for Cisco given a loss of vendor lock-in.
- Yesterday, BofA/Merrill launched coverage on Alcatel with a Neutral rating, and expressed concerns about the company's ability to hit 2015 revenue estimates amid a weak demand environment. Two weeks ago, Dell'Oro forecast global telecom capex will fall 2% in 2015 due to slowing mobile revenue growth.
- Bulls argue a lot of bad news is priced in, and the strong Web/mobile traffic growth will provide a lift to capex.
- Other decliners: ERIC -2.6%. ZHNE -3.2%. PKT -3%.
Oct. 6, 2014, 11:30 AM
- EZchip (EZCH -12.5%), a top supplier of network processors for edge/access routers, now expects Q3 revenue of $19M, below prior guidance of $22M and a $22.6M consensus.
- CEO Eli Fruchter: "We have seen weakness in orders as well as inventory adjustments across most of our key customers that are serving the carrier networking equipment space. We believe this is a temporary slowdown, caused primarily by a weaker carrier spending environment that the market is currently going through." Like others, he's optimistic growth will soon pick up.
- Fruchter's remarks echo those from Cisco (EZchip's top customer), Juniper, Ciena, Finisar, JDS Uniphase, and several other firms. Soft North American wireline capex (led by AT&T) has especially been taking a toll on the industry.
- Several telecom equipment and component/chip suppliers are following EZchip lower. CIEN -2.8%. CAVM -2.8%. OCLR -2.7%. ZHNE -2.7%. CYNI -3.1%. AFOP -2.1%. NPTN -2.4%. OPLK -1.7%.
Oct. 3, 2014, 1:37 PM
- Adtran (NASDAQ:ADTN) expects Q3 revenue of $162M-$163M and EPS of $0.23-$0.24, below a consensus of $177.4M and $0.27.
- The company blames a bigger-than-expected Q/Q drop in European sales, and a "softer enterprise spending environment." On the other hand, sales to U.S. carriers (a weak spot for many companies as of late) grew Q/Q, and Adtran forecasts "a re-acceleration in carrier spending both in Europe and the U.S." in 2015.
- Telecom equipment peer Cyan (CYNI -5.4%) is selling off on a day the Nasdaq is up 1%. Calix (CALX -1.1%) is off moderately.
Sep. 22, 2014, 1:45 PM
- High-beta tech stocks are selling off hard as the Nasdaq registers a 1.3% decline. The selling is broad-based, with Internet, solar, and enterprise tech stocks all well-represented among the ranks of major decliners.
- Major Internet decliners: BIDU -4.7%. ANGI -7%. YELP -5.9%. AWAY -5.1%. CHGG -5.9%. GRUB -5.8%. P -5.2%. Z -4.6%. TRLA -4.8%. ATHM -7.9%. BITA -7%. DANG -5.9%. WB -5.3%.
- Solar: FSLR -4.5%. SCTY -7.5%. SPWR -4.5%. DQ -7.6%. JKS -5.5%. ASTI -6.3%. ENPH -5.5%. CSIQ -4.8%.
- Enterprise: WDAY -5.4%. GIMO -6.7%. VMEM -7.7%. IMPV -4.8%. MKTO -4.9%. SPRT -5.1%. CSOD -5.5%.
- Others: HIMX -4.6%. SIGM -5.6%. WATT -9.7%. CYNI -5.3%. ADNC -5.7%. PXLW -5%. SWIR -5.8%. MITK -6%. OCLR -6%.
Sep. 11, 2014, 7:11 AM
- "Combined, the two companies might be valued at $9.85-$14.80 with a midpoint of $12.33," says RBC Capital, upgrading JDS Uniphase (NASDAQ:JDSU) to Outperform, with price target lifted to $18 from $11.
- Previously: JDS Uniphase to split into two public companies
- JDSU +12.4% premarket to $13.61; other optical networking names, Ciena (NYSE:CIEN) +0.8%, Finisar (NASDAQ:FNSR) +1.5%.
Sep. 5, 2014, 9:39 AM
- Goldman is going contrarian on Ciena (NYSE:CIEN), upgrading shares to Buy after they tumbled yesterday due to the light guidance accompanying Ciena's FQ3 beat. The firm cites valuation, and a belief Ciena's margin weakness is temporary.
- On its CC (transcript), Ciena mentioned "up-front incentives" provided to AT&T to secure a supplier role for Ma Bell's massive Domain 2.0 SDN/NFV initiative will pressure FQ4 sales and margins.
- The company also stated early-stage international deployments will hurt margins, and that order timing/revenue recognition for a couple major international projects remains uncertain. Plenty of other companies (Finisar being the most recent) have also reported soft telecom capex is taking a toll.
- CEO Gary Smith insists Ciena's issues are temporary, and that efforts such as Domain 2.0 are a long-term positive. "We have been focused on the convergence between optical and packet, and also on driving a more software-driven architecture for some time now ... You are talking about a very large-scale shift at how people build networks. It's not trivial, not going to happen overnight." He adds 30% of Ciena's revenue now comes from "non-carrier infrastructure," much of it for Internet giants.
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