Finisar At Risk Of Profitless Prosperity
Stephen Simpson, CFA
Stephen Simpson, CFA
Finisar May And Should Help Start Consolidation
Darspal S Mann
Darspal S Mann
Finisar Still Looking For Leverage
Stephen Simpson, CFA
Stephen Simpson, CFA
Mar. 29, 2015, 7:39 PM
- Optical component industry consolidation "was a common topic of discussion among investors and companies" at the industry's recent OFC conference, reports Piper's Troy Jensen. "The reasons for consolidation are well known and center on operational expense savings, a more rational pricing environment, and more complete product lines."
- One deal that's viewed as especially likely: A Finisar (NASDAQ:FNSR) purchase of JDS Uniphase's (NASDAQ:JDSU) optical component/laser unit (CCOP), currently set to be spun off as Lumentum Holdings in Q3. Activist Sandell Asset Management has been urging JDS to sell CCOP, which had FY14 (ended June '14) revenue of $794M (+7% Y/Y). Jefferies' James Kisner thinks a deal could happen, but not before the spinoff occurs.
- Jensen on industry consolidation in general: "The question isn't really an if, but more of the urgency of potential sellers and buyers and also at what price a deal would take place. In general, our feeling is that investors were slightly more anxious for a deal, while companies we spoke with sensed the need for consolidation, but were less anxious."
- The industry has already seen a decent amount of M&A. In addition to CCOP, smaller component vendors Oclaro (OCLR - $213M market cap), Alliance Fiber (AFOP - $308M market cap), Applied Optoelectronics (AAOI - $196M market cap), and NeoPhotonics (NPTN - $217M market cap) could be targeted. NeoPhotonics has soared since delivering a big Q4 beat (fueled by strong 100G component demand) on March 3.
Mar. 25, 2015, 3:57 PM
- With the Nasdaq down 2.3%, only a handful of tech companies are posting 2%+ gains. Meanwhile, the ranks of those posting 4%+ losses are considerable.
- Notable decliners include telecom/networking chipmakers Broadcom (BRCM -5.3%) and PMC-Sierra (PMCS -4.4%), chip equipment giant Applied Materials (AMAT -5.5%), optical component vendor Finisar (FNSR -6.7%), smart grid hardware/software vendor Silver Spring (SSNI -7.9%), Chinese app developer Cheetah Mobile (CMCM -4.4%), cable infrastructure/set-top vendor Arris (ARRS -4.8%), server OEM Super Micro (SMCI -5.8%), IP licensing firm Finjan (FNJN -13.8%), and cloud life sciences software leader Veeva (VEEV -5.7%).
- Broadcom, PMC-Sierra, and Applied Materials have joined a slew of other chip industry names in posting steep losses. Finjan is reversing yesterday's big gains. Cheetah Mobile, which sold off post-earnings last week, announced today's it's the lead investor in a $24M funding round for social/mobile ad platform Nanigans; the move follows the $58M purchase of French mobile ad network MobPartner.
- Previously covered: Solar stocks, Mobileye, GoPro, Groupon, On Track, Netlist, Baidu/Qihoo, AMD, Yingli, Lexmark/Kofax
Mar. 6, 2015, 9:15 AM
Mar. 5, 2015, 5:37 PM
Mar. 5, 2015, 4:27 PM
- Though its FQ3 results were nearly in-line, Finisar (NASDAQ:FNSR) is guiding for FQ4 revenue of $310M-$330M and EPS of $0.22-$0.28, mostly above a consensus of $307.9M and $0.23. Compared with FQ3, FQ4 results will benefit from an extra, but be hurt by the timing of the Chinese New Year.
- Datacom revenue rose 8.5% Q/Q and 11.4% Y/Y to $234.4M, lifted by strong wireless transceiver and 40G/100G component demand; Internet data center buildouts likely boosted the latter. Telecom revenue (under pressure for a few quarters) fell 11.3% Q/Q and 14% Y/Y to $71.9M. In addition to weak carrier capex, the Q/Q drop was caused annual price cuts.
- Operating expenses rose 3% Y/Y to to $63.2M (compares with 4% revenue growth). Gross margin fell to 30% from 31.1% in FQ2 and 37.2% a year earlier (price pressure). FQ4 GM guidance is at 30%.
- Finisar is up to $21.35 AH. Rival JDS Uniphase (NASDAQ:JDSU) is following Finisar higher, rising to $13.51.
- Finisar's FQ3 results, PR, earnings slides (.pdf)
Mar. 5, 2015, 4:02 PM
- Finisar (NASDAQ:FNSR): FQ3 EPS of $0.25 in-line.
- Revenue of $306.28M (+4.2% Y/Y) beats by $0.49M.
Mar. 4, 2015, 5:35 PM
Feb. 12, 2015, 11:03 AM
- Cisco (NASDAQ:CSCO) beat FQ2 estimates on the back of 8% Y/Y product growth (aided by favorable comps), offered in-line guidance (better than feared, given forex pressures), and reported a 5% increase in product orders. Enterprise, SMB, and public sector orders respectively rose 10%, 8%, and 7%, and service provider orders dropping 1% (compares with a 10% FQ1 service provider drop).
- Cisco still isn't modeling a rebound in service provider or emerging markets demand for several quarters, and forecasts global service provider capex will be down by a mid-single digit % in 2015. But it's more optimistic about enterprise, public sector, U.S., and EMEA demand.
- Telecom and networking equipment vendors, many of whom have been hit hard by capex pressures, are rallying following Cisco's numbers, as are a couple of component/chip suppliers. The Nasdaq is up 0.7%.
- Notable gainers include Alcatel-Lucent (ALU +4.7%), Aruba (ARUN +3.4%), Ruckus (RKUS +5.1%), Sonus (SONS +3.4%), Extreme Networks (EXTR +3.4%), Brocade (BRCD +1.9%), Adtran (ADTN +3%), Infoblox (BLOX +2.7%), Finisar (FNSR +2.1%), Cavium (CAVM +2%), Ixia (XXIA +1.9%), and Mavenir (MVNR +3.4%).
- Cisco's 18% Y/Y wireless product sales growth appears to be going over well with Aruba and Ruckus investors, and its 11% switching growth with Extreme and Brocade investors.
Jan. 30, 2015, 2:56 PM
- Optical networking/carrier Ethernet hardware vendor Ciena (CIEN -4%), optical component suppliers Finisar (FNSR -2.4%) and Oclaro (OCLR -2%), and telecom chipmakers AppliedMicro (AMCC -5.9%) and Cavium (CAVM -4.4%) are all off after component vendor JDS Uniphase (JDSU -7.4%) missed FQ2 estimates and provided soft FQ3 guidance.
- On its CC (transcript), JDS observed its FQ2 network enablement (test equipment) and service enablement (telecom software/services) revenue fell a combined 8% Y/Y due to "weaker carrier spending and no budget flush in historically stronger December quarter." Network enablement is expected to remain soft in seasonally weak FQ3 as customers weigh their 2015 spending plans. Service enablement is expected to grow ~24%, after growing 16.6% in FQ2.
- AppliedMicro is down 10% since providing a soft FQ4 EPS guidance (-$0.09 vs. a -$0.07 pre-earnings consensus) on Tuesday afternoon to go with an FQ3 beat. Cavium is giving back the gains it saw yesterday after beating Q4 estimates and providing strong Q1 guidance.
Jan. 23, 2015, 10:32 AM
- Infinera (INFN +17.7%) knocked the cover off the ball yesterday afternoon, soundly beating Q4 estimates and issuing strong Q1 guidance on the back of growing demand for its DTN-X optical transmission/switching platform for 100G deployments.
- Rival Ciena (CIEN +3.7%) and optical component vendors JDS Uniphase (JDSU +2.7%) and Finisar (FNSR +2.3%) are rallying in response. The companies followed equity markets higher yesterday after Verizon guided for its 2015 capex to be slightly above 2014 levels (contrasts with AT&T's planed capex cut).
- On its CC (transcript), Infinera said it added 10 new invoiced DTN-X customers in Q4 (3 new to Infinera altogether), raising its total to 59, and that nearly half of all DTN-X clients are now opting for the company's Instant Bandwidth rapid provisioning tech. Initial revenue for the Cloud Xpress point-to-point interconnect platform was received in December, and 8 customer commitments have been received to date.
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. 4, 2014, 4:33 PM
- Finisar (NASDAQ:FNSR) expects FQ3 revenue of $297M-$312M and EPS of $0.23-$0.27, below a consensus of $323.9M and $0.28.
- FQ2 datacom revenue totaled $215.9M, +6% Y/Y but -10% Q/Q thanks to declining wireless transceiver sales and "lumpy order patterns" from several customers. Telecom revenue remained pressured by weak carrier capex, falling 6% Q/Q and Y/Y to $81.1M.
- Gross margin fell to 31.1% from 32% in FQ1 and 37.1% a year ago. Opex fell 3.1% to $67.3M.
- Low expectations - shares were down 27% YTD going into earnings - are limiting Finisar's AH drop for now.
- FQ2 results, PR, slides (.pdf)
Dec. 4, 2014, 4:02 PM
- Finisar (NASDAQ:FNSR): FQ2 EPS of $0.23 misses by $0.02.
- Revenue of $296.98M (+2.2% Y/Y) misses by $18.27M.
- Shares -7.06% AH.
Dec. 3, 2014, 5:35 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%.
Finisar Corp. provides optical subsystems and components that are used in data communication and telecommunication applications. Its optical subsystems consist primarily of transmitters, receivers, transceivers, transponders and active optical cables that provide the fundamental... More
Industry: Networking & Communication Devices
Country: United States
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