Sep. 2, 2014, 1:45 PM
- Ahead of Thursday's FQ1 report, Jefferies' James Kisner has downgraded Finisar (FNSR -6.2%) to Hold, and cut his target by $6 to $19.
- Kisner cites weak pricing for both datacom and telecom optical components, weaker-than-expected 100G datacom share, a Chinese inventory correction, Cisco/Huawei vertical integration risk (previous), and looming price pressure/share loss to startups and possibly Intel.
- Fellow component vendors JDS Uniphase (JDSU -2.2%), Oclaro (OCLR -1.7%), and Alliance Fiber (AFOP -2.3%) are also off, as is equipment vendor Ciena (CIEN -2.1%). JDS and Alliance were among the names that followed Finisar lower last Wednesday, following cautious notes from MKM and RBC.
- Jefferies raised alarm bells about AT&T's wireline capex in June, before Juniper and JDS offered soft guidance blamed on light North American capex.
- A lot has been priced in: Finisar now only trades for 9x FY16E (ends April '16) EPS exc. net cash.
Aug. 27, 2014, 12:52 PM
- Ahead of Finisar's (FNSR -3.9%) Sep. 4 FQ1 report, MKM's Michael Genovese has respectively cut his revenue and EPS estimates for the quarter by $3M and $0.01, albeit while reiterating a Buy.
- Genovese predicts "soft 2HCY14 carrier capex and the mix shift to low margin Chinese sales is likely to result in fairly anemic Telecom revenue growth and limited [gross margin] expansion in the near term." But he's still upbeat about Finisar's datacom sales (boosted by Web data center buildouts), and thinks telecom sales "should improve in 2HCY15 as the 100G Metro market positively inflects."
- Likewise, RBC's Mark Sue is reiterating an Outperform, but offering cautious remarks. "Inventories are creeping upward, inventory lead-times are decreasing and there’s concern that current soft-pricing may continue or spread to higher speed products."
- Sue thinks Chinese competition is affecting pricing for "low-mid speed components," and suggests Finisar should slash capex and launch a buyback. Shares plunged in June due to light FQ1 EPS guidance that stemmed from margin pressure.
- A slew of other firms with strong telecom capex exposure are also trading lower. JDSU -1.8%. INFN -1.6%. CYNI -2.4%. AFOP -1.5%. CAVM -1.4%. ZHNE -1.6%. Juniper and multiple component vendors have already reported seeing soft near-term capex trends.
- For component vendors, a decent amount of bad news has been priced in since April.
Aug. 21, 2014, 3:59 PM
- Optical component vendors JDS Uniphase (JDSU +4.3%), Finisar (FNSR +3.4%), Oplink (OPLK +3.2%), Oclaro (OCLR +3.6%), and Alliance Fiber (AFOP +2.5%) have all rallied on a quiet day of trading, and so has client Ciena (CIEN +2.7%). No news has hit the wires to explain the gains.
- JDS, Oclaro, and Alliance Fiber all sold off in recent weeks (I, II, III) after providing disappointing guidance in their calendar Q2 reports. JDS (like Juniper following its Q2 report) observed soft North American wireline capex is pressuring industry sales.
Aug. 14, 2014, 11:46 AM
- Ciena (CIEN +1.9%) is catching a bid following vague M&A chatter. The gains come even though Cisco just reported an 11% Y/Y drop in service provider orders for the July quarter, and stated it expects carrier demand to remain soft for several quarters.
- Ciena fell yesterday in response to JDS Uniphase's weak guidance and cautious CC commentary. Its FQ3 report is due on Sep. 4.
Aug. 13, 2014, 2:45 PM
- B. Riley and Piper have downgraded JDS Uniphase (JDSU -8.9%) following its light Sep. quarter outlook. Each cites the impact of soft carrier spending.
- B. Riley's Dave Kang (downgrade to Neutral) notes the AT&T/DirecTV deal has affected Ma Bell's spending (previous), and that industry demand is pressured by a transition to software-defined networking (SDN) architectures that's still in its early stages.
- Kang: "In hindsight, we significantly under-estimated the potential impact of the SDN transition on the telecom equipment industry." He notes the transition is hurting JDS' test equipment/software sales (expected to fall to $160M-$175M in FQ1 from $199M in FQ4) more than its optical component sales. Optical component/laser division sales are expected to total $200M-$210M in FQ1 vs. $196.9M in FQ4.
- On the CC (transcript), CEO Tom Waechter admitted North American carriers "have ratcheted down wireline spending" (echoes of Juniper), and that wireless investments "have been tepid due to rapid changes in network technology architectures." On the other hand, he states component demand "remains healthy with notable strength in Datacom, 100G modulators and China's infrastructure spend."
- Ciena (CIEN -2.7%) and Fabrinet (FN -3%) have joined the ranks of companies following JDS lower. Cisco reports after the bell.
Aug. 11, 2014, 4:16 PM
Aug. 10, 2014, 5:35 PM
Jul. 29, 2014, 11:18 AM
- Cyan (CYNI +5.7%) is getting a lift from news major customer Windstream plans to spin off its network assets into a REIT. Windstream predicts the move will allow it to "accelerate broadband investments, transition faster to an IP network and pursue additional growth opportunities to better serve customers."
- Soft orders from Windstream have taken a toll on Cyan in recent quarters. Windstream fell to less than 10% of revenue in Q1, but CEO Mark Floyd expressed optimism on the CC (transcript) Windstream would increase orders for Cyan's metro network equipment in 2H14 once its long-haul network buildout was finished.
- Cyan's Q2 report arrives on Aug. 11.
Jul. 23, 2014, 1:45 PM
- Juniper's (JNPR -9.8%) soft Q3 guidance, along with its related commentary on U.S. telco demand, is taking a toll on fellow telecom equipment suppliers Cisco (CSCO -1.2%), Ciena (CIEN -3.2%), Cyan (CYNI -2.5%), Zhone (ZHNE -6.5%) Ruckus (RKUS -1.6%), and Sonus (SONS -3.8%).
- Optical component vendors JDS Uniphase (JDSU -2.9%) and Finisar (FNSR -2%) are also off, as are several chipmakers (previous) with heavy networking/telecom exposure.
- On its CC (transcript), Juniper stated "market dynamics including M&A activity" are affecting the "sequencing and timing" of U.S. carrier projects. Jefferies reported in June AT&T has significantly cut its wireline capex in the wake of the DirecTV deal.
- There has been speculation AT&T is keeping a lid on wireline capex ahead of the full rollout of its ambitious Domain 2.0 initiative, which will feature the launch of software-defined networking (SDN) and network functions virtualization (NFV) platforms.
- Juniper insists it remains well-positioned with the aforementioned U.S. carriers, and that it has "major design wins" for next-gen projects. The company adds demand remains healthy with U.S. federal, cable, and Internet clients.
- The company's router revenue rose 7% Y/Y in Q2 to $617.8M, and its switch revenue rose 25% to $199.8M. Security product revenue fell 8% to $111.6M. The Junos Pulse VPN software ops (about to be sold for $250M) contributed $31.4M in revenue ($15.9M product, $15.5M service).
Jun. 17, 2014, 9:29 AM
- Cisco (CSCO) is buying Tail-f Systems, a Swedish provider of network orchestration software for carriers, for $175M in cash + retention incentives.
- Tail-f's software enables the rapid provisioning of apps/services over networks featuring hardware and virtual appliances from multiple vendors. Its offerings can be used to enable SDN implementations (likely of particular interest to Cisco), but can also work with more conventional networks.
- Light Reading notes AT&T and Deutsche Telekom are Tail-f clients - both are hatching big SDN initiatives that present challenges for Cisco - and that its revenue is believed to be below $30M. CEO Fredrik Lundberg insists Tail-f will continue its multi-vendor support post-acquisition.
- The purchase follows Cisco's 2012 acquisitions of network management/planning software firm Cariden and policy control software vendor BroadHop, and provides a fresh use for its offshore cash. Cisco has set a goal of doubling its software sales from 2012-2017.
- Carrier routing archrival Juniper bought network management software firm WANDL last year. Cyan (CYNI) is an independent player in the network orchestration space.
Jun. 5, 2014, 12:49 PM
Jun. 5, 2014, 9:12 AM
Jun. 5, 2014, 7:42 AM
- In addition to beating on revenues and EPS, Ciena's margins - adjusted gross of 43.1% and adjusted operating of 6.2% - are also ahead of estimates.
- Q3 revenue guidance of $585M-$615M is better than consensus of $583.3M, with adjusted gross margin expected in the low-mid 40s range.
- CC at 8:30 ET
- CIEN +12.9% premarket
- Previously: Ciena beats by $0.04, beats on revenue
Jun. 5, 2014, 7:03 AM
Jun. 4, 2014, 5:30 PM
Jun. 2, 2014, 4:43 PM
- Jefferies reports AT&T (T -0.1%) significantly cut its wireline capex starting last month.
- It thinks many companies could be affected, including equipment vendors Alcatel-Lucent (ALU -2.2%), Ciena (CIEN -3.9%), Juniper (JNPR +0.2%), and Adtran (ADTN -5.1%), and component vendors JDS Uniphase (JDSU -2%) and Finisar (FNSR -0.7%).
- As its is, AT&T's 2014 capex budget ($21B) is down $200M from 2013's spending level. Moreover, the carrier's huge mobile infrastructure needs and the DirecTV deal could be motivating it to cut wireline spend.
- Also: AT&T may be looking to keep capex down ahead of the full rollout of Domain 2.0, an initiative meant to improve network flexibility, lower costs, and cut provisioning times through the embrace of software-defined networking (SDN) and network functions virtualization (NFV).
- MKM has argued Domain 2.0 will be a negative for Cisco, but a positive for Ciena and Finisar, among others.
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