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%.
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.
Sep. 4, 2014, 12:47 PM
Sep. 4, 2014, 7:31 AM| Comment!
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. 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.
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. 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. 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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