Finisar (FNSR) +8.9% AH following its FQ4 beat. FQ1 guidance is for revenue of revenue of $245M-$260M and EPS of $0.22-$0.26, mostly above a consensus of $248.9M and $0.20. A 150 bps Q/Q increase in gross margin to 32.2%, caused by a favorable mix, contributed to the EPS beat. Finisar says it's seeing strong demand for 10G/100G Ethernet components for datacom gear - 10G is being rapidly adopted in data centers, and some firms are starting to embrace 100G. Opex +4% Y/Y. a little above rev. growth of 2%. JDSU +3%, NPTN +4.3%, and CIEN +1% in sympathy. FN, OCLR, and OPLK could also rally. CC at 5PM ET (webcast). (PR)
NeoPhotonics (NPTN +5.2%) and Alliance Fiber (AFOP +4.2%) close up strongly after SA contributor Inflection Point Investing argues the optical component vendors are plays on the 100G optical networking boom, while making a fresh bull case for Infinera (INFN +1.6%). IPI points out NeoPhotonics mentioned in May it's seeing strong 100G component sales, and that it "supplies to seemingly every big vendor in the optical space." Regarding Infinera, the firm is encouraged by Ciena's (CIEN +2.2%) earnings call remarks about "seeing a strong uptick" in 100G optical demand, with U.S. carriers leading the way. (previous)
Ciena (CIEN) +11.9% thanks to its FQ2 beat, which follows months of investor fretting over telecom capex. FQ3 guidance is for revenue of $515M-$545M, above a $509.5M consensus. Ciena sacrificed margins a bit - while revenue rose 12% Q/Q, gross margin fell 210 bps to 42.5% - but given the size of its revenue beat, investors don't mind. Sales of integrated Ethernet/optical networking hardware (Ciena is a leader here and recently announced a refresh) +10% Y/Y and 57% of revenue. Ethernet switches +91% and now 11% of revenue; optical networking -32%, software/services +3%. Two customers (AT&T/Verizon?) made up 31% of sales. INFN +6.7%. JDSU +5.1%. FNSR +5.9%. JNPR +2.5%. ALU +4.2%. SONS +3.8%. (PR)
A few Cisco rivals and suppliers are up premarket after the networking giant beat estimates while reporting strong data center switch/server sales and service provider orders (albeit while cautioning the SP capex environment remains tough). Some others might move higher following the open. JNPR +3.6%. FFIV +3.2%. CIEN +3.9%. EZCH +1.2% - Cisco mentioned on its earnings call sales of its ASR 9000 edge routers, which EZchip supplies network processors for, were up 40%+ Y/Y.
Cisco (CSCO) guides on FQ3 call (webcast) for FQ4 EPS of $0.50-$0.52 and revenue growth of 4%-7%, which compares with a consensus of $0.51 and 6.9%. Revenue growth will take a 1% hit from the Linksys sale. Gross margin is expected to drop to 61%-62% from FQ3's 63%. Shares +7.9% AH. JNPR +1.6%. BRCD +1.1% CIEN +1.5%.
Evercore launches coverage on Ciena (CIEN +2.1%) with an Overweight and $20 PT, giving a lift to the telecom equipment maker. The move comes a day after Ciena announced new Ethernet modules for its 6500 Packet-Optical Platform, which combines Ethernet and optical networking capabilities in the same box. The upgrade adds support for Ciena's SAOS operating system, long a staple of Ciena's Ethernet-only gear. Integrated Ethernet/optical products made up 53% of Ciena's FQ1 revenue.
A Q1 beat and strong 2013 guidance lead Infinera (INFN +22.8%) to surge to 52-week highs. Industry peers are up in sympathy, a day after many declined thanks to AT&T: CIEN +3%. FNSR +2.8%. JDSU +1.5%. ADTN +2.2%. CALX +1.5%. On its earnings call, Infinera guided for Q2 revenue of $130M-$140M and EPS of -$0.04 to $0.01, above a consensus of $124.3M and -$0.05. Gross margin (an issue going in) is expected to rise to 37%-39% from Q1's 36%. 2013 revenue growth is now pegged at the the high end of a guidance range of 10%-20% (consensus is 17%). Purchase commitments for the advanced DTN-X optical transmission system grew by 6 to 27. Needham has upgraded shares to Buy.
Adtran's (ADTN +13%) Q1 beat is contributing to strong gains in telecom equipment, chip, and component stocks, as investors take it as another sign of improving telecom capex going into earnings season. Adtran's remarks about strong demand from both U..S. and international carriers can't be hurting. CSCO +2.5%. CIEN +6.4%. JDSU +4.6%. ALU +4.6%. FN +4.8%. FNSR +6%. PKT +4.2%. RKUS +4.2%. JNPR +3.9%. CAVM +3%. INFN +2.9%. OCLR +4%. SONS +2.5%. 2013 has seen a string of rallies (I, II, III) tied to capex hopes.
Telecom equipment/optical component names underperform following FBR's Cisco/Juniper downgrades, as investors mull the impact of lower demand for switches/routers among service providers and enterprises on demand for complementary hardware and the parts that go into it. Given software-defined networking (the main reason for FBR's downgrade) will have a limited impact on hardware use on many carrier networks, is the Street overreacting? JDSU -4.2%. FNSR -3.3%. CIEN -3.8%. ADTN -3.1%. ALU -2.7%. ADTN -3.1%. SONS -4.7%. INFN -2.6%. FFIV -2.3%.
Telecom equipment and component makers trade higher after China Mobile (the world's largest carrier) forecasts a 49% Y/Y increase in capex in 2013 to a hefty RMB190.2B ($30.6B). Vodafone and France Telecom's plans to build a fiber network in recession-hit Spain might not be hurting either. FNSR +6.6%. ALU +2.9%. JNPR +2%. OCLR +4.8%. CIEN +1.5%. JDSU +1.5%. ALLT +3.3%. ERIC +1.2%.
Ciena (CIEN) +13.9% following its FQ1 beat, which is adding fresh fuel to hopes of improving telecom capex. FQ2 guidance is for revenue of $465M-$495M, in-line with a $482.1M consensus. Gross margin was 44.6%, +190 bps Q/Q and +270 bps Y/Y. Expected to be in low-40s in FQ2. Sales of integrated Ethernet/optical networking gear (53% of revenue) +18% Y/Y. Ethernet switches +113%, optical transport -47%. Opex roughly flat. 2 customers made up 26% of sales. Shares remain well below early 2011 levels, and even further below 2007 levels. (PR)