New Focus Touts Mystery Customer

New Focus Inc. (Nasdaq: NUFO) couldn't keep the good news to itself: In a press release issued at the end of last week, the optical component vendor claimed to have snagged a new customer that could account for up to 10 percent of its revenue in 2001.

"We believe this is a signficant addition that will help us diversify our customer base," says CFO William L. Potts.

So who's behind door number three? Sources claiming to be close to the deal have told Light Reading that it's Nortel Networks Corp. (NYSE/Toronto: NT), although neither New Focus nor Nortel would comment.

Like many component vendors, New Focus has relied on a small, influential group of customers to establish itself in the optical market. But reliance on such a small pool becomes increasingly risky as revenues grow. "With widespread concern about capital spending, smaller companies can benefit from adding at least one big customer every quarter," says Conrad Liefur, analyst with U.S. Bancorp Piper Jaffray.

New Focus's current customers are spread across the vendor's two product lines: tunable lasers used in testing optical gear, and optical components that form the basis of that gear. The new customer will be purchasing optical components, New Focus says.

If Nortel becomes the next big buyer for New Focus, it still won't be its biggest customer -- even if it kicks in 10 percent of the company's coffer. Alcatel USA (NYSE: ALA: Paris: CGEP:PA) accounted for 11 percent of New Focus's $14.4 million revenues in its second quarter ended July 2, 2000. Corvis Corp. (Nasdaq: CORV) contributed 22.1 percent to New Focus's $22.2 million third-quarter revenues. Corning Inc. (NYSE: GLW) added 10.7 and 12 percent, respectively, to second- and third-quarter revenues. The vendor also won a deal with Ciena Corp. (Nasdaq: CIEN) this past quarter, but hasn't said how much revenue it contributed.

The leading customer for New Focus's tunable test lasers is Agilent Technologies Inc. (NYSE: A), which accounted for about 14.2 percent of second-quarter and 12.6 percent of third-quarter revenues. Smaller quantities of lasers were purchased this year by Avanex Corp. (Nasdaq: AVNX), JDS Uniphase Inc. (Nasdaq: JDSU), Lucent Technologies Inc. (NYSE: LU), and Nortel.

To support its growing customer list, New Focus says it plans to expand its existing facilities in the U.S. and China by about 47 percent during 2001.

In trading at the end of last week, New Focus shares were selling at $30.94, up over 17 percent -- a nice recovery from the walloping the vendor endured in the market downturn earlier this week (see LR Index Stocks Pummeled). It was down a tad, at $28.63, at the end of trading today, Tuesday.

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com

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