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Optical components

Infinera Boosts Avanex

Optical components vendor Avanex Corp. (Nasdaq: AVNX) had a surprise customer in its first quarter -- Infinera Corp. (Nasdaq: INFN) (See Avanex Reports Q1.)

During an earnings call with analysts yesterday, Avanex CEO Jo Major called out Infinera, along with Alcatel (NYSE: ALA; Paris: CGEP:PA), as each representing 10 percent or more of the first quarter's near $51 million sales.

Nortel Networks Ltd. and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) each just missed the 10 percent mark, Major said.

The mention of Infinera is surprising in a couple of ways.

First, it's unusual for a startup to be a 10 percent customer for a public company -- normally it's just the bigger names, such as Alcatel and Nortel, that top the 10 percent mark.

Second, Infinera builds its own optics, cramming them onto homemade indium phosphide (InP) chips. (See Infinera Declares WDM War.)

Avanex didn't hint at what Infinera is buying, though Major did note that Avanex hit record revenues in transponders, modulators, and dispersion compensators during the quarter.

For its first quarter, ended Sept. 30, Avanex reported net losses of $9.8 million, or 5 cents per share, on revenues of $50.9 million, compared with losses of $9.1 million, or 4 cents per share, on revenues of $45.6 million the previous quarter.

For its first quarter a year ago, Avanex reported losses of $16.9 million, or 12 cents per share, on revenues of $41.2 million.

Avanex's non-GAAP first-quarter loss of 3 cents per share was a penny worse than the 2 cents analysts had forecast, according to Thomson First Call , and revenues were pretty much in line with expectations. But Avanex predicted second-quarter revenues of $52 million to $55 million, beating the $51.8 million forecast recorded by First Call.

Avanex shares climbed 19 cents (12.5%) to $1.71 in after-hours trading, marking the second quarter in a row that investors have been happy with the company's results. (See Avanex Soars on Q4 Forecast.)

Avanex isn't quite out of the woods yet, though. While the company has $16.4 million in cash, that figure is down from the $29 million reported at the end of June. At least some of that was attributable to problems with Avanex's invoicing system and is balanced out by a $12.6 million spike in accounts receivable, Avanex officials said on the call.

Cash has been a key question for Avanex -- and for fellow components vendor Bookham Inc. (Nasdaq: BKHM; London: BHM) -- as both companies try to right themselves before the money runs out. (See Avanex Concerns Continue.)

Avanex is showing some signs of life. While the company still isn't profitable, it's claiming some progress with new products.

For example, Avanex says an optical amplifier with monitoring capability is shipping into the backbone of a Tier 1 carrier's fiber-to-the-home buildout. That product "was a strong contributor to our revenue performance this quarter," Major said.

Major also highlighted a "multimillion dollar" win in Asia for new 980nm pump lasers targeted at the submarine market. (See Avanex Intros Pumps.)

Avanex also intends to join the reconfigurable optical add/drop multiplexer (ROADM) race, but believes that high prices are stunting growth in that market. So, the company is developing a ROADM subsystem built "with more modest functionality but at a substantially lower price." That product is expected to debut before OFC/NFOEC in March, Major said.

— Craig Matsumoto, Senior Editor, Light Reading

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fiber_r_us 12/5/2012 | 3:35:55 AM
re: Infinera Boosts Avanex >Amplifiers would be interesting, but would Infinera need a lot of them?

They would need a pair of them at every terminal, and a pair at every ILA site. Is that a "lot"? Depends on the length of the route. Certainly anything outside of a metro area would require a "lot".

> My first impression would be that Infinera would use amps in special cases, where some carrier wants really long reaches.

Every terminal would have a pair. And, if the system was longer than about 100km, you would have another pair every 80km or so. Neither is a "special case" and, unless you are thinking purely of metro area networking, I wouldn't consider hundreds of km "really long reaches". In NA, 1000s of km are "really long reaches".
fiber_r_us 12/5/2012 | 3:35:55 AM
re: Infinera Boosts Avanex Infinera's system is amplified at the terminals and every 80km or so (just depending on where the ILA sites are on the carrier's plant). Infinera only uses the integrated chips at the terminals and when they have to regen every 400-500km or so. It is cheaper to amplify all of the wavelengths than to regen them, even with the Infinera integration.

Here is the product page for the amplifier that goes into ILA sites:

http://www.infinera.com/produc...

And several of the cards in the terminal shelf have amplifiers on them.
longshort 12/5/2012 | 3:35:54 AM
re: Infinera Boosts Avanex >>> they are both in death spirals <<<

Is this just your own opinion, or do you have facts to back that up?

whyiswhy 12/5/2012 | 3:35:53 AM
re: Infinera Boosts Avanex Longshort...

I think I covered that with my usual safeharbor:

JMHO

Now you can guess whether I based my humble opinion on inside information or not.

-Why
^Eagle^ 12/5/2012 | 3:35:52 AM
re: Infinera Boosts Avanex could it be possible that the purchases were more related to the old Corvis line they are supporting at Broadwing. Maybe Broadwing needed to use some of the un populated slots in one of their Corvis racks? maybe increasing capacity on some of those links where the Infinera stuff is not applicable?

overall, I agree with the consensus guess that it is probably things like edfa, dispersion compensators, and interleavers.

so just tossing out the Corvis / broadwing link as a possibility to see if there is any insight on this board. Lots of networks are expanding and adding capacity.

also, any chance it could be the Mux/Demux? I am thinking probably not, but if Infinera is having any issues with monolithically integrating passive mux demux with enough isolation and seperation with their active InP devices like the detectors and lasers for rx / tx, this could also be a possibility. typically doing passive functions like mux/demux in InP takes different fab and sometimes even different base epi than the active bits like lasers, detectors, and other associated high speed electronics.

Just a thought.

Overall, I agree it is probably the amps, dispersion stuff, etc as others have posted.

Just wanted to toss out the other things as possibilities and find out if anyone knows more.

sailboat
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