re: JDSU May Be Mulling Optical ExitWhile JDSU, Avanex, Bookham are not doing well, the Chinese fiber companies (Photop, Photon, etc) are doing much better - profitable with sizeable business. Maybe in the end this fiber component industry will be like the CD-ROM drive industry - the only players are Chinese companies because they have low cost advantage and they are willing to live with low profit margins.
re: JDSU May Be Mulling Optical ExitIt would be a shame for JDSU to throw in the towel. But the optical business is a difficult money to be profitable because of the fact that many have stated - too many players and too little volume.
With the move from 300-Pin MSA and X2/XENPAK to SFP, XFP, and SFP+ the high margin business is no longer there. Where cost is king, the Chinese based companies can win because manufacturing cost is low. In addition to that they have an advantage with domestic customers that non-Chinese company can not compete with as China upgrades it Infrastructure.
The question is... will the market be at the cusp of a ramp up for large volume that SFP,XFP, and SFP+ is forecasting. If it is JDSU maybe throwing the towel too early. Or do we believe that Optical market will still be in this mode for a few more years ... and is JDSU not willing to wait that long?
re: JDSU May Be Mulling Optical ExitThat is ridiculous. Photon is a barely breakeven business trying to prop up its cash burning/guzzling parent: Neophotonics. Fiberxon also isn't throwing off any serious cash and is being bought by Luminent.
There are some distinct problems with M&A at the moment. Unless people can make gains by opex reductions, there seems to be little sense in combining the businesses. There is a dual problem however, both a gross margin and an opex problem. The real question is how to solve the gross margin issue.
M&A can help the gross margin problem, but only in the very long term and only marginally. The assumption is that pricing would get better - i.e. there would be optical price increases - if there were fewer players. That MIGHT be true for new kinds of products, but for existing products market pricing is established. The real question is how to lower the cost of optics in an effective and scalable way like Moore's Law.
re: JDSU May Be Mulling Optical ExitFinisar is reporting 37-40% gm on a business that's 90% modules with highly regarded products. Who needs the chinese?
They mentioned that gm's were at 40% for this qtr, but would be slightly down on the upcoming one....I heard around 37% mentioned somewhere. The following qtr, gm's are expected to return back around 40%.
re: JDSU May Be Mulling Optical ExitToday it was revealed that the head of JDSU's T&M business is going over to Veeco (Veeco! Is that like jumping from the Hindenberg to the Titanic?) Does it make an optical spin less credible or more? Or irrelevant?
It certainly doesn't make it sound like JDSU is healthy. Both of those stocks are at or near 52-week lows.
With the move from 300-Pin MSA and X2/XENPAK to SFP, XFP, and SFP+ the high margin business is no longer there. Where cost is king, the Chinese based companies can win because manufacturing cost is low. In addition to that they have an advantage with domestic customers that non-Chinese company can not compete with as China upgrades it Infrastructure.
The question is... will the market be at the cusp of a ramp up for large volume that SFP,XFP, and SFP+ is forecasting. If it is JDSU maybe throwing the towel too early. Or do we believe that Optical market will still be in this mode for a few more years ... and is JDSU not willing to wait that long?
Craig,
There are some distinct problems with M&A at the moment. Unless people can make gains by opex reductions, there seems to be little sense in combining the businesses. There is a dual problem however, both a gross margin and an opex problem. The real question is how to solve the gross margin issue.
M&A can help the gross margin problem, but only in the very long term and only marginally. The assumption is that pricing would get better - i.e. there would be optical price increases - if there were fewer players. That MIGHT be true for new kinds of products, but for existing products market pricing is established. The real question is how to lower the cost of optics in an effective and scalable way like Moore's Law.
seven
http://investor.finisar.com/do...
They mentioned that gm's were at 40% for this qtr, but would be slightly down on the upcoming one....I heard around 37% mentioned somewhere. The following qtr, gm's are expected to return back around 40%.
It certainly doesn't make it sound like JDSU is healthy. Both of those stocks are at or near 52-week lows.