China Still Bothers Finisar
An inventory buildup in optical components and a general slowdown in China's optical network buildouts have gone on for two quarters now, but Finisar characterized those factors as a short-term blip. "We don't believe they have a huge amount of inventories there. We believe it's a combination of end-market demand and some inventory," Finisar CEO Eitan Gertel said on Wednesday's conference call with analysts.
It's an important point for the optical components industry, because a lengthy pause in China's optical buildout would probably cause a lot of trouble. Finisar didn't shed much light on how much longer a China slowdown might last, though.
Beyond that, Finisar executives had to answer suggestions that the company is just plain losing market share, especially in reconfigurable optical add/drop multiplexers (ROADMs) and especially to JDSU (Nasdaq: JDSU; Toronto: JDU). "To the best of our knowledge, there is no share loss at all," Gertel said.
Analyst Ed Zabitsky of ACI Research , who had been predicting inventory problems in optical components, thinks there's still one or two more quarters of inventory burn-off to go, as he wrote in a research note published Wednesday night.
Zabitsky does expect the ROADM market to come back by the end of the year, but he doesn't sound optimistic about a reignition of Chinese demand. "Over 90 percent of all cell sites in China are now fiber-connected. Do not expect that business to come back for Finisar anytime in the near future," he wrote.
— Craig Matsumoto, West Coast Editor, Light Reading