Finisar Enjoys Optium Growth
Finisar did beat analysts' expectations, recording pro forma net income of 4 cents per share, versus the 3 cents predicted by Reuters. But it's going to face at least one flat quarter before growth kicks in, chairman Jerry Rawls said on yesterday's conference call with analysts.
"Finisar had a good quarter, but the guidance didn't seem so great," says John Harmon, an analyst with Needham & Co. "The Finisar part guided for a flat quarter. The growth is from Optium."
Finisar's revenues in its first quarter, which ended Aug. 2, were $128.7 million. The company is saying second-quarter revenues will be $121 million to $131 million, with Optium contributing another $35 million.
The numbers are on par with what analysts were expecting, and Rawls said he expects things to perk up in Finisar's third and fourth quarters, which cover the period from November through April.
None of this is particularly awful news, but it doesn't seem to justify Finisar's jump in price. Shares were up 16 cents (13.6%) at $1.34 in morning trading.
One possibility is that investors are seeing some analyst predictions rise cosmetically, now that Optium is included in the mix.
It's also possible that the picture turned out to be less bleak than expected. Finisar's share price had dropped during the past week.
There was some reason for trepidation. Equipment manufacturers are reporting a lull in carrier spending, and the optical sector got a particularly pessimistic look from Ciena Corp. (NYSE: CIEN) last week. (See Ciena CEO: Slowdown Looks Shortlived and Ciena Slumps on Q4 Outlook.)
But the component side -- minus Avanex Corp. (Nasdaq: AVNX), which many consider an isolated case -- hasn't sung so sad a tune. (See Avanex Misses Hard.)
"The fiber-optic component guys' quarters have been fairly solid," Harmon says. JDSU (Nasdaq: JDSU; Toronto: JDU) "had a great optical quarter. They said their book-to-bill was greater than 1, including optical." (A book-to-bill ratio bigger than 1 indicates that the business is growing.)
JDSU even said its manufacturing couldn't keep up with demand in some areas -- which actually turned out to be a problem when it came time to report earnings. (See Doink! JDSU Hits Capacity Ceiling and Capacity Constrained.)
Yesterday's earnings gave little indication of any cost savings from the merger. (See Finisar & Optium Challenge JDSU.) Because the deal closed after Finisar's first quarter ended, the companies' earnings were reported separately. Besides, "it's too early for them to be able to cut any costs yet," Harmon notes.
Finisar reported first-quarter revenues of $128.7 million and net income of $4.7 million, or 2 cents per share, compared with fourth-quarter revenues of $121 million and losses of $8.7 million, or 3 cents per share. (See Finisar Reports Q1.)
For its first quarter a year ago, Finisar reported revenues of $105.7 million and losses of $7.3 million, or 2 cents per share.
— Craig Matsumoto, West Coast Editor, Light Reading