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Optical components

Finisar Enjoys Optium Growth

The Finisar Corp. (Nasdaq: FNSR) merger with Optium Corp. (Nasdaq: OPTM) is off to a good start, with the stock climbing in response to an otherwise unremarkable earnings report yesterday.

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

Vent 12/5/2012 | 3:32:27 PM
re: Finisar Enjoys Optium Growth Consolidation will only come from someone who has the cash, either to buy or even with a all share deal pay for the restructuring-pay offs
neither bookham or avanex are in this category.
I would suggest oplink who still have cash or possibily Emcore. look also to the start ups or spin offs finishing the money raised, a reason for the Cyoptics-Pirelli link up. Pirelli essentially paid to get it's photonics division off it's books and got 30% of Cyoptics, Cyoptics raised some more cash. Who else is running out ?
Possibily the datacom side of Avago is a good bet as private equity look to raise cash themselves. But who has the cash, maybe it's time for diverse groups like nestgroup who have already various photonic buisiness inc the ex ericcson group northlight or possibily Emcore

vent
DarkWriting 12/5/2012 | 3:32:31 PM
re: Finisar Enjoys Optium Growth If you want to know who JDSU will buy, just find out which companies personally know the management at JDSU and that have management and VCs that need to be bailed out at JDSU stockholder's expense.

DW
Pete Baldwin 12/5/2012 | 3:32:38 PM
re: Finisar Enjoys Optium Growth Ah, JDSU... gut feel says they're scouting for acquisitions on the test & measurment side only. But it's been a while since I've asked them about acquisitions.
HomerJ 12/5/2012 | 3:32:39 PM
re: Finisar Enjoys Optium Growth Opnext is a tough one. What UK/US-based company wants to hook up with a company controlled out of Japan? Anyone out there who's dealt with Japanese customers and/or Japanese managers knows what I mean. Control freaks!

I've always thought Avago's datacom-centric product line is a good fit for a telco component company like Bookham as the optical stuff doesn't exactly mesh with anything else left at Avago. But I guess the private equity guys are holding out for too much. Or it's more of turd than appears.

JDSU has lots of cash, what're they up to?
Pete Baldwin 12/5/2012 | 3:32:40 PM
re: Finisar Enjoys Optium Growth So after Finisar/Optium, where does consolidation go next? A couple of people have mentioned that Bookham/Avanex chatter has started up again, but I wonder if maybe it's too late for that one.

Who leads the next charge, if there is one? Opnext?
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