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Optical components

Finisar Ignites Optics Explosion

On the eve of OFC/NFOEC, optical stocks are skyrocketing, fueled by a Finisar Corp. (Nasdaq: FNSR) earnings call raising that company's stock more than 40 percent.

Finisar stock was up $1.27 (43%) to $4.18 in midday trading. And other optical shares were climbing, too. Avanex Corp. (Nasdaq: AVNX) was up 39 cents (23%) to $2.08 -- and that's after the stock rose nearly 20 percent earlier this week. (See What the Heck's With Avanex?.)

Bookham Inc. (Nasdaq: BKHM; London: BHM) was up 96 cents (12.8%) to $8.45, while MRV Communications Inc. (Nasdaq: MRVC) climbed 34 cents (10.2%) to $3.66. Even giant JDSU (Nasdaq: JDSU; Toronto: JDU) got a boost, up 28 cents (8%) to $3.77 with more than 100 million shares traded, more than twice the usual amount.

The joy isn't necessarily spreading to the systems sector. Ciena Corp. (NYSE: CIEN) is fluttering above and below the break-even line; at this precise moment it's down 3 cents (0.65%) at $4.61, thanks to an analyst downgrade. (See Ciena Down on Downgrade.)

The optical lovefest stems from Finisar's earnings surprise. For its third quarter, ended Jan. 31, Finisar reported net income of $8.3 million, or 3 cents per share, on revenues of $93.5 million, compared with losses of $15.8 million, or 5 cents per share, on revenues of $86.6 million in the previous quarter. (See Finisar Reports Q3.)

For its third quarter a year ago, Finisar reported losses of $33 million, or 15 cents per share, on revenues of $73.1 million.

The profits of 3 cents per share eclipsed analysts' estimates of a break-even quarter, according to Reuters Research . And Finisar is forecasting another profit of about 3 cents per share for its first fiscal quarter, which ends in April.

Finisar thus met its goal, set last year, of profitability in the second half of its fiscal 2006. On a conference call yesterday, chairman and CEO Jerry Rawls told analysts the company has "emerged from the largest economic downturn in history," apparently forgetting about those pesky 1930s.

Now, it's important to remember that Finisar's strength is in enterprise optics, as opposed to the telecom optics that Avanex, Bookham, and JDSU play in. Still, for a sector that's been beleaguered for years, investors apparently are interpreting Finisar's news as a sign that the optical component business is finally coming back to normal.

Next week's OFC/NFOEC in Anaheim, Calif., could be the most upbeat one in years, analysts and vendors say. Dozens of companies have released product announcements in advance of the show -- just look here and scroll down to the "News Wire Feed" section.

— Craig Matsumoto, Senior Editor, Light Reading

Pete Baldwin 12/5/2012 | 4:03:45 AM
re: Finisar Ignites Optics Explosion How does the saying go? "The bubble is back! My options will make me rich!" (Whatever happened to that guy, anyway?)

Chances of any big guys acquiring each other were slim before, and they seem more slim now that the valuations got a jolt upwards. I still wonder if there doesn't have to be one more BIG consolidation (i.e. a big player getting eliminated/absorbed) before the sector fully rights itself.
dmw_qqqq 12/5/2012 | 4:03:43 AM
re: Finisar Ignites Optics Explosion The JDSU volumw was 165m shares, which was 4 times its average daily transaction amount.

For a moment I thought I had found the wayback machine that brought me back to year2000, then I realized that's because my lunch was too heavy...I love the feeling though.

D
whyiswhy 12/5/2012 | 4:03:40 AM
re: Finisar Ignites Optics Explosion If this is real, why is JDSU looking to exit the component business?

What's the old saying? There's a sucker born every minute, or is it fool me once, shame on you, fool me twice, shame on me?

It's clear the money managers are trying to build a bubble again.

Just get out before it falls (this time).

-Why
DarkWriting 12/5/2012 | 4:03:39 AM
re: Finisar Ignites Optics Explosion At least in Finisar's case. They have a patented digital control transceiver design that can give them a competitive advantage in the enterprise market. They are also vertically integrated on the VCSEL/optics. Someone had to be making money in this space at this point. That doesn't mean the others should follow, however. There's still plenty of room for more shakeouts (Stratos, Picolight, JDSU enterprise).

DW

PS. NO, I don't work for nor own stock in Finisar.
oemarket_com 12/5/2012 | 4:03:38 AM
re: Finisar Ignites Optics Explosion Probably the industry is recovering gradually. But share market always overreacts.
oemarket_com 12/5/2012 | 4:03:38 AM
re: Finisar Ignites Optics Explosion Bigger players may not tend to be more efficient than smaller players, in the fiber optical component industry.
Bigger players may not have better financial position than small ones.
Consolidation in the past was rather the broken down of those hyped companies, than healthy acquisition from more successul companies.
cw.774 12/5/2012 | 4:03:34 AM
re: Finisar Ignites Optics Explosion I've often wondered why this particular technology nich is so succesptible to irrational exuberance. I think electro-optics topics excite folks like my Dad, who understood electricity and electronics of the by gone era ... the end.

The key is the Enterprise market they tap - people are replacing computers i.e. datacom, SANs and all that stuff VARs build companies around selling boxes at 5% markups. Same component technologies, but very different world. It could end quickly as it started by my experience.
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