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Optical components

Opnext Dips on 40G Stagnation

Opnext Inc. (Nasdaq: OPXT) shares are down nearly 30 percent in midday trading following news that the company is seeing a slowdown in the critical 40-Gbit/s market.

Reporting its earnings Monday, Opnext said sales from the former StrataLight -- which sells 40-Gbit/s transponders -- were down 25 percent compared with Opnext's second quarter. To make matters worse, the second quarter had been down 15 percent from the first.

Opnext officials said revenues for the company's third quarter, which ends in December, would be $75 million to $80 million, compared with expectations of $86.6 million, according to Reuters Research . (See Opnext Reports Q2.)

It's true that rival Mintera Corp. has gained some ground in 40-Gbit/s transponders, scoring deals with Fujitsu Network Communications Inc. and with Opnext's prized customer, Nokia Networks . (See Fujitsu Picks Mintera and Mintera Nabs Nokia Siemens.)

Mintera has been catching up in this market on the strength of putting a 40-Gbit/s transponder into a linecard, rather than requiring an entire system, as StrataLight initially did.

But that's not the sole reason for Opnext's disappointing results. For one thing, Mintera signed those deals some time ago; they just got announced recently.

A bigger factor might be that AT&T Inc. (NYSE: T) -- a big 40-Gbit/s customer for Nokia Siemens and, therefore, for Opnext -- "put the brakes on deployment" of 40-Gbit/s systems for the second half of this year, writes analyst Paul Bonenfant of Morgan Keegan & Company Inc. , in a note issued this morning.

Opnext did note yesterday that the 40-Gbit/s sales drop was most pronounced in North America.

If AT&T did decelerate on 40-Gbit/s spending -- the carrier didn't immediately reply to a Light Reading email about that -- then it might not reverse course quickly, Bonenfant notes. The priority for capital expenditures appears to be on wireless, in the wake of complaints about lousy 3G data coverage for the iPhone.

NSN, by the way, notes that Opnext is still a supplier for 40-Gbit/s transponders, alongside Mintera. "We have not selected one or the other," says Pathmal Gunawardana, head of NSN's Optical Connectivity Group in North America.

Gunawardana won't say whether Opnext and Mintera are providing parts for the same slots at NSN. But he said NSN wants to keep, "not just those two suppliers, but other suppliers, engaging them in the process" of developing 40-Gbit/s products. That way, NSN has a better shot at having a supplier that's primed for mass production, when the market reaches that point. And the competition helps NSN get lower prices, he says.

Opnext shares were down 84 cents (29%) at $2.03 midday.

— Craig Matsumoto, West Coast Editor, Light Reading

Pete Baldwin 12/5/2012 | 3:52:52 PM
re: Opnext Dips on 40G Stagnation

Got an interesting response from AT&T:  They say they're not slowing down their 40G deployment ... but they *are* done with the 40G backbone, as of last year.  Which would imply a lessened need for 40G from them - which would be bad news for StrataLight anyway.

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