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Optical components

Optical Stocks Climb Again

ANAHEIM, Calif. -- On top of anecdotal evidence of business being up, the publicly traded optical components companies went nuts Monday, continuing the upward streak that began late last week when Finisar announced unexpectedly strong earnings. (See Finisar Ignites Optics Explosion.)

Bookham Inc. (Nasdaq: BKHM; London: BHM) climbed 47 cents (5.6%) to $8.93, while Finisar Corp. (Nasdaq: FNSR) rose 66 cents (16.2%) to $4.74 and MRV Communications Inc. (Nasdaq: MRVC) climbed 53 cents (14.3%) to $4.23.

And then there was Avanex Corp. (Nasdaq: AVNX), up 39 cents (18.6%) to $2.49. Avanex has nearly doubled its price in the past week. (See What the Heck's With Avanex?.)

Optical love wasn't universal, though, as shares of components giant JDSU (Nasdaq: JDSU; Toronto: JDU) actually fell by two percent yesterday.

The gains show that investors have been itching to get into these stocks, possibly because they see optical components as one way to play the fiber-to-the-home boom, observers say.

Could there be something more, though? John Dexheimer, partner with private equity fund First Analysis, tossed an intriguing clue while moderating the final panel at Monday's The Optical Society (OSA) Executive Forum 2006, here, a precursor to OFC/NFOEC.

Dexheimer thinks it might be related to Google (Nasdaq: GOOG) building a dark-fiber network, the uses for which have yet to be fully articulated. "Apparently some of the Google millionaires are buying up optical components stocks in anticipation of what Google's doing," he says. (See Google's Own Private Internet.)

Whatever the reasons, the runup has some optics executives worried. After all, the new investors in the stocks might be disappointed to find that the optical turnaround hasn't completed itself yet. "They're all going to expect earnings like Finisar's," one moaned.

— Craig Matsumoto, Senior Editor, Light Reading

Pete Baldwin 12/5/2012 | 4:03:23 AM
re: Optical Stocks Climb Again Well... whaddaya think? Sound plausible?
The stocks are back down a bit today, probably from predictable profit-taking? Avanex did the right/obvious thing and announced a public offering -- might as well sell the stuff while it's hot.

Now these companies have purchasing power and, in Avanex's case, extra cash. I'm thinking this makes consolidation happen *slower* -- none of the public cos will want to get bought, and all the private ones just raised their prices, I'm sure...
DarkWriting 12/5/2012 | 4:03:22 AM
re: Optical Stocks Climb Again Just enough lipstick on the pig for a drunken sailor to ask for a kiss???

DW
oemarket_com 12/5/2012 | 4:03:11 AM
re: Optical Stocks Climb Again If bandwidth becomes a hot commodity again, fiber optical companies will certainly be hot. Maybe someone is betting at the early stage of that trend.

-oemarket.com
Pete Baldwin 12/5/2012 | 4:03:06 AM
re: Optical Stocks Climb Again If bandwidth becomes a hot commodity again, fiber optical companies will certainly be hot. Maybe someone is betting at the early stage of that trend.

Yes, I think you're exactly right.

But man, what a shaky play. Nothing against the companies involved but I'm not sure the components sector is ready to be "hot" just yet.

Here at OFC, some execs are wondering if this past week's runup might have been too much too soon ... what happens when the March-quarter earnings reports all come out "normal" instead of "Finisar superstar?"

btw, i should note for posterity that Avanex fell something like 18 percent yesterday. Avanex took profits (a $48M stock offering) and shareholders did the same. But then, it's back up about 6 percent this morning.
Pete Baldwin 12/5/2012 | 4:03:05 AM
re: Optical Stocks Climb Again btw: Nice shameless login name there, oemarket :)

Ah, I don't mind. it's not as bad as that Web site that I won't name here ... longtime readers know what I'm talking about. Every merger story we did, this guy would post, "Gosh, i wonder if they met on [ZZZZZZ].com ... i find ALL kinds of great leads there!" Can't say i miss those.
oemarket_com 12/5/2012 | 4:01:05 AM
re: Optical Stocks Climb Again [Quote]But man, what a shaky play. Nothing against the companies involved but I'm not sure the components sector is ready to be "hot" just yet. [/Quote]

Components sector will probably not be as "hot" as it was a few years ago. But once the optical component market inevitably grows together with the demand for bandwidth, there will be some rapid changes on the players in that sector. Companies with competitive edges will gain much quickly in a growing market.
The competitive edge may not only come from technology advantage, but also form manufacturing and operation efficiency, cost structure and marketing power.
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