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Optical components

What the Heck's With Avanex?

Avanex Corp. (Nasdaq: AVNX) stock screamed northward by 20 percent today, possibly driven by scraps of news that point to the ongoing optical recovery.

Avanex shares climbed steadily for most of the day, rising by as much as 22.5 percent. Avanex closed up 28 cents (19.7%) at $1.70.

Lots of stocks were up today, even in the optical sector -- MRV Communications Inc. (Nasdaq: MRVC) and Oplink Communications Inc. (Nasdaq: OPLK) each rose about 8 percent, for example. Maybe Avanex was just playing catch-up amidst a good day for tech. "It's been selling at a discount to the [optics] group," says analyst John Harmon of Needham & Co.

Sometimes, a stock surge is driven by a news release. Avanex released one today, but come on: a monitoring filter based on fiber Bragg gratings? Not exactly a barn burner. (See Avanex Intros FTTH filter.)

It could be that investors are just excited to see Avanex get its name into the hot FTTH sector, says analyst Dave Fore of SurTerre Research. FTTH and PON products such as triplexers are likely to be a hot topic at OFC/NFOEC show next week. (See Pirelli Unveils Triplexer and NeoPhotonics Intros Triplexer.)

Investors might also be cheered by news that the undersea optical market is resurfacing. [Ed. note: Is anyone tired of that pun yet? No? Good.] Light Reading reported Monday that some subsea network operators could be readying for upgrades. (See Lit Capacity Running Low on Subsea Routes.)

That's going to benefit Alcatel (NYSE: ALA; Paris: CGEP:PA), most observers presume. And Avanex is a key components supplier to Alcatel, having acquired Alcatel Optronics and the Corning Inc. (NYSE: GLW) fiber-optics division in 2003.

That deal put Avanex -- alongside Bookham Inc. (Nasdaq: BKHM; London: BHM), which acquired the optics division of Nortel Networks Ltd. -- into a spiral of restructuring and losses that's lasted years. The losses haven't stopped, but both companies claim the restructuring is winding down.

It's not like either company is in the clear yet. Avanex's recent earnings were marred by a shortfall in revenues, and Bookham's most recent forecast fell short of analysts' expectations. (See Avanex Trudges Along, Avanex Gets Slapped, and Bookham Basks in 'Cramer Effect'.)

Avanex officials were not immediately available for comment.

— Craig Matsumoto, Senior Editor, Light Reading

optigong 12/5/2012 | 4:04:08 AM
re: What the Heck's With Avanex? Rumors ? FTTH contract ? Submarine deal ?
Pete Baldwin 12/5/2012 | 4:04:05 AM
re: What the Heck's With Avanex? Man, there's a tumult of news releases related to OFC next week -- including, I think, one a day this week from Avanex. Wow.

Optical stocks are behaving more normally today, but JDSU is up 9%. Optical's got buzz. The question is whether that can translate into particular success for either Avanex or Bookham.
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