A few people held their breath when JDSU split into two companies in August last year, wondering what fate might befall optical components spin-out Lumentum and test/assurance-focused Viavi. Would they survive as independents or find themselves trapped and trampled in highly competitive markets?
Currently they both appear to be more than holding their own.
Lumentum Holdings Inc. published its fiscal second-quarter results late Thursday, with revenues of $218.3 million up slightly compared with a year earlier and with the previous quarter and an improved operating margin. (See Lumentum Reports Fiscal Q2.)
And it looks like 2016 could deliver further growth as the firm's 100G products are in demand. CEO and president Alan Lowe noted on the company's earnings call that demand from China and equipment vendors supplying the North American metro transport market is "particularly strong," and that investments made in 100G components and ROADMs are paying off.
MKM Partners Partners analyst Mike Genovese expects further demand for Lumentum's 100G and ROADM products and has a "buy" rating on its stock, which is trading up 7% to $23.76 in early morning trading Friday.
Earlier in the week, Viavi Solutions Inc. displayed the same revenue and margin trends -- up quarter-on-quarter and year-on-year to $232.1 million and an operating margin of 4% -- and named a new CEO, Oleg Khaykin, a comms industry veteran who has just been acting as a senior adviser to Silver Lake Partners. Khaykin takes over from interim CEO Richard Belluzzo, who continues as Viavi's chairman. (See Viavi Reports Fiscal Q2 and Former Int'l Rectifier CEO to Head Viavi.)
The results were much better than expected, with its Network Enablement line of business (test tools for optical networks and DSL access) particularly strong with sales of $136.4 million, up 5.7% from a year earlier and 16% better than in the previous quarter. That news, plus a positive outlook and the announcement of a stock repurchase program, sent the company's share price up by 16% on Wednesday.
MKM's Genovese believes Viavi's shares are currently undervalued -- the current price is $6.08 -- and says the company could strengthen its financial position through divestitures (most likely of its anti-counterfeit unit that makes specialist inks for banknotes) and potentially acquisitions.
Viavi also this week lined up its talking points for Mobile World Congress with an enhancement to its CellAdvisor Base Station Analyzer product and launched a new tool for monitoring hybrid (physical, virtual, private cloud and public cloud) networks called Observer SightOps.
— Ray Le Maistre, , Editor-in-Chief, Light Reading