For its fiscal fourth-quarter 2012(to end-April),fiber-optic communications component and subsystem maker Finisar Corp of Sunnyvale,CA,USA has reported revenue of$239.9m,up 1.3%on$236.9m a year ago but down 1.3%on$243m last quarter.
Compared with last quarter,continued strength in revenue for datacom products(up 9.2%from$133.7m to$146m)was offset by continued softness in revenue for telecom products(falling 14.1%from$109.3m to$93.9m).The latter was due mainly to sluggish carrier capital expenditures and the full three-month impact of annual price reductions for telecom products(which went into effect in January,and were at that higher end of the normal 10-15%reduction).Gross margin consequently fell from 31.8%last quarter to 31.4%(although this exceeded guidance of 31%).
On a non-GAAP basis,operating income fell from$24m(an operating margin of 9.9%of revenue)last quarter to$20.9m(8.7%of revenue).This was partly a result of operating expenses rising slightly from$53.3m to$54.6m(above the expected$54m,due to higher employee benefit and payroll tax amounts associated with the beginning of the calendar year).Earnings before interest,taxes,depreciation,and amortization(EBITDA)fell from$35.2m(14.5%of revenue)last quarter to$34.2m(14.2%of revenue).
Due mainly to Finisar entering into a long-term lease of land in Wuxi,China(about 70 miles from the firm's current 150,000ft2 manufacturing facility in Shanghai)in anticipation of building a new facility(with a first phase of 400,000ft2 expected to open in calendar second-half 2013),capital expenditure has risen from$17.4m last quarter to$23m(where it is expected to remain per-quarter over the next 18 months).Finisar also repaid an equivalent of$1.1m of debt related to its July 2011 acquisition Ignis ASA of Oslo,Norway(the remaining$3.2m outstanding is expected to be repaid in fiscal Q1/2013).During the quarter,cash and cash equivalents rose from$218.3m to$234.5m.
"We continued to invest in research and development and make good progress on a number of new innovative products,including additional customer qualifications of our tunable XFP transceivers and design wins for our Flexgrid wavelength-selective switches[WSS],ROADM[reconfigurable optical add-drop multiplexer]line-cards,40G and 100G products,"says CEO Eitan Gertel.
"In datacom,we are investing in a variety of MSA[multi-source agreement]and proprietary form factors for both short-and long-reach transceiver applications,which include SFP+,XFP,QSFP,CXP and CFP,"elaborates Gertel.Demand for the firm's 100G LR4 CFP transceivers continues to grow,and its next-generation lower-power LR4 CFP(with new internally designed directly modulated lasers)should be released in late summer."Our 16 Gig SX and LX SFP+Fiber Channel transceivers continue to be very well received in the market,and we continue to qualify this product with multiple new customers,"he adds."We are the only supplier within this industry to have both products in full production."
Finisar is continuing to invest in its QSFP portfolio and is developing a new short-and long-reach product,while expanding capacity for its existing QSFP product line."Many of our customers are migrating to QSFP due to the increased front-panel density it offers over SFP+and the versatility of the form factor in servicing many different applications and regions,"comments Gertel.
"In our parallel product line we continue to see significant traction with several key OEM customers for our proprietary optical engine that will be used in next-generation storage systems,switches,routers,servers and super-computers,"Gertel notes.Finisar expect this product line to grow very rapidly over the next few years as many customers move to using its optical engine for high-density solutions with low power and very high bandwidth.
In telecoms,Finisar continues to invest in new product development for its WSS,optical channel monitoring,10 Gig,40 Gig and 100 Gig product lines."Our success in winning new customers for our low-port-count WSS platform for the 1x2 and 1x4 applications has continued,"says Gertel."Our high-port-count WSS platform has also been very successful in winning new programs for our 1x9,1x16 and 1x23 Flexgrid products."Finisar claims to be the only firm currently delivering a full portfolio of flexible-grid WSS modules.
"We have also continued to win next-generation line cards with multiple customers based on our LCoS[Liquid Crystal on Silicon]technology and Flexgrid capabilities,"Gertel continues."We will continue to increase our market share as more of the industry incorporates Flexgrid technologies into ROADM systems,"he believes.
In its tunable XFP transceiver business,Finisar has completed numerous further qualifications,and is now focusing on design efforts towards next-generation tunable XFP module development.
"Although we have made great progress releasing numbers of new innovative products and winning new design opportunities,the current level of carrier capital expenditures-coupled with the macroeconomic situation-has resulted in lower revenues than we have expected for these products,"notes Gertel.
For fiscal first-quarter 2013(to 29 July 2012),Finisar expects revenue to fall 6%to$218-233m,down in not only telecoms(for which spending continues to be soft worldwide)but also datacoms.The firm expects declines in both gross margin(to 30.4%)and operating margin(to 5.5-7.0%),with operating expenses level at$54.6m."The current macroeconomic outlook remains uncertain,driven by some of the latest developments in Europe as well as the slowing of economic growth in China,"notes executive chairman Jerry S.Rawls.
"While the current level of carrier capital expenditures has muted the near-term revenue impact of these new products,we believe that our strong portfolio of product and new design wins has set a strong foundation for revenue growth in the second half of 2012 and beyond,"Gertel concludes.
