Finisar up 12% in AH

Optical component supplier, Finisar, reported their earnings after the market closed today. They also guided better than “feared” given Ciena’s warning today.

http://seekingalpha.com/news/2978026-finisar-up-12_1-percent…

Given Ciena’s sales slowdown for Q1 (whose primary customers are the Telecos), it appears that someone must still be buying optical equipment components this quarter and demand is still strong.

Food for thought.

–Kevin

6 Likes

FYI if it isn’t clear. Optical component companies like Finisar supply the low level parts needed to assemble the high end network gear made by companies like Ciena’s, Alcatel-Lucent, and to some degree Infinera. Infinera is a bit different in that they assemble a good portion of their low level components on their own, and use their own fab to combine all of these components onto one chip. It gives them a huge efficiency advantage and it really is an engineering marvel.

That said, Infinera does rely on some components makers, like Oclaro, Finisar, Lumentum, NeoPhotonics and Avago. Which one of these providers is current I do not know, although Oclaro was once mentioned as a provider a few years ago.

Nevertheless, sufficient demand does exist to assemble optical networking gear from a component manufacturer perspective. It just so happens that the demand isn’t as strong from the perspective of a Ciena customer base.

Reading the tea leaves I think Infinera is eating a bit of Ciena’s lunch right now.

Best,
–Kevin

8 Likes

FYI if it isn’t clear. Optical component companies like Finisar supply the low level parts needed to assemble the high end network gear made by companies like Ciena’s, Alcatel-Lucent, and to some degree Infinera.

Kevin,

Do you know if there’s a supply chain lag in the components that Finisar provides (i.e. could component parts have been ordered but assembled final products not sold through???) to the final purchased networking solutions? This might offer another explanation for Finisar’s good results and Ciena’s weak guidance.

Chris

1 Like

could component parts have been ordered but assembled final products not sold through?

Chris, great question, and one I don’t know the answer to. But if I had to guess I would say those orders are projected out in the rough to within 10% or some other negotiated tolerance. Then, payment is guaranteed to within that order quantity to secure bulk pricing. I’d assume if orders are scaled down there is a window to do so, but the window is constantly revolving, and penalties would apply if made after the window arrives.

I know that doesn’t really answer your question, but it has to take time to actually manufacture the final assembled product, and to do so the components must be available on hand. If some other supply chain master can comment I think you’ll get a better answer :slight_smile:

Best,
–Kevin

1 Like

I know that doesn’t really answer your question, but it has to take time to actually manufacture the final assembled product, and to do so the components must be available on hand. If some other supply chain master can comment I think you’ll get a better answer :slight_smile:

Thanks Kevin. My main point was that a good Finisar result may not necessarily mean good things to come for INFN in the near term. Finisar guidance,OTOH, may mean more.

Chris

3 Likes

Finisar guidance,OTOH, may mean more.

Yes, I agree. It was the guidance provided that caught my attention. Someone out there is still heavy on the component orders, and whoever that is, they wouldn’t be heavy on the orders if they didn’t have their own customer pipeline in the horizon to back it.

Best,
–Kevin

3 Likes

From Finisar’s conference call transcript…

http://seekingalpha.com/article/3748996-finisars-fnsr-ceo-je…

Troy Jensen - Piper
Congrats on the nice October quarter gentlemen. Hey Jerry, for you, I was wondering if we could spend some time on ROADMs and WSS demand. I guess it’s been a while since we’ve seen some good growth from that. So can you go over maybe like the form factors that matter right now? And I know historically, you had some design wins with Cisco and Sienna and just the design activity, in competition, in the ROADM market?

Jerry Rawls - Chairman and CEO
Well, demand for wavelength selective switches is strong. Most of the demand, as you might imagine, is for Flexgrid optical switches. And we see it from all over the world. So, I’m not going to comment specifically on any particular customer but I think it’s fair to say that it’s an exciting time for us as we have – as we see the volumes increase and we are – lead times going out on wavelength selective switches.

Troy Jensen - Piper
And then how about just one on datacom. So, the 100G transceiver business, can you just talk about capacity that you have today? And where you guys are at utilization? And how much capacity you plan on having over the next couple of quarters?

Jerry Rawls - Chairman and CEO
Well 100 gig includes a number of products and the most – the important ones today are the CFP form factor, CFP2 form factor and the QSFP 28. We are shipping everything we can and we’re not – and the lead times are going out. So, it’s a very strong market right now. And it’s strong in all three form factors. The QSFP 28 is the one that I would say, on a percentage basis, we’ve seen the greatest increase in revenue. And I expect that that will be the case over the next probably one to two years, it’s – I’m sure it’s going to take off because that’s the big product for the year for the hyperscale data centers.

There you have it, the market for 100 gig, driven by data center demand, is here right now and going on strong, and is likely to continue for the next several years.

Best,
–Kevin

3 Likes