Finisar CC Replay:
corporate-ir.net
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My take, all in all a good Q. Solid revenue growth both sequentially (32%) and Y-o-Y (96%). Net income was also v. strong seq. (42%) and Y-o-Y (220%). FC product up 33% seq. GE up 53% seq. GE represented 13% of total revenues.
Major Customers/rev/%
EMC 5.8 mill 21% (Flatish Seq, as EMC underordered this Q,scrambling to catch up on orders)
Brcd 4.8 18% (Rising fast now #2 Up significantly 149% seq!)
Emlx 3.0 11%
ALA/NN 2.9 11%
Extr
} not 10% but both impt. contributors
Fdry
Opticity - Metropolitan WDM Optical Transport Platform:
400k booked this Q. 3 trials and one order form that, another trial underway. FNSR Expects more wins in this space.
CATV - Digital Return Systems: 2+ million booked. CATV equip. OEMs Antc, Secor(sp?) and Mot looking into incorporating. ASPs ~ 750k dependant on configuration. Another CATV equip. OEM has contacted FNSR in this Q.
Test Instruments - Growth seen flatish till next PY.
Negatives:
Margins were weak due to product shift to optical subsystems (81% of total revs). Management has shifted production overseas 20% to 70% at Q's end for cost savings. Next Q could see *flatish* GMs but improve afterwards, according to CEO. I suspect a round of profit taking will occur based on this, as the stock has run up recently. I could be wrong. The IPO proceeds generated interest income that contributed significantly to the bottom line. Back out the interest income and the EPS do not have the day trading bullet headline grabbing attention of Marc's post.
Here's another link to an article on Finisar:
theonlineinvestor.com
Finisar
Optical Networking Sizzles
August 18, 2000 - We just wrote about Finisar (Nasdaq:FNSR) in June, yet much has happened in those two months including a 60% jump in the stock price since then. Finisar makes fiber optic subsystems and test systems used in high-speed networking and Storage Area Network (SANs) equipment. The company just announced an acquisition on Wednesday after the close and preannounced better-than-expected earnings for its fiscal first quarter.
Finisar said it plans to buy Sensors Unlimited, a private company that makes performance monitoring components used in fiber optic networks. The $730 million deal, mostly FNSR stock, will buy a company with revenues of $15 million and pretax income of $6 million. While the price tag sounds steep (49 times trailing 12-month revenues), that's the state of affairs in fiber optic networking equipment. It's a blistering hot area and companies can use their soaring stock as currency to pay up for acquisitions and build their business. Finisar itself is trading at 70 times trailing revenues.
Concurrent with the acquisition announcement, Finisar released preliminary first quarter results. Revenues for the quarter ended July 30 are thought to exceed $27 million, up 95% from a year ago and up over 30% sequentially. Growth continues to be driven by the higher-margin optical subsystems business. Net income is expected to be $0.03 per share, beating the analyst consensus by a penny.
Finisar makes optical data links--transmitters, receivers and transceivers--that operate at Gigabit speeds. It also makes optical link extenders and other products designed to increase the performance and reliability of networks. Finisar sells these products to original equipment manufacturers (OEMs) in the networking equipment and fibre channel SAN markets. Customers include EMC, Brocade Communications, Newbridge Networks, Sun Microsystems, HP, IBM and Compaq. Finisar also sells network performance testing systems.
Finisar attempts to differentiate its products on performance and reliability but it also does so with value-added features, most notably performance monitoring capabilities achieved via a microprocessor and software built into these subsystems.
The company targets four main markets: Gigabit Ethernet for LANs, fibre channel for SANs, cable TV and metro data networks. The first two are already starting to blossom and should soon be multibillion dollar market opportunities. The drive for faster, better networking on the enterprise level is well documented, and the storage networking story has really come of age in the past year. As for cable TV, Finisar products provide return path transport on two-way cable systems. Cable operators are in the early stages of a massive upgrade to their infrastructure, so this market is expected to take off in the next year. Finally, optical loops for metropolitan areas are a very hot topic these days, as the bottleneck in data transmission is increasingly at the interconnect between enterprise networks and Internet backbones. This is also a large market opportunity measured in billions that should start to ramp this year.
The fact that Finisar is positioned in front of such massive market opportunities is why investors have given a market cap of $5.6 billion to a company with sales of just $80 million. The company is not only profitable, but well capitalized for additional growth opportunities. Finisar ended last quarter with $321 million in cash, thanks in part to a successful secondary offering in April despite that being in the midst of the tech sector meltdown.
To justify its valuation, the company will need to demonstrate rapid progress in capturing the large market opportunities it currently targets. The company hopes to continue its historical growth rate (90% over the past five years) into the next five years, and the preannouncement of 95% growth in the latest quarter indicates they are slightly ahead of schedule.
- James Hale
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