More News***Wednesday August 30, 2000
dailyherald.com
business section
Booming fiber-optics industry keeps
Stratos Lightwave on hectic pace
"WHAT WE USED TO THINK WERE STANDARD,
COMMODITY-TYPE ITEMS ARE GETTING MORE
AND MORE DIFFICULT TO MAINTAIN A
CONSISTENT SOURCE OF SUPPLY." - STRATOS
LIGHTWAVE'S JIM W. MCGINLEY chief executive.
The fiber optics industry, which includes Lucent Technologies Inc.
and other heavyweights, is booming because optical networks
translate the ones and zeros of computer language into light signals
that travel faster, farther and in greater volumes than traditional
electronic signals.
Only 20 percent to 30 percent of telecommunication access lines
are fiber, said industry analyst Ted Moreau of Robert W. Baird &
Co. The rest are electric wires that generally slow data-traffic
down. As companies upgrade from wire to fiber, equipment
suppliers such as Stratos rush to fill an avalanche of orders.
Order backlog for Stratos in the quarter ended July 31 jumped to
$47 million, up 88 percent over the previous quarter, McGinley
said. The magnitude of the increase took the company by surprise.
"What made our success in the marketplace was the ability to
deliver," McGinley said. Now "we're scrambling, trying to get the
capacity in place in a rapid manner so we can support (customers')
needs."
Stratos sells optical subsystems and components to companies that
build networking equipment and telecommunications systems,
including Nortel Networks Corp., Alcatel Alsthom S.A. and Cisco
Systems Inc.
Its main competitors include Agilent Technologies Inc., IBM Corp.,
Finisar Corp., Lucent Technologies Inc., Infineon Technologies
Inc. and Lisle-based Molex Inc.
The optical subsystems Stratos makes translate electronic signals
into light signals and send them down fibers, and pick up light
signals at the end of fibers to convert them back into electronic
form.
The company is racing to meet year-end production targets of 100
percent growth in optical subsytems and 200 percent growth in
optical components, McGinley said. Stratos plans to hire more than
200 new employees, increasing its staff size by about 33 percent.
It's stocking up on basic parts such as resistors, capacitors and
circuit boards.
Formerly the optical division of Chicago-based Methode
Electronics Inc., Stratos Lightwave made an initial public offering
on June 27 that generated $183.8 million from 8.75 million shares
at $21 per share. The company took home $170.9 million after the
underwriting discount.
Methode, which has plants in Rolling Meadows, still owns 86
percent of Stratos' outstanding common stock but plans to spin off
the company by June 2001, according to the Stratos prospectus.
The stock is trading around $40, well above its initial offering price.
Analyst Steve D. Levy of Lehman Brothers Inc. forecasts Stratos
will generate $110.6 million in revenue during fiscal 2001, ending
next April, and $170 million the following year, compared with
$71.78 million in fiscal 2000. He expects earnings for fiscal 2001
will increase 120 percent to $8.38 million, or 13 cents per share, up
from $3.81 million in fiscal 2000. Lehman Brothers was the lead
underwriter of the Stratos IPO.
To keep pace with demand, Stratos needs to ward off competitors
who have been trying to poach the company's key engineers. It lost
only one of about 80 last year, McGinley said, "and the reason
why we didn't lose more is because they knew the IPO was
coming."
In fact, he added, one of the main reasons Stratos went public was
to create a stock options incentive program that would help retain
engineers.
Now, the human resources department is looking "almost globally"
for more optical engineers and is recruiting locally to fill more than
200 manufacturing positions.
But labor isn't the only thing that's tight at Stratos. Even
nuts-and-bolts parts that used to be plentiful are harder to acquire.
"What we used to think were standard, commodity-type items are
getting more and more difficult to maintain a consistent source of
supply," McGinley said. "Even circuit boards are more difficult to
get in a quick time frame."
To help shore up supplies as well as boost research and
development, Stratos acquired the compound semiconductor
division of Spire Corp. in December 1999 for $13 million.
"We felt that to be committed to the business long-term, we really
had to have the capability of making our own devices," McGinley
said. "We didn't want to be dependent on the merchant market
forever as far as when we could release a new product."
The nonstop pressure to send more data faster
over communications networks is straining
Stratos Lightwave Inc., a Chicago-based
fiber-optic equipment supplier. "Here comes the
wave - you're just trying not to get killed by it,"
said Jim W. McGinley, 44, the company's
president and chief executive.
The fiber optics industry, which includes Lucent Technologies Inc.
and other heavyweights, is booming because optical networks
translate the ones and zeros of computer language into light signals
that travel faster, farther and in greater volumes than traditional
electronic signals.
Only 20 percent to 30 percent of telecommunication access lines
are fiber, said industry analyst Ted Moreau of Robert W. Baird &
Co. The rest are electric wires that generally slow data-traffic
down. As companies upgrade from wire to fiber, equipment
suppliers such as Stratos rush to fill an avalanche of orders.
Order backlog for Stratos in the quarter ended July 31 jumped to
$47 million, up 88 percent over the previous quarter, McGinley
said. The magnitude of the increase took the company by surprise.
"What made our success in the marketplace was the ability to
deliver," McGinley said. Now "we're scrambling, trying to get the
capacity in place in a rapid manner so we can support (customers')
needs."
Stratos sells optical subsystems and components to companies that
build networking equipment and telecommunications systems,
including Nortel Networks Corp., Alcatel Alsthom S.A. and Cisco
Systems Inc.
Its main competitors include Agilent Technologies Inc., IBM Corp.,
Finisar Corp., Lucent Technologies Inc., Infineon Technologies
Inc. and Lisle-based Molex Inc.
The optical subsystems Stratos makes translate electronic signals
into light signals and send them down fibers, and pick up light
signals at the end of fibers to convert them back into electronic
form.
The company is racing to meet year-end production targets of 100
percent growth in optical subsytems and 200 percent growth in
optical components, McGinley said. Stratos plans to hire more than
200 new employees, increasing its staff size by about 33 percent.
It's stocking up on basic parts such as resistors, capacitors and
circuit boards.
Formerly the optical division of Chicago-based Methode
Electronics Inc., Stratos Lightwave made an initial public offering
on June 27 that generated $183.8 million from 8.75 million shares
at $21 per share. The company took home $170.9 million after the
underwriting discount.
Methode, which has plants in Rolling Meadows, still owns 86
percent of Stratos' outstanding common stock but plans to spin off
the company by June 2001, according to the Stratos prospectus.
The stock is trading around $40, well above its initial offering price.
Analyst Steve D. Levy of Lehman Brothers Inc. forecasts Stratos
will generate $110.6 million in revenue during fiscal 2001, ending
next April, and $170 million the following year, compared with
$71.78 million in fiscal 2000. He expects earnings for fiscal 2001
will increase 120 percent to $8.38 million, or 13 cents per share, up
from $3.81 million in fiscal 2000. Lehman Brothers was the lead
underwriter of the Stratos IPO.
To keep pace with demand, Stratos needs to ward off competitors
who have been trying to poach the company's key engineers. It lost
only one of about 80 last year, McGinley said, "and the reason
why we didn't lose more is because they knew the IPO was
coming."
In fact, he added, one of the main reasons Stratos went public was
to create a stock options incentive program that would help retain
engineers.
Now, the human resources department is looking "almost globally"
for more optical engineers and is recruiting locally to fill more than
200 manufacturing positions.
But labor isn't the only thing that's tight at Stratos. Even
nuts-and-bolts parts that used to be plentiful are harder to acquire.
"What we used to think were standard, commodity-type items are
getting more and more difficult to maintain a consistent source of
supply," McGinley said. "Even circuit boards are more difficult to
get in a quick time frame."
To help shore up supplies as well as boost research and
development, Stratos acquired the compound semiconductor
division of Spire Corp. in December 1999 for $13 million.
"We felt that to be committed to the business long-term, we really
had to have the capability of making our own devices," McGinley
said. "We didn't want to be dependent on the merchant market
forever as far as when we could release a new product." |
