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21 September 2009


Finisar’s revenue grows 20%, driven by 10-40Gb/s applications

For its fiscal first-quarter 2010 (ended 2 August 2009), fiber-optic communications component and subsystem maker Finisar Corp of Sunnyvale, CA, USA has reported revenue of $135.5m. However, excluding $6.7m from the Network Tools division (sold to JDS Uniphase Corp during the quarter), revenue from continuing operations was $128.7m, up 19.8% on $107.5m last quarter and 11.2% on $115.8m a year ago (including the impact of the Optium merger, completed on 29 August 2008).

Excluding the contribution from Optium, optics revenue of $99.9m is up 21.3% on $82.3m last quarter but down 13.7% from what was a record (prior to the merger) of $115.7m a year ago.

Revenues from 10-40Gb/s applications was $51.9m, up 27.8% on $40.6m last quarter and 61.1% on $32.2m a year ago (due mainly to Optium).

“Order trends continue to underscore healthy customer demand for ROADMs [reconfigurable optical add-drop multiplexers] and products capable of transmitting at 10Gb/s for use in datacom and telecom applications,” says executive chairman Jerry Rawls. Finisar also saw the first orders and revenue for its QuadWire product for 40Gb/s parallel optics applications. “This product marks our first foray into that new market for us,” he adds.

On a non-GAAP basis, gross margin was 28.8%, up on 27.2% last quarter (reflecting greater product shipments) but down from 36.6% a year ago (reflecting lower revenues and yields from higher-speed components as well as the impact of the Optium merger ahead of manufacturing cost synergies expected over the next three quarters).

“While gross margins for optics were up from last quarter and a little better than we expected, we can look for additional improvement in the near term as our top line continues to improve, product mix turns favorable and additional synergies are realized with respect to manufacturing costs,” says CEO Eitan Gertel.

Although down from $9m a year ago, income was $1.8m compared to a loss of $3.4m last quarter.

During the first quarter, cash and short-term investments (plus other long-term investments that can be readily converted into cash) rose from $37.2m to $60.4m, mainly reflecting the sale of the Network Tools business for $40.6m in cash.

Following the completion of an exchange offer on 6 August where it retired $47.5m in principal amount of its convertible subordinated notes due 15 October 2010 (in exchange for 28.3 million shares of common stock and $24.9m in cash), Finisar has retired a further $15.2m principal value of its notes in an all-cash, privately negotiated transaction.

*Also, following stockholder authorization, Finisar’s board of directors has approved a 1-for-8 reverse split of its common stock (from about 515 million to 64 million shares), which will begin trading on NASDAQ on a split-adjusted basis on 28 September under the temporary trading symbol FNSRD. The trading symbol will revert to FNSR after about 20 trading days.

The reverse split is intended to encourage investor interest in Finisar's stock by giving more visibility to earnings per share as a measure of company performance. The firm also believes that a higher share price could broaden Finisar’s appeal to investors, in addition to reducing per-share transaction fees and certain administrative costs.

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