5 August 2010


Oplink’s margins dip as it expands to meet growing demand

For its fiscal 2010 (to end-June), optical networking component, module and subsystem maker Oplink Communications Inc of Fremont, CA, USA has reported revenue was $138.8m, down 3.4% on $143.7m. However, fourth-quarter revenue of $38.9m was up 16% on Q3’s $33.6m and up 20% on $32.4m a year ago (as well as exceeding the forecast $35–38m), although this included $2.1m from Taiwan-based AMIT Technology, acquired last quarter).

The three 10% customers were Tellabs, Alcatel-Lucent, and Huawei (accounted for 41% of revenue collectively), although there were also strong contributions from Sienna, Fujitsu, and Cisco. Of total revenue, 33% came from North America, 22% from Europe, and 45% from Asia.

“It was a strong quarter across all lines and geographies,” says president and CEO Joe Liu. “Worldwide carriers are spending more on next-generation optical tools to increase bandwidth and service to many new applications,” he adds. “Business is strong in both access and metro markets, FTTx is growing, and so is the metro core and the metro edge,” continues Liu. “We have experienced these demand trends for several quarters now, and we were able to ramp up our production capacity as a result of our ongoing expansion efforts... We expect these demand trends to continue.”

Non-GAAP gross margin rose from just 27.4% in fiscal 2009 to 33.7% in fiscal 2010. In particular, Q4 was 33.5% (up on 30.6% a year ago). However, this was down slightly on Q3’s 34.5%.

This was due to Oplink increasing manufacturing and R&D headcount substantially (from 3446 to 3821) in order to expand production capacity. As Oplink continued to invest in R&D and new product initiatives, non-GAAP operating expenses have risen from $6.3m a year ago and $6.6m last quarter to $7.4m, partly due to R&D expenditure rising by $456,000 (although OpEx also included a full quarter of expenses from AMIT).

Net income has risen from just $249,000 a year ago and $2.6m last quarter to $3.6m. This took fiscal 2010 net income to $11.1m, compared with a net loss of $13.8m in fiscal 2009.

During the quarter, cash, cash equivalents and investments fell $24.4m to $160.3m. However, this was due mainly to repurchasing 1.5 million shares of common stock for $22m (of which $20.8m was paid during the quarter, and the remainder after quarter end).

“The outlook for the current quarter is good; however, long-term visibility is still limited,” says Liu. “Hence, we remain cautiously optimistic about the growth trends we are experiencing,” he adds. “The environment for our products is picking up, and we are planning for sequential increases in revenue,” comments chief financial officer Shirley Yin.

For first-quarter 2011 (to end-September 2010), Oplink expects revenue to grow 21–29% to $47–50m (including $2m of sales unable to be shipped in fiscal Q4 due to capacity and supply constraints, plus $3m from AMIT). Despite this, gross margin will remain flat, due to product mix and increased labor costs in China manufacturing facilities (although Oplink’s headcount addition will probably be limited to no more than 200 during the quarter, says Liu). Also, operating expenses should continue to rise in the coming quarters, as the firm continues to increase spending on R&D, targeting 40G and 100G products.

See related items:

Oplink grows revenue but profit dips

Oplink increases margin and profit despite revenue dip

Oplink’s recovery continues from March-quarter low

Oplink goes into profit as revenue rebounds

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