5 September 2011

Finisar’s quarterly revenue falls 3.7% to $228.2m 

For its fiscal first-quarter 2012 (to end-July 2011), fiber-optic communications component and subsystem maker Finisar Corp of Sunnyvale, CA, USA has reported revenue of $228.2m, up 9.8% on $207.9m a year ago but down 3.7% on $236.9m last quarter, driven mainly by continued softness in demand from telecom customers, particularly Chinese OEMs. Revenue included $7m from acquiring a controlling stake in Norway-based Ignis ASA (which provides optical components and network solutions for fiber-optic communications) on 18 May through end-June (the end of Ignis’ fiscal quarter).


Compared to last quarter, sales of LAN/SAN products rose by 0.2% ($143,000), sales of metro/telecom products (including WSS/ROADM line cards) fell by 6.7% ($9.3m), and sales of products for analog and CATV applications rose by 12.7% ($400,000). Sales of 10Gbps or faster products rose by 1.2% ($1.3m), sales of less than 10Gbps products rose by 6.1% ($5.5m), and sales of WSS/ROADM line-card products fell by 47% ($15.9m).

On a non-GAAP basis, gross margin has fallen from 35.2% a year ago and 34.2% last quarter to 32.1%, driven by by lower overall revenue and by Ignis’ products (for which gross margin is lower than Finisar’s average). However, gross margin still exceeded guidance of 30.7–31.7%, due to lower-than-expected manufacturing costs.

Operating expenses have risen from $44.2m a year ago and $48m last quarter to $52.4m, driven by the addition of $2.4m of Ignis operating expenses and by R&D expenses rising by $2.5m (from $32.9m to $35.4m) due to the development and qualification of new products (including the tunable XFP transceiver). Nevertheless, operating expenses were still lower than expected.

Compared with $29m a year ago and $33.1m last quarter (operating margin of 14% of revenue), operating income was $20.9m (9.2% margin, but at the top end of the expected range of 7.3–9.3%). Income from continuing operations was $19.5m, down from $25.8m a year ago and $32.1m last quarter.

“During the first quarter we continued to invest in our new product development programs, including our tunable XFP transceivers, 40Gbps and 100Gbps products, 16Gbps fiber channel transceivers and our edge or access ROADMs,” says executive chairman Jerry Rawls. “We are currently qualified at multiple OEM customers for our tunable XFP transceiver and are in qualification with more than 15 additional customers,” he adds. “We expect production of this product to start to ramp during the second quarter of fiscal 2012,” notes CEO Eitan Gertel.

During the quarter, capital expenditures were $16.3m (down from $19.4m last quarter). Also, on 29 June, Finisar closed its cash tender offer for the remaining outstanding shares of Ignis ASA, and now holds 100% of the shares. The total cost of the acquisition during the quarter was $76.7m. In addition, on behalf of Ignis, Finisar repaid debt equivalent to $8.2m. Cash and cash equivalents hence fell from $314.8m to $238.1m. However, excluding the impact of the uses of cash with respect to the Ignis acquisition, repayment of debt, and payout of previously accrued bonus amounts, cash reserves would have risen by $15.2m. During the first quarter, accrued compensation expense fell by $7m, due mainly to the pay out of employee bonuses previously accrued during fiscal 2011.

Including the impact of the consolidation of Ignis (involving about $14m of revenue at a gross margin of 23–24%, additional operating expenses of $5m and dilution to earnings per share of about $0.02), for fiscal second-quarter Finisar expects revenue of $235–250m and non-GAAP operating margin of 8.5–10.0%.

Finisar expects the Ignis acquisition to be accretive to non-GAAP earnings per diluted share within one year following the closing of the tender offer (subject to the achievement of anticipated synergies).

See related items:

Finisar reports annual revenue up 50.6% to record $948.8m for fiscal 2011

Finisar grows 57.6% year-on-year to record quarterly revenue of $263m

Finisar’s quarterly revenue up 16% to record $240.9m

Finisar’s fifth quarter of double-digit growth yields record revenue of $207.9m

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