News

9 February 2009

 

Opnext’s revenues fall 12% from last quarter

For its fiscal third-quarter 2009 (to end-December 2008), optical module and component maker Opnext Inc of Eatontown, NJ, USA has reported sales of $70.5m. This is up 6.2% on $66.4m a year ago (due mainly to increased sales of XFP, X2 and SFP products, partially offset by lower sales of 40G and XENPAK modules). However, it is down 12.1% on last quarter's $80.2m.

“The market weakness that we saw at the end of last quarter continued to impact our performance throughout the December quarter,” says president & CEO Harry Bosco. The sequential decrease affected all product lines except XFP products. Sales of 10Gb/s and above products fell 13.6% from $65.6 to $56.7m, while sales of less than 10Gb/s products fell 6.7% from $9m to $8.4m, and sales of industrial and commercial product fell 3.6% from $5.6m to $5.4m.
Sales to Cisco and Alcatel-Lucent represented 35.2% and 15.9% of sales, respectively, compared to 38.6% and 14.6% last quarter. Sales to other top ten customers grew 4.4% sequentially to 31.8% of revenue.

Gross margin has fallen from 32.8% a year ago and 30.5% last quarter to 22.1%, including a 7.5 percentage point negative effect from excess and obsolete inventory charges associated with the reduced demand for communication products. Gross margin was also negatively impacted by lower sales volumes (partially offset by the net benefit from foreign currency exchange fluctuations and hedging programs).

Operating expenses have risen 27.3% from $24.4m last quarter to $31.1m, due mainly to a $5.7m goodwill impairment charge resulting from the current weakness in the communications market, a $0.9m increase in bad debt expense associated with the recent bankruptcy filing by Nortel Networks, and the negative effect from foreign currency exchange fluctuations (partially offset by a decrease in spending for R&D materials). Excluding the goodwill impairment charge, stock-based compensation expense, class-action-related litigation expenses and costs associated with the acquisition of StrataLight Communications Inc of Los Gatos, CA, USA (announced last July), non-GAAP net loss was $6.8m, although this was largely due to the $5.3m increase in excess and obsolete inventory charges and $0.9m of Nortel-related bad debt expense. This compares with net income of $3m last quarter and $5.6m a year ago.

Cash and cash equivalents fell from $221.7m at the end of March to $206m, due mainly to $6.6m of short-term loan payments, $6.5m of payments on capital lease obligations, $2.2m of costs incurred in connection with the StrataLight Communications acquisition, and $2.5m of additional capital investments.

“We expect weakness to continue in 2009,” says Bosco. “In addition, we are experiencing increased pricing pressure, an unfavorable product mix, and the adverse effect of foreign currency exchange fluctuations,” he adds.

“In this difficult demand environment, our focus is on continuing to serve our customer base, completing the integration of StrataLight, and reducing our expense structure while we continue to invest in R&D programs for our future,” Bosco continues. “Our goal remains to enhance our industry leadership at the higher network speeds and expand our customer relationships as we address the continuing need for greater bandwidth.”

“We continue to take a cautious short-term view based on a challenging macro-environment and tempered customer views,” says Bosco. For its fiscal fourth-quarter 2009 (to end March), Opnext hence expect revenues, including results from its subsystems business (formerly StrataLight, acquired on 9 January), of $80-90m.

See related items:

Opnext completes StrataLight acquisition

Opnext’s revenues fall during lull after initial 40Gb/s deployments

Opnext to acquire StrataLight

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