27 June 2011

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

For its fiscal 2011 (to end April), fiber-optic communications component and subsystem maker Finisar Corp of Sunnyvale, CA, USA has reported record annual revenue of $948.8m, up 50.6% on fiscal 2010’s $629.9m.

Of the $318.9m increase in revenue, sales of products for applications less than 10Gbps rose by 22.2% ($64.3m), sales of products for applications equal to or greater than 10Gbps rose by 72.4% ($180.1m), and sales of wavelength selective switch (WSS) and reconfigurable optical add-drop multiplexer (ROADM) line-card products rose by 108.4% ($78.5m), while sales of products for analog and cable TV (CATV) applications fell by 20.6 ($3.9m)%.

On a non-GAAP basis, Finisar has also achieved records for operating income ($147.7m, up from $44.7m, as operating margin more than doubled from 7.1% to 15.6% of revenue); net income ($138.7m, up from $37.5m); and diluted earnings per share ($1.55, up from $0.56).

However, for its fiscal fourth quarter, revenue was $236.9m, up 25.7% on $188.5m a year ago but down 9.9% on $263m last quarter due mainly to soft demand from telecom customers, particularly Chinese OEMs. The firm had warned in March that the quarter would be impacted by: the full three months of the annual price negotiations with telecom customers that typically take effect on 1 January; the 10-day-long shutdown at certain customers for Chinese New Year in February; the adjustment of inventory levels at some telecom customers (particularly for products that had previously been on allocation and long lead times, including WSS and ROADM line-cards); and a slowdown in business in China overall.

Of the $26.1m drop in revenue from last quarter, sales of less than 10Gbps products fell by 3.9% ($3.6m), sales of 10Gbps or faster products fell by 7% ($8.2m), sales of WSS/ROADM line-card products fell by 28.7% ($13.7m), and sales of products for analog and CATV applications fell by 13.6% ($0.5m).

On a non-GAAP basis, operating expenses have risen from $43.2m a year ago and $46.4m last quarter to $48m, driven by higher R&D expenses associated with the development and qualification of new products, including the firm’s tunable XFP transceiver. Consequently, operating income has fallen from $44.7m (an operating margin of 17% of revenue) last quarter to $33.1m (14% of revenue).

Likewise, despite being up on 32.6% a year ago, non-GAAP gross margin has fallen from 34.7% last quarter to 34.2% (although this exceeds guidance of 32–33%). Net income was $32.1m ($0.33 per diluted share), almost double the $16.7m a year ago ($0.22 per diluted share) but down from $42.5m last quarter ($0.47 per diluted share). During the quarter, cash and cash equivalents rose from $310.2m to $314.8m.

On 18 May, Finisar closed its cash tender offer (announced in March) for the shares of Norway-based Ignis ASA, which provides optical components and network solutions for fiber-optic communications. The firm’s stake in Ignis has now risen from 32% to a controlling interest of about 81% of the outstanding shares. “We believe Ignis’ whole-owned subsidiary Syntune will provide us a secure supply of superior tunable lasers used in producing our tunable XFP transceiver,” says CEO Eitan Gertel.

“During the quarter we continued to invest in our new product development programs, including tunable XFP, to generate a significant pipeline of new products,” says executive chairman Jerry Rawls. “We expect this pipeline will enable us to win new opportunities with both LAN/SAN and telecom customers and expand our market share,” he adds. “We are currently in qualification with 15 customers for our tunable XFP transceiver and expect production of this product to start to ramp during the first fiscal quarter of 2012.”  

For fiscal first-quarter 2012 (to end-July 2011), Finisar expects declines in revenue to $215–230m, non-GAAP operating margin to 8–10%, and earnings per diluted share to $0.17–0.21.
However, during fiscal Q1/2012, Finisar will apply consolidation accounting for its ownership stake in Ignis from 18 May through 30 June 2011 (the end of Ignis’ fiscal quarter, or about 50% of Finisar’s fiscal Q1). Including the elimination of any intercompany revenue and other items, Finisar expects the impact to be (i) additional revenue of about $6.5m, with a non-GAAP gross margin of 23–24%, (ii) an additional non-GAAP net operating loss of about $1m and (iii) a negative impact to earnings per diluted share of about $0.01. Nevertheless, Finisar expects the Ignis acquisition to be accretive to non-GAAP earnings per diluted share within one year of closing the tender offer (subject to the achievement of anticipated synergies).

Taking into account the impact of the consolidation of Ignis, for fiscal Q1 Finisar hence expects revenue of $221–236m; non-GAAP operating margin of 7.3–9.3%; and earnings per diluted share of $0.16–0.20.

See related items:

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

Finisar’s quarterly revenue rises 12.9% to record $188.5m

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