News

18 December 2006

 

OCP grows revenue 28.3% quarter-to-quarter; makes management changes; launches XFP 10km temperature options 

For its fiscal fourth-quarter 2006 (to end-September), fiber-optic component manufacturer Optical Communication Products Inc of Woodland Hills, CA, USA has reported revenue of $19.1m, up 29.2% on a year ago and as much as 28.3% on fiscal Q3. However, net loss rose to $1.4m, compared with $437,000 in Q3 and a net income of $1.6m a year ago.

Full-year fiscal 2006 revenue was $70.1m, up 25.3% on fiscal 2005, mainly due to increased demand from existing customers. Order backlog is $8.6m, down from $11.7m a year ago. Net income rose to $1.4m from $941,000 for fiscal 2005. Cash reserves are $126.9m.

“Historically, OCP has delivered strong gross margins relative to the industry. However, over the past year, gross margins have declined [from 38.7% in fiscal 2005 to 29.1% in fiscal 2006, and from 42.8% in fiscal Q4/2005 to 22.9% in fiscal Q4/2006] as a result of our current product mix, which included a higher percentage of low margin products, lower market ASPs, and higher labor costs,” says president and CEO Philip F. Otto.

“During fiscal 2007 we are implementing specific initiatives to improve gross margins while also accelerating our revenue growth as industry demand for fiber-optic components increases,” he adds. “We expect to begin to see a measurable impact in 2008 and we have established a long-term goal of restoring sustainable gross margins to levels greater than 30% as we grow.”

The initiatives are as follows:

• establishing higher-volume manufacturing operations in China;
• generating product cost savings by internally sourcing lasers from the GigaComm Corp operation in Taiwan, acquired in August;
• accelerating product development and speed-to-market programs through the integration of an additional design center located at OCP’'s Taiwan operation;
• reducing the percentage of low-margin products from the product mix while bringing higher-ASP products to market, including high-performance XFP/SFP+ products supporting 10 Gigabit Ethernet applications;
• creating integrated, close-to-market operations in Asia, North America and Europe to more closely align with global customers and, in particular, to participate directly in the cost reduction and design activities centered in Asia;
• instituting improved financial analysis and controls under the new chief financial officer.
  

“Following key management changes in the latter half of fiscal 2006, our new team is focused on achieving a number of important strategic milestones that will substantially enhance OCP’s competitive position,” Otto says. "In a very short time we have established an integrated Asian business platform through our acquisition of Taiwan-based GigaComm and our recently announced partnership with SAE Magnetics [in October], which we expect to result in the commencement of [low-cost, high-volume] manufacturing in China by the fourth quarter of fiscal 2007.”

OCP expects revenue of $80-90m for fiscal 2007, including GigaComm. “As we further implement our operational initiatives outlined above, execute our speed-to-market product strategies, and position the company for accelerated growth as a globally competitive fiber optic and FTTH components supplier, our fiscal 2007 plan also calls for a year-over-year increase in operating expenses of approximately 40-45% (including estimated non-recurring transition charges of $3-3.5m for the move of manufacturing to China),” says Otto. Until these initiatives take effect, OCP expects a significant gross margin decline in first-half fiscal 2007 compared with Q4, but the potential for modest quarter-to-quarter improvements later in the year.

* OCP’s management changes and promotions

OCP has announced the resignation (effective at the end of December) of founders Dr Muoi Van Tran and Susie L. Nemeti. Tan has been a director since 1992, and was president (from September 1994) and CEO (from March 1999) until July 2006, when he was appointed chairman and chief technology officer. Susie Nemeti was chief financial officer from OCP’s inception in 1991, and was appointed senior VP of corporate development in May 2006.

Tran will continue as chairman, and both Tran and Nemeti will assist in consulting roles as OCP executes its operational transition during fiscal 2007. Co-founder Mohammad Ghorbanali, chief operating officer, left OCP in October and also continues to provide consulting services.

Philip F. Otto was appointed president and CEO in July and Frederic T. Boyer was made senior VP and chief financial officer in August. In accordance with OCP’s bylaws, the authorized number of directors has been increased from seven to eight by appointing Otto to the board.

Also, OCP has promoted Dr David Jenkins to VP and managing director, Europe and Middle East, and Terry Basehore to VP of Sales, North America. Jenkins joined OCP in July 2000 as managing director of European Operations. Previously, he held senior positions with fiber-optic equipment manufacturers including Agilent Technologies and Hewlett Packard. Prior to joining OCP in 2003, Basehore was president and general manager of Gould Fiber Optics, and held sales and marketing positions at AMP Inc, including director of US field sales.

Also in fiscal 2006, director of manufacturing Dr Liew-Chuang Chiu, who joined OCP in 2005, was promoted to VP of worldwide manufacturing, and former GigaComm CEO Dr Jacob Tarn became general manager of OCP Asia.

“OCP has undergone a series of pivotal management changes over the past nine months and our new management team is eager to accelerate our global market initiatives and capitalize on growing opportunities in the fiber-optic components and fiber-to-the-home markets,” says Otto.

Also, OCP’s recent voluntary internal review of its past stock options grant practices found no evidence of any misconduct.

* OCP launches XFP 10km temperature options

OCP has launched its industrial- (-40 to +85 degrees C) and extended- (-5 to 85 degrees C) temperature XFP pluggable optical transceivers.

“We are addressing the expanded application requirements of the XFP market by offering additional operating temperature options to our portfolio,” said director of marketing Kirk Bovill. “We are sampling our cost- and performance-optimized modules to several customers.”
The XFP transceiver is designed to provide multi-protocol support for the 10 Gigabit Ethernet, OC-192 SONET/SDH and 10 Gigabit Fiber Channel to distances of up to 10km. The multi-rate modules support data rates of 10.7-9.95Gb/s. The modules are compatible with ITU-T G.691, ITU-T G.709, and Telcordia GR-253 standards.

The serial electrical interface and DDM functionality are based as per the XFP multi-source agreement (MSA). The DDM functionality enables the end-user to monitor internal temperature, DC supply voltage, transmitter bias current, transmitter output power, and receive optical signal level in the performance of the XFP transceiver. Integrated DDM functionality also incorporates warnings and alarms to monitor these parameters.

OCP’s industrial-temperature 10Gb/s XFP transceiver will be exhibited at the Optical Fiber Communication Conference & Exposition (OFC 2007) on 25-27 March at the Anaheim Convention Center, CA, USA.

Visit: http://www.OCP-inc.com