Capex Continues To Surprise On the Upside
Posted on March 3, 2014
A key fundamental driver of the communications equipment industry and associated supply chain stock performance is the growth in overall capital spending by service providers, including wireless, fixed and cable TV operators. Coming into 2014, the general expectation by Wall Street analysts was for 2014 to be a decent year of overall growth in capital spending on the order of 2%-4%, with the wireless component growing much faster in the 6%-9% range. The 2014 growth expectation was due to a ramp in spending in key markets like China given the expectation that LTE would be finally rolled out in earnest, Europe given operators were expected to start growing spending after a period of under-investment in the past few years and the US given wireless operators were expected to continue to grow spending to enhance network quality and expand LTE coverage.
I continue to view the upward bias on 2014 operator capex as favorably for communications equipment and supply chain companies.
Here are some key highlights of recent capital spending commentary from key operators in the US, China and Europe from 4Q13 earnings calls that took place in January and February:
China: After a delayed tendering process by China Mobile in 2013 for LTE equipment suppliers, a portion of China Mobile capital spending was delayed into 2014. This deferral into 2014, combined with all the major operators ramping LTE spending in 2014 is likely to lead to an overall China capex growth of 15% in 2014 vs. prior expectations of about 10% growth.
US – In the US, AT&T, Verizon, T-Mobile, Comcast, Time Warner Cable and Charter all raised their respective 2014 capex plans vs. prior analyst expectations. In addition, Google announced it is planning to expand its Google Fiber network to 34 additional cities in the future, which may add to the competitive pressure in residential broadband networks in future years.
pico thanks for that insight. I didn't recall GOOG as an OCLR customer but they clearly are...so GOOG please connect the planet.
Top-Tier Customer Base
Oclaro is committed to being the preferred supplier of
optical components, modules and subsystems and delivering
innovation across all of our product areas, business processes
and practices. Top-tier customers that we partner with include:
ADVA Optical Networking • Alcatel-Lucent • Arista
Bosch • Brocade • Canon • Ciena • Cisco • Dell
Ericsson • Extreme Networks • Fanuc • FiberHome
Fujitsu • Google • Heidelberg • Hitachi • HP
Huawei • Infinera • Juniper Networks • Kyocera
Laserline • Lumenis • Mitsubishi• NEC
Nokia Siemens Networks • Padtec • Panasonic
Ricoh • Spectra-Physics • Tellabs • ZTE
Not a bad finish considering and that its still above $3 despite markets ride downhill...We are heading into the crossroads of ER and markets typical slide in may so we shall see how it holds out...Obviously if they make the analysts happy then we should be good..
Last October, we were discussing a summer-ish buyout due to the retention bonus's that some of the VPs and directors were signing on for. The last retention bonus was slated for 7/1/2014, of the group of 3 grants. I believe this was the main idea for a big move by summer. Other than that, even without it, serious cost-cutting internally (either prepping for buyout or not), should translate to higher stock price anyway.
Starting up another silicon photonics company called Rockley Photonics in southern California. Rickman & Bookham, now Oclaro, own many silicon photonics patents which someday may become quite valuable since it appears that silicon photonics will not die.
Capex has been declining for the past couple of qtrs in telecom. You will need a years worth of patience at least. Those with the best track records are saying 2016 is when things finally get sufficient. They are not the headline makers, but headline hype is a fools game in this sector.
....including a pledge of capital stock. hmmm interesting.
Looks like it's just a typical accounts receivable loan (up to 80% of A/R). The rates they got are actually pretty good (roughly 3 to 4% range). I secured an A/R loan for my business at 6% and that took A LOT of shopping around.
In Silicon Valley, companies are given the advice to get extended term credit lines when the times are good as an insurance policy against bad times. Silicon Valley Bank specializes in these credit lines so this is an indication that SVB are positive about the OCLR future.
I take this credit line announcement as just another sign that Oclaro is being well managed.