OCLR has no debt vs NPTN. Also OCLR has more cash. Both companies need 100G products to grow which I think will happen. On the down side, OCLR has a loss in legacy products to overcome.
c175172 made a comment about these two companies merging. Maybe that is not a bad idea!
Overall, I would think both companies are about equal in terms of value and chances of recovery.
May 9, 2014 11:01 a.m. ET
It has been another tough week for optical stocks.
Contract manufacturer Fabrinet (ticker: FN) and components maker Oclaro (OCLR) put up poor results and guidance. Although both companies made positive comments about strong global 100G telecom demand, much like JDS Uniphase (JDSU) (rated at Buy) last week, they reported weak revenue and margins due to their nontelecom businesses (Fabrinet) and company-specific product-execution issues (Oclaro). They also each reported meaningful declines in their datacom segment, which has investors worried about Finisar (FNSR) (rated at Buy).
We are much less concerned about Finisar, however, because Oclaro is a large datacom customer for Fabrinet, and Oclaro's miss was due to company-specific product-cycle execution, not overall datacom-market demand.
JDS Uniphase was upbeat on China saying it began shipping 100G optical-telecom products in the second half of 2013 and that the business will grow throughout 2014. Management indicated that incremental communications and commercial optical-products sales into China could reach $10 million by third-quarter 2014 and the network and service enablement segment could add another $5 million by the fourth quarter.
Oclaro's datacom business is a campus-to-campus or data center-to-data center business that is similar, application-wise, to telecom. Oclaro had strong 100G carrier-frequency pulse (CFP) sales to China Telecom (CHA) in the December quarter, but this was down in March due to inventory. We also think that Oclaro is behind in the industry transition to CFP2 against companies such as Finisar and JDS Uniphase. Oclaro continues to see "large demand" for 10G small form factor pluggable transceiver products to support the long-term evolution (LTE) build-out in China with the line sold out in the March and June quarters.
Oclaro had another record quarter for 40G telecom line cards to Coriant (private) intended for AT&T's (T) existing long-haul dense wavelength division multiplexing network. The company said 40G sales will be up again in the second quarter but these are end-of-life orders. There is a precipitous drop-off expected in second quarter with further significant roll down in calendar 2015. We find this to be interesting because it suggests AT&T is capping its 40G long-haul investments and that it may build a new 100G long-haul network in 2015. If this were to happen, it would likely be strongly positive for Ciena (CIEN) (rated at Buy).
JDS Uniphase's conference call confirmed that AT&T's new metro optical deployment of Ciena equipment in Project velocity Internet protocol (VIP) cities is slated to begin after June 2014 gated by certain software-integration milestones. This creates very compelling opportunities for Ciena in the October quarter and beyond, but also some risks around the July quarter guidance. However, with Ciena down 23% since its April 3 investor day (versus the Nasdaq down 3%), we think these concerns are largely priced in.
We are reiterating our Buy rating on Infinera (INFN) because all of the 100G telecom data points are strong. Infinera, itself, strongly beat and raised when it reported first quarter 2014, but the stock is down 7% (versus the Nasdaq down 1%) since on investor worries about the sector, creating an attractive buying opportunity. We are also reiterating our Buy rating on Finisar, where we expect a solid report and guide next month. Finisar is down 19% since April 24 (versus the Nasdaq being down 2%) in front of what could be better-than-feared results. We are reiterating our Buy rating on Ciena because, notwithstanding some near-term AT&T timing concerns, the outlook is quite strong. Finally, we are reiterating our Buy rating on JDS Uniphase because, notwithstanding the same AT&T issues as Ciena, the optical outlook appears solid and the network and service enablement order book and margin trends are showing strong signs of underlying improvement.
The Barron' s article is actually negative on Oclaro. It states "We also think that Oclaro is behind in the industry transition to CFP2 against companies such as Finisar and JDS Uniphase." It has a "buy" rating on FNSR and JDSU. If you believe in imminent strong spending on 100G and you want to play it SAFELY, you better buy JDSU now rather than gambling on OCLR. JDSU took a big hit after its earnings and guidance misses but it is profitable. Oclaro is in a very precarious situation. It' is bleeding money profusely, its legacy products are rapidly declining while its 100G are not ramping fast enough to avert stiff competition.
Rundown. Oclaro gets pummeled in four days by 50% from its highs by the big boys who knew what was coming(someone call the SEC:)). Hopefully it stabilizes but probably went into give me a reason to start rising mode.. Some positives is the turnaround is still on track and short interest has not increased much although it doesn't matter at this point.
The loss per share was a huge improvement and the best its been in a long time.. There is an article in Barron's entitled "Black eyes for optical stocks won't last" seems positive from title however you need to pay to read it(darn)..Keep hope alive and that hopefully when Oclaro ever reports positive earnings it rises with the same passion that it got pummeled in.
I usually tend to ignore postings with the term "POS" in them. However, I thought it would respond to this:
Actually, yes, that may not be a bad idea.
If OCLR were to merge with NeoPhotonics, OCLR could immediately roughly triple is China market share. This is increasingly important because China appears to be the country where the significant telecom capital spending is expected to take place.
Second, although I'm too new in this area to have intimate knowledge on this topic, it seems that NPTN's manufacturing process does allow NPTN to enjoy much higher gross margins than OCLR. Potentially, if OCLR were to adopt similar techniques as NPTN, the overall gross margin for OCLR could increase significantly, maybe even double.
Now we can see the future..and the future's bright.......the future's Oclaro ^^
Sentiment: Strong Buy
Institutions do not "diversify" their positions in that manner. Also, the vast majority of them were informed and well aware of the warrant exercise. So the dilution factor is out of the equation. I'm sure it was watched by a few folks...including some SRO's.
Why do you think it was a short attack rather than institutions liquidating? Given the terrible outlook, Oclaro deserved to be down that much.
OCLR has about $1.12 per share in cash. In the next quarter, the cash will decline by about $25M. Tangible Book value is about $2.0 per share. Study the quarterly report. Do not refer to Yahoo statistics.
Agreed. The shorts shook a lot of shares from weak hands. Kudos to the swiftness of the short attack, in bringing OCLR down over 40% in one day. Now we will see how many of them try to pig out when the opposite reaction begins. There will be hogs slaughtered with the backhand of the market... this is a certainty.
OCLR has $1.33 per share in cash and almost no debts. Book value is about $2.30 per share. I do not see any potential bad news in the near future. The stock should go up 10-25% once the shorts move onto their next target.
I have followed OCLR for the last few years. Made some money and made some wrong calls on it but overall I have seen how it trades and how the business works. I took profits at the highs and loaded up while it was going down. congrats to the guys that got in down here and below. The spin will go the other way in the next 6 weeks and they are looking good going forward both as a stand alone or a potential buy out. 4 to 5 in 90 to 120 days. wait and see.
100G is the replacement for the shrinking legacy products since there is a product transition happening now to 100G.
in 2014, both datacom and telco will be ramping up 100G deployments and decreasing 40G.
Oclaro is taking a leadership position especially with the first CFP2 which will be the volume product for 100G.
Additionally the Oclaro 100G margins are double the margins of the legacy products.
100G is the future of optical components and the real story from the Oclaro conference call.
Whomever masters CFP4 specs better and faster will be the determining factor. Content streaming is going to be an even bigger business model in the next decade, as more and better content will become available. Who will be best positioned to keep up with content development and distribution at a high quality remains to be seen.... but I like OCLR's part in this recipe.
It seems the market may be understanding the significance of ALU'a "strong Optical" and "strong China" results. Some of this may also rub off on OCLR, as it confirms that Huawei will have a phenomenal 2014, and I believe Huawei is an OCLR 10% customer. However, it's obvious to me that NPTN is much better positioned to take advantage of these trends.
Not growing nearly fast enough to compensate for the shrinking legacy products, and meanwhile the clock is ticking as losses mount...