Getting out on next pop - assuming there is one. So tired of this market. Companies that are doing well, booking positive EPS, guiding higher get no respect. While BS like Tesla gets all the market mojo. Really distressing.
While Soros can be bearish on China, what does this mean for OCLR?
China is making an economic transition from heavy industry, export manufacturing, and massive building to services and technology.
Many other Asian countries have made this transition with Korea (South) being an example.
A basic infrastructure requirement for this economic transition is telecom with fast internet available to the entire population. China has a 5 year program 2016 - 2020 to build out a world class telecom infrastructure equivalent to Korea.
The China government has committed to a massive investment in the optical backbone and 2016 is only Year 1 of this 5 year program.
I cannot see the Chinese government cancelling this program since it is basic infrastructure for the new economy.
WSJ today: Mr. Soros’s recent hands-on approach reflects a gloomier outlook than many others on Wall Street. His worldview darkened over the past six months as economic and political issues in China, Europe and elsewhere have become more intractable, in his view. While the U.S. stock market has inched back toward record levels after troubles early this year and Chinese markets have stabilized, Mr. Soros remains skeptical of the Chinese economy, which is slowing.
The fallout from any unwinding of Chinese investments likely will have global implications, Mr. Soros said in an email.
“China continues to suffer from capital flight and has been depleting its foreign currency reserves while other Asian countries have been accumulating foreign currency,” Mr. Soros said. “China is facing internal conflict within its political leadership, and over the coming year this will complicate its ability to deal with financial issues.”
Mr. Soros worries that new troubles will arise in China partly because he said the nation doesn’t seem willing to embrace a transparent political system that he contends is necessary to enact lasting economic overhauls. Beijing has embarked on overhauls in the past year but has backtracked on some efforts amid turbulent markets.
The Stifel Conference webcast is on the OCLR Investor Website.
Q & A discussion
1. Strength and length of the optical cycle? - Stronger than 2000 cycle with current cycle having better economics for the datacenter operators and carriers.
2. OCLR differentiation for 100G QSFP28 module? - OCLR focused on longer distance QSFP28 where OCLR can differentiate based on laser technology and performance leaving the short distance market to the commodity vendors.
3. OCLR differentiation for 100/200G CFP2ACO modules? - OCLR is first to market, only vendor in production now, and have software integration done for all 7 DSP's. OCLR is now Number 1 CFP2ACO vendor.
4. OCLR forecast for CFP2ACO modules? - OCLR forecast shipments of $20 million in December 2016 quarter. In 2017 calendar year the CFP2ACO market is forecast at $200 - $400 million and OCLR expects to be the number 1 vendor.
5. Will the China demand continue? - OCLR explained that there is a large backlog with fixed orders and prices for the next several quarters. There is a China government plan 2016 - 2020 to build out the China optical network so we are only in Year 1 of this program. OCLR does not think that US government export restrictions will affect the ZTE or Huawei business.
6. Can OCLR increase production to meet demand? - OCLR is building out substantial capacity now mainly for test and measurement. The OCLR fabs can meet any potential demand so the fabs are not a constraint. The new revenue from this production build out will become evident later in 2016 and in 2017.
7. Can OCLR increase margins from 27% to 35%? - OCLR has a goal to increase margins to 35% in 2017 as the production volumes increase. A major factor in the better margins will be better utilization of the OCLR fabs.
Cisco has released the latest version of its Visual Networking Index (VNI). And it should come as no surprise that the "Cisco Visual Networking Index (VNI) Complete Forecast for 2015 to 2020" predicts that global IP traffic will nearly triple, with a compound annual growth rate (CAGR) of 22%, over the next five years. Global broadband speeds will nearly double, from 24.7 Mbps in 2015 to 47.7 Mbps by 2020.
The traffic growth will derive from a combination of the addition of 1 billion new internet users, as many as 10 billion new devices and connections (much of these machine-to-machine), and increasing consumption of video. In fact, internet video will account for 79% of global internet traffic by 2020, according to the new Cisco VNI, up from 63% in 2015.
Overall, global IP traffic will hit 194.4 exabytes per month by 2020, according to the VNI, up from 72.5 exabytes per month in 2015. That will make the global annual run rate 2.3 zettabytes by 2020, up from 870 exabytes in 2015.
Much of this traffic will come from Asia Pacific. That region will drive 67.8 exabytes/month by 2020 (a 22% CAGR) and will see three-fold growth. Other regional predictions include:
•North America: 59.1 exabytes/month by 2020, 19% CAGR, two-fold growth
•Western Europe: 28.0 exabytes/month 2020, 20% CAGR, two-fold growth
•Central Europe: 17.0 exabytes/month by 2020, 27% CAGR, three-fold growth
•Latin America: 11.6 exabytes/month by 2020, 21% CAGR, two-fold growth
•Middle East and Africa: 10.9 exabytes/month by 2020, 41% CAGR, six-fold growth
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Thanks for the reply. China wants to continue to modernized so should really add to there revenue.
I just listened that presentation. At about 21 minutes, the question asked is indiscernible, but the answer is about the convertible debt. The lock up being discussed is the three year period from the convertible notes launch (Feb 2015) which brings us to Feb 2018. At which point Oclaro will have a right to redeem the notes at the original value, ie $1.46, a forced conversion. I think the article says, that if Oclaro tried to redeem, the note holders would immediately convert.
Thanks Whyarentirich, the recent article on SeekingAlpha by Jonathan Martin is very well written about the Oclaro convertible bond. Still it not completely explains the 3 years lockup as Greg mention in the recent investor conference though? I will try to contact Jonathan to understand more clearly about this since Oclaro IR does not answer my email about this too. GLTAL
Sentiment: Strong Buy
I really don't how long they have doing business in China, but it has been quite awhile.
12 months demand is nice, but 12 years demand would be nicer, if you catch my drift.
Gray thinking of taking a position in OCLR.How long have they been doing work in China?
Concerning OCLR, the entire Chinese optical network needs upgrading and this is a long term project.
The Chinese government is making a major investment in the optical network and internet in a multi-year program
When you hear the recent comments from OCLR management that demand in China is strong for at least the next 12 months, keep in mind this NY Times article.
NY Times -June 3, 2016
This week, an online report published in China Daily, a state-run, English-language newspaper, said that China, the world’s second-largest economy, ranked an abysmal 91st in the world in internet speed, with the average broadband connection scored at a mere 9.46 megabits per second, or Mbps. There are nearly 200 countries in the world.
The report ranked the top five countries in internet speed as South Korea, Sweden, Norway, Japan and the Netherlands. The average broadband speed in South Korea was reported as 26.7 Mbps. In Sweden, it was 19.1 Mbps.
The data was part of a broader report that was aimed at boasting of China’s internet connectivity, under the title “Evolution of the Internet in China.” The report listed as its sources the China Internet Network Information Center, an agency under the Ministry of Industry and Information Technology; the website of People’s Daily, the Communist Party newspaper; the Broadband Development Alliance, a research group; and Akamai Technologies, a content delivery network and cloud services provider based in Cambridge, Mass.
The report promoted the fact that China now has 688 million people online, about half the population; that it added 40 million new internet users in 2015; and that 90 percent of users can get online via their mobile phones.