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Analog Devices, Inc. Message Board

  • is it a buy? had a good run, then came earnings. half price. danny, might be a nice swap for mcp if you still have it.

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    • oclr/started pos today 1.85. i think a pt 2.52 eventually.

    • found this from oclr board. talks about jdsu too.
      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. Less

 
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