They've got excellent products, but if they lack critical mass business-wise, then semiconductor manufacturers are not going to trust that the company will be around for the long haul, and will consider it too risky to buy their products.
Being best of breed should help assure they are still around when after their weaker competitors have died off. In the long term there are all sorts of perils, China competition, disruptive new technologies. But I feel pretty comfortable with FNSR for the medium term.
Their balance sheet is indeed one reason I own INFN stock and not CIEN. Balance sheet isn't everything, but I do believe the odds tend to be tipped in favor of those companies that have the stronger balance sheets.
Noticed the article about Goldman Sachs saying some of these comm hardware companies are prime buyout candidates. OK, sure Goldman Sachs sucks as a company but that doesn't mean they don't have some smart people here and there within their organization.
I bought some Calix. There are a lot of techs that I like as companies but their stocks are up a lot and I am a value investor. Calix looks like a good buy. Listened to their conf call, one of the callers mentioned Adtran is their largest competitor. Adtran was also mentioned in that GS article. Calix looks like a somewhat better value to me but I bought some Adtran as well.
Seems like the main upside for companies in this biz is if they can tap heavily into the hitherto virtually untapped international market.
Any grizzled veterans who have followed CALX and ADTN a while who know who their foreign competitors might be and how formidable you feel those are in competing with them for market share?
The bottom line: High speed data transmission is a growth industry, yet companies in that business have stocks that are not at particularly lofty valuations. I don't feel real confident on which are the best prospects, but I do have a feeling that in the aggregate these are going to do very well.
That Goldman article is also of interest to me because it provides some new investment ideas. Silver Springs, Adtran, and Calix.
Those all look interesting to me. Pretty good values in terms of financial ratios and they all are projected to have about 10% annual revenue growth according to Yahoo's figures. That is similar to the projected revenue growth of INFN.
I didn't buy any Silver Springs since they are in the business of using power lines as conduits for broadband which I am concerned may prove to just be a novelty item in the long term. Adtran and Calyx I have a harder time figuring out exactly where they fit into the comm world. However, they both seem like intriguing stock possibilities to me. I bought some Calyx and will study Adtran a bit more and possibly may buy some.
One thing that leads me to prefer INFN is its far better balance sheet. On the other hand, I believe when Micron was about 5 bucks I shied away from it partly based on balance sheet, and since then it went up something like 500%.
Looked at CIEN's chart, wish I had bought some at 18. At 22 I am not inclined. These are clearly the two promising plays in optical transport and I feel like I shouldn't have all my bets on one horse. It would be handy if INFN and CIEN merged, then the investment decision would be easy. I imagine that would run into antitrust obstacles, however.
I am not an expert in this field but I get the impression that INFN has the superior technology at the optical transport level but that CIEN is big in packet switching so that they appear to have a more comprehensive offering system wise.
Market could go down and stock could hit dirt. I don't think that would dampen business much, business that relies on shuffling data around must continually migrate to bigger pipes or die.
Another name for "tier one" is "old guard".
To me it is not too crucial whether INFN wins a lot of business with the folks who sell to grandma.
Got some when it was below 1.00 and sold at something like 1.35. Still felt it was a great value but a bit murky business wise. They seem to be doing ok, although I guess their last quarterly was underwhelming judging by the drop from the 2's to the upper 1's. Anyway, seems like a decent entry point right now. Yahoo shows estimated revenue growth in the teens. Still seems to me this is a prime buying opportunity for one of the big semi eqt companies. Its been a while so it has faded in my memory but as I recall they have one primary competitor, was that Applied Materials? So seems like these guys might be of interest to Lam or someone like that.
Anyway, I'm in for a bit. Will be keeping an eye on them with a hope of buying more if the price is right.
I was dismissive of FNSR in an earlier post, but there are some things one could argue in favor of it as an investment. Projected PE just a little over 10 is pretty attractive for a company in a high growth tech field. I am trying to decide whether to buy some. My main hesitation is I don't feel I have any handle on what is the long-term outlook for FNSR's products. But with the analysts predicting a high rate of growth, it appears the consensus is that their market outlook is good.