re: The CEOs mentioned moving out of 10G and dropping product lines due to competition.
Two huge advantages for Finisar when volume ramps as it is doing with 10G. First, it becomes hands down the "lowest cost producer" by a wide margin from its manufacturing leverage. Secondly, their huge facilities gives them the capacity to respond far more quickly and assertively to bids from from the Web 2.0 giants. It leaves JDSU unable to respond. Although Avago is in a better position with its own manufacturing facilities, it does not appear able to have the scale necessary to service these types of customers. For Finisar the more volume it gets the more advantages it accumulates over the competition.
yep, one day Finny will be will a "respectable" woman on the street and we won't these market pimps controlling her.
Finisar took everyone by surprise this summer when their revenues ramped from 10G optical upgrades. Notice how many questions the analysts were asking regarding sustainability for this "cycle." Jerry had to tell them it was a long trend and not the cyclical, lumpy nature of telecom demand. Barclays and Needham has gotten it along Jefferies Kisner although he still trying to defend his silicon photonics gaff. FO has over promised and under delivered countless times that successful bear raids like Friday's are fairly easy for the hedgies to pull off.
However I think those days are numbered. There's a lot of smart people on the street and once this huge growth opportunity is fully recognized, FNSR can add another $20 easily in 2014....and if telco kicks in...we will get our cake and icing too.
The market for telecom operator routers and Carrier Ethernet switches grew by 7% year-on-year to $3.6 billion in the third quarter of 2013 and is expected to experience further growth in the fourth quarter, according to numbers published by Infonetics Research.
The analyst firm notes that sales in all the categories it tracks -- edge routers, core routers, and Carrier Ethernet switches -- were all higher than a year earlier.
Cisco Systems Inc. remains the market leader, with a 38% market share, while Alcatel-Lucent took second spot, Juniper Networks Inc. third, and Huawei Technologies Co. Ltd. fourth.
The market is set for ongoing annual growth that should, if the Infonetics Research Inc. team is correct, exceed $20 billion in 2017.
So what is the problem here, Mr. Market?
That's true, anything less than OK report causes a nasty market reaction. Probably why there has been so much fear in the stock now.
Looks like the market priced in a flat to slightly down guidance. That seems to be what every one is expecting so we will just have to see what happens next week.
If there is one thing that stands out about holding FNSR all these years, its this:
"Risk is the most when you feel the safest."
Very unnerving to say the least.
Very interesting interview with LC on Gazettabyte today. Still can't see any major negatives for FNSR, in fact, 10G appears to be very strong in both datacom and metro. That should be positive for FNSR, but the market seems hellbent on taking it down as far as possible for a lower reentry point, probably 1Q14.
Two research firms note that:
North America a hot spot for WDM equipment, spend up 20% overall...
"Ciena had top spot in North American WDM equipment sales, with its sales up 9%. Fujitsu, in second spot, saw a 65% rise in sales. Cisco Systems (CSCO) was third, and saw a mere 1% sales rise. Infinera, in fourth place, saw a 22% rise in sales."
"Spending for ROADM, 40G and 100G all increased slightly over the prior quarter.Although CPO revenues fell for the first time in a year due to lower spending in Asia-Pacific, annualized CPO spending surpassed US$7bn for the first time."
At the UBS conference today, Cisco gave no further clarification about it poor results while JDSU remained optimistic on telecom improvement continuing.
Thanks. LightCounting's Light Trends has just added a very interesting article about CIsco and their take for optical components....
"So despite the volatile sales results of datacom equipment vendors, the datacom transceiver market held steady from early 2012 then posted a significant jump in Q2 2013 and it is likely to hold steady for the rest of this year. With the increasing importance of 40GigE and then 100GigE, datacom transceiver vendors have reason for optimism in 2014 as well, even if Cisco’ guidance is not encouraging."
Well worth reading. lightcountingdotcom
Cisco is so huge and entrenched in contrast to tiny and agile Neophotonics. So while Chambers is realizing how vulnerable Cisco is to new developments and market changes that it no longer creates or controls, Jenks can remain optimistic since he has far more ability to quickly respond and adjust to market conditions. Cisco is not nearly as dominate in the telco space as is Huawei, Alcatel Lucent and Ciena and has been struggling in its efforts to improve its position. New platforms for 100G speeds and above means a much longer evaluation process for the telcos and these push backs are also wearing thin on the systems makers.
So little change in visibility in telco, but as you mention as contracts get awarded over the next few months the clarity should improve considerably. And certainly Neophotonics has a much better business relationship with the chinese than Cisco.
Neophotonic's CFP2 is similar to Oclaro's, designed for the longer reach from the data center to the metro loop. Finisar has CFP2 modules that address both long and short reaches. It will be interesting to see how well Finisar does with its long reach modules against the more traditional telco suppliers.
I think NPTN got hit too severely on the seemingly immaterial financial reporting, but combined with the push backs from telco, the optical players have taken a push back from the market as well. Hopefully we will see a strong rebound in telecom when the carriers finally finish their evaluations. Until then, the lack of news keeps the market nervous with the leading opticals given their hefty gains this year. Wondering how much FNSR might recover heading into earnings...
Until the situation clears, FNSR is going to be negatively impacted to say the least....
There were positive indications here for FNSR given the strengths in data centers and switching, but that is lost in the dust and debris.
Oh, and btw, did you catch the article: "EXCLUSIVE: Here's What Happened When Cisco Lost A $1 Billion Deal With Amazon," this past week from Business Insiders? Very interesting, although we know that Cisco has not fared very well with the mega players in the web 2.0 market who tend to build their own. Wondering if part of Cisco's strategy in rushing to launch its CPAK ahead of the CFP2 was an attempt to improve its chances for winning more contracts in this market...if it was, it didn't seem to help.
I haven't come across any major disruptions at the optical layer by SDN thus far and don't expect any within 2 or more years at least. Thus,
at this point, I believe Cisco's Nexus 7700, which uses the Insieme architecutre, is their only 100G capable switch that is shipping with CPAK modules. I have also read Cisco's present position is that all of its new 100GbE cards will use CPAK, and there will be no merchant market option for these optics, ever. It has also said that all future 100GbE cards regardless of platform will use CPAK exclusively.
Elsewhere, Arista is using Finisar's on board optics to achieve higher density allowing it to get 12 100G ports per card compared to Cisco's 10 ports. I am still assuming that Finisar is a qualified vendor for everyone else, especially the 10G and 40G transcievers which has far higher adoption in the datacenter and enterprise than 100G. Right now that is apparently driving FInisar's numbers.
As we know, Kisner jumped the gun for the sensationalism of what is possible which as he learned the hard way, must always be weighed with what is pratical.
I agree the JDSU report was favorable for FNSR but the street must read it to get that. Also looks like the weakness that triggered the sells has been from the tier 2 players....nice to see JDSU's true flex starting to get some traction, that bodes well for FNSR and its new Wuxi plant....telcos have been waiting for a second source supplier and ROADMs will a strong product next year.
Both indicated datacom was strong. Nothing has changed here and this continues fueling Finisar. Telecom has been sluggish all year and Jerry said earlier (either in Jun or Sep) that he did not expect the spending recovery to really trigger until 2014. Looks like the high speed trading algorithms caused a market brain fart across the sector this morning. Its recovering and will continue to as sense returns.
Although much has been discussed about Kisner's flub on how quickly Intel and it silicon photonics will negatively impact Finisar, the fact is they are still diligently at work partnering with Corning on nexgen products:
"Corning analyzed Intel’s technology requirements and developed Corning® ClearCurve® LX Multimode Fiber, designed to enable 25G transmission at 1310 nm, the wavelength used in silicon photonic systems, and capable of the tight bends within and around data center components. In addition, Corning developed the MXC Connector, which provides up to 64-fiber connectivity in a smaller footprint and at a lower cost than most traditional multi-fiber connectors. When configured with 64 fibers, this solution is designed to deliver data rates up to 1.6 terabits per second.
“We relish the opportunity to develop innovative solutions that solve tough problems for our customers,” said Clark Kinlin, executive vice president, Corning Telecommunications Business Group. “Intel is leading the way in silicon photonics, and we’re proud to provide the optical connectivity solutions that enable Intel’s technology for next-generation data centers.”
I don't think there's anything here to worry about for at least another year...but one would be very foolish to ignore or dismiss out of hand just because they feel Finisar is invulnerable. I think whoever comes in with the lowest cost solution will probably be the leader. That's why Finisar is on top right now, and maybe they will
remain there. We all know how the market hates surprises, so if I think one is about to take place, I'd much rather be cashed out.
Doesn't seem likely. Anybody big enough to buy FNSR such as IBM and Intel would much rather try to develop disruptive tech that would eventually displace pluggable optics and that is ongoing. The future in optics is more a game of leap frog.