"Infinera delivered yet another beat and raise driven by continued 100G demand from
both telecoms and internet content providers. For 2015, the company expects to grow
revenue faster than market growth of 8%-9%. Given continuing strong demand for
100G and INFN’s continuously improving product portfolio we are forecasting much
stronger 20.2% revenue growth in 2015. Infinera remains one of our top picks for
2015. Reiterate Overweight.
! Metro opportunity: INFN confirmed that they did not bid on a “recent major Tier
1” metro RFQ which we believe was Verizon. However, Tom Fallon indicated that
there is a lot of RFQ activity on metro 100G now and that Infinera expects to launch
a metro aggregation product aimed at that opportunity “later this year.” Infinera
expects metro aggregation to become material to revenue in 2016.
Infinera sees the next frontier for 100G optical networking taking place in the data center interconnection market segment, one that the company's leader says will be driven by the rise in server-to-server traffic to accommodate the growth of cloud and content services.
"We believe this is the market that will drive the first volume adoption of 100-gig into the Metro starting this year and accelerating into 2015," Fallon said, according to a Seeking Alpha transcript. "Industry analyst firm ACG expects the Metro cloud market to grow to over $3 billion by 2019, which significantly expands Infinera's addressable market and further enhances our operating leverage by driving more volume to our vertically integrated manufacturing capability. In the distinct but complementary Metro aggregation market, we expect 100 -- to see 100-gig growth starting in late 2015 or early 2016."
Until February 3rd with the quarterly results, not much will happen with the stock.
Any good news on the OCLR outlook for 2015 can move OCLR quickly.
If volume is the issue then a merger with a partner requiring high volume 100G production could be coming since the 100G market growth rates through 2018 are 28% annually.
Sean - Your comment about the fabs being underutilized is a key issue with Oclaro planning to ramp 100G production in the second half of 2015 with an increase in average gross margins to 25%.
If there is an M&A then it will because they see this ramp in 100G sales on the near horizon.
The cure to the Oclaro stock is a ramp of 100G sales later in 2015 matching projections of the metro and datacenter 100G market forecasts from analysts.
At the Oclaro Investor site there is the new presentation for the Needham conference.
The most interesting points are:
1.100G transceiver worldwide market grows from $453M in 2013 to $1.5B in 2018
2.Oclaro 100G CFP2 large scale production for metro and datacenter markets ramps in the second half of 2015.
It will be interesting to see about the guidance given for 2015 in the Oclaro conference call in early February.
On January 14 there is an Oclaro presentation at the Needham conference and the OCLR Quarterly Results in early February.
The OCLR stock can move quickly on any concrete news about the 100G sales ramping.
In the meantime it is obvious how the stock is being manipulated.
Optical components are a cyclical industry and Oclaro is well positioned as a leader in 100G to profit from the upcycle in 2015 and 2016,
This is the slide on data centers from the Dec 11, 2014 Oclaro investor presentation noting that the 100G market is in the early stages.
40G data center networks started to deploy in CY12, modules operate in topologies
for 40GE or high density 10GE Oclaro addresses this Market with 40/100G, CFP, CFP2, CFP4 40/100G,
QSFPIII-V Die 10G SFP+
10G being driven by high density server to TOR data center architectures
100G data center deployments just started in CY 13/14 with acceleration in 100G driven by
high density QSFP+28
While the consolidation possibilities are complex and can be debated, would you agree that 2015 should be an up year for optical component company stocks as the 100G sales ramp?
The optical components industry needs consolidation and with the entry of Koch Industries there is a new player with money in the game.
As the 100G business takes off in 2015 it will give a lift to all the stocks allowing the mergers to happen in an up market.
I still think that Cisco has an interest in Oclaro so there are several possible homes for Oclaro.
Analysts still think a Finisar deal for JDSU's optics group is likely to happen, but it is not clear when. James Kisner, analyst with Jefferies, wrote in a research note, "Management commentary supports our belief that Finisar is likely to acquire JDSU's CCOP business, though we suspect that the deal will take longer to consummate than we previously anticipated."
— Dan O'Shea, Managing Editor, Light Reading
2015 should be the year where the 100G sales take off and the OCLR stock will respond to the upcycle. Optical components is a cyclical business as can be seen though the OCLR stock chart.
Another slide from the Oclaro Investors presentation = Dec 11, 2014
100G Drives Optical Transceiver Revenue Growth
Source: Infonetics10/40/100Goptical transceivers Biannual worldwide Market Size and
forecast, October 2014
$3.5B market in CY18
100G Transceiver revenue grows from $453M
in 2013 to $1.5B in 2018 at a CAGR of 22%
primarily driven by:
Telecom/Line Side – Optical Subassemblies
- Coherent Transceivers
Data Center – III-V die
- 10/40G/100G MSA Transceivers
• Improved the Balance Sheet
• $94M in cash at end of Q115
• Essentially debt free (Cap Leases)
• $40M Line of Credit available
• Cut AEBITDA losses by more than half from Q114 to Q115
• From ($19.1M) in Q114 to ($8.9M) in Q115
• Reduced OPEX by $10M per quarter
• Reduced AEBITDA breakeven target to $100M in Revenue
Well Coriant is OCLR's largest customer and there are other Oclaro 100G modules that are long haul so this quote may not apply but Oclaro could still be winning this business.
This news confirms the comment from the Oclaro CEO in the Nov 4, 2014 conference call.
"In the first quarter fiscal 2015, revenues came in at the upper end of our guidance at $89.2 million. As discussed in our last call, we expected sales for our 100G client-side business in China to be down in Q1 as major Chinese customers digested shipments from a very strong Q4. We do expect sales for the 100G client for the Chinese market to rebound nicely this quarter driven by customers in and out of China. "
Tellabs is the major 100G supplier to Verizon for the metro network.
Tellabs is now part of Coriant which is the number 1 Oclaro customer