SUNNYVALE, Calif. (AP) -- Shares of Finisar Corp. sank Thursday after the company said its second-quarter net income dropped 83 percent and it expects its third-quarter results to miss Wall Street expectations.
Its revenue fell short of analyst forecasts, and its shares dropped $1.76, or 9.6 percent, to $16.68 in midday trading.
The company, which makes fiber optic communications components, said after the market closed Wednesday that its profit plunged as weak revenue growth failed to offset a sharp rise in expenses.
For the three months that ended Oct. 30, Finisar reported net income of $5.9 million, or 6 cents per share, compared with $33.8 million, or 39 cents per share, a year earlier. Excluding one-time items, Finisar said it earned 23 cents per share.
Analysts, on average, were expecting adjusted earnings of 22 cents, on revenue of $242.2 million, according to data provided by FactSet.
Finisair said its second-quarter revenue edged up to $241.5 million, from $240.9 million last year.
The company said its operating expenses rose to $61.5 million, up 33 percent from a year earlier including a 30 percent spike in research and development costs and a 62 percent leap in general and administrative costs. Sales and marketing expenses rose 9 percent.
For its fiscal third quarter, the company expects adjusted earnings between 20 cents and 24 cents per share, on revenue ranging between $235 million and $250 million.
Analysts had been expecting 26 cents per share profit, on revenue of $249.9 million. Most cut their estimates for the third quarter, but some most remained more optimistic than traders Thursday.
"We continue to believe Finisar will outperform investor expectations in 2012 as the company executes on numerous new product cycles and the industrywide inventory correction that began earlier this year continues to get smaller in the rear view mirror of investors," Jefferies analyst James Kisner told investors in a note.
Kisner kept a "Buy" rating on the stock and advised clients to "be greedy when others are fearful," and buy the stock as shares fell, even though he cut his earnings estimate from 28 cents to 21 cents per share.
Citi analyst Kevin Dennean also kept a "Buy" rating and said Finisair's guidance for the current quarter "suggests a healthy dose of conservatism." Company leaders were cautious about market share gains the company might see because flooding in Thailand has hurt competitors, but he said he expects Finisair to benefit when competitors and customers use up the inventory they have.
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