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Finisar announces ‘all-time record’ 2017 results

19 Jun 2017

But overall fourth quarter sales drop 6% on Q3 despite surging demand for 100G transceivers. Chinese market still sluggish.

Finisar, a developer of subsystems and components for fiber optic communications, has announced what it is calling “all-time record” financial results for its fourth quarter and full fiscal year, which ended April 30, 2017.

"Revenues for fiscal 2017, totaled $1.45 billion, an all-time record for the company and an increase of $186.1 million, or 14.7%, over fiscal 2016," said Jerry Rawls, Finisar's Chief Executive Officer.

”But, despite continued robust demand in our fourth fiscal quarter for our 100G QSFP28 transceivers for data center applications, which grew over 30% over the third quarter, our overall revenues were $357.5 million, a decrease of $23.1 million, or 6.1%, compared to the third quarter."

He explained the drop: “This decline was primarily the result of a decline in telecom revenues due to lower revenues from our Chinese OEM customers and the impact of the full three months of the annual telecom price erosion."

Q4 and 2017 highlights

The company listed its business highlights from the latest quarter (Q4, 2017), in relation to that preceding it, as follow:

  • Revenues were $357.5 million, a decrease of $23.1 million, or (6.1)%, from $380.6 million.
  • Sales of datacom products decreased by $2.8 million, or (1.1)%.
  • Sales of 100G QSFP28 transceivers for datacom applications increased over 30%; however, this increase was more than offset by lower demand for other datacom products, primarily 10G and below-shortwave transceivers.
  • Sales of telecom products decreased by $20.2 million, or (18.2)%. This decrease was primarily due to reduced revenues from Finisar’s Chinese OEM customers and the impact of the full three months of the annual telecom price erosion.
  • Cash, cash equivalents and short-term investments increased $22.6 million to approximately $1.2 billion at the end of the fourth quarter.

Full year performance

For the full-year of fiscal 2017, sales of products for datacom applications increased by $112.6 million, or 12.1%, compared to the preceding year. This increase was due primarily to growth in demand for 100G transceivers, which grew over 80% compared to fiscal 2016.

Sales of products for telecom applications increased by $73.5 million, or 22.0%, over 2016. This growth was driven by growth in the demand for 100G systems.

Cash, cash equivalents and short term investments increased $674.3 million to $1.2 billion at the end of the fiscal year, compared to $562.5 million at the end of the preceding fiscal year.

Considering the business outlook, the company stated, “For the first quarter of 2018 we expect revenues in the range of $330 to $350 million, gross margin of approximately 35%, operating margin of approximately 14%, and earnings per diluted share in the range of approximately $0.37 to $0.43.”

‘Cloudy crystal ball’

In the conference call associated with the results announcements, the company was asked about the expected sequential Q2 2017 growth in China which had been expected but had not happened, and whether this would actually appear later this year.

Jerry Rawls, CEO, commented, “We have heard for a long time 2017 was going to be a strong year in China. Well to tell you so far, it has not been a strong year in China. I've heard from a number of Chinese OEMs that said the second half of this year will be a strong year. Well we haven't seen much of that yet. So I think our crystal ball is a little cloudy with respect to China.

“There have been some bright spots and some new upgrades. There have been announcements of new deployments or ROADMs but most of the things that I have seen have been relatively limited I would almost call them trial scale deployments in the US.”

He continued, “Considering our business in China, we have talked about historically how the Chinese OEMs have contributed about 20% of Finisar’s revenue and I think at this point [mid-2017] we were significantly less… I would say we're in the low teens. So depending on when that demand snaps back obviously there is a lot of opportunity there. But in terms of our guide for Q1, 2018, obviously we're expecting it to continue to be challenging.”

James Kisner of analyst Jefferies LLC asked a question about the apparently weakening marketplace for 10 gigabit systems: “How big is 10 gig within datacom overall and what are you expecting sequentially – is that sector still declining?”

Kurt Adzema, Finaisr’s Exectuive VP & Chief Financial Officer replied, Yes. I think 10 gig is about 20% or so of datacom and we expect that market to continue to decline over time.”

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