Oclaro expects Thai flood to affect two quarters
While other companies have offered predictions on the impact of the flooding in Thailand for the rest of this year, Oclaro (NASDAQ:OCLR) Chairman and CEO Alain Couder told financial analysts November 10 that he expects Oclaro to feel the flood’s effects for two quarters.
Couder says he’s expecting the flood that has knocked out Fabrinet’s Chokchai facility and temporarily closed its Pinehurst campus to cost Oclaro $25 million to $30 million in lost revenue in the current quarter and another $10 million to $20 million in the company’s fiscal third quarter, which ends March 31, 2012.
He is hopeful that things will return to normal in the company’s fiscal fourth quarter.
Oclaro is fortunate in that it relies on Fabrinet for only 30% of its finished goods. The company produces 60% of its products in its facilities in Shenzhen (which will have been put up for sale as part of a cost-reduction plan; see "Oclaro looks to downsize") with the rest spread out at other facilities.
However, 60% of its Fabrinet production took place at Chokchai. The company is currently moving as much of that as it can to Pinehurst, which has resumed limited operations this week. It also is attempting to fill in the gap at Shenzhen and elsewhere.
The flood experience has not soured Oclaro’s relationship with Fabrinet, however. The two companies recently reached a new contract for manufacturing services.
But Oclaro is about to introduce a second source for contract manufacturing services. It expects to sell the Shenzhen facility to a “major contract manufacturer” in the near future. Fabrinet and this new party will then compete for ongoing business, particularly new products.
Other companies, such as NeoPhotonics and JDSU, have cited their expectations for the flood’s impact on their businesses during the current quarter (see "NeoPhotonics third quarter disappoints" and "JDSU forecasts down due to Thailand flooding"). Oclaro is the first company to extend its expectations into the coming year.