Opnext Inc. (NASDAQ:OPXT) on August 4 reported revenues in its first fiscal quarter at the very low end of its previous guidance. Continuing a theme begun with Oclaro’s assessment of the optical communications market (see "Oclaro: Inventory correction over, but revenue slump continues in 4Q11"), Opnext management said that, looking forward, inventory corrections were less of a concern than fitful carrier deployment plans.
Opnext said it garnered $93.1 million in revenues during the quarter, which ended June 30, 2011, after guiding $93 million to $97 million. The fiscal first quarter performance represented an 18% improvement over the same quarter last year, but a 2% decline from the previous quarter.
Combined, Cisco and FiberHome contributed 40% of revenues for the quarter.
Chairman and CEO Harry Bosco said that the company stubbed its toes in two areas during the quarter that affected revenues. First, the installation of new machines to make 100-Gbps CFP modules constrained capacity, while the company ran into system interoperability issues with two new customers of 40-Gbps DQPSK modules. Bosco told participants in an analyst call August 4 that the CFP production issues had been solved. One of the 40G module interoperability problems also had been put to bed, while work is ongoing on the second.
Meanwhile, gross margin of 21.8% in the quarter represented a 2.2% sequential improvement and a 3% uptick compared to the quarter ended June 30, 2010. Bosco cited this number as an indication that the company’s cost-reduction initiatives had begun to pay off.
EBITDA was $2.0 million compared to $17.3 million in the previous quarter and negative $8.5 million in the year-ago quarter.
Looking forward, Bosco said he expects revenues for the upcoming quarter to fall between $89 million and $95 million. “At present, demand remains soft and we don’t anticipate any significant growth in the near term,” Bosco told participants on the call. However, he said this was mainly due to the vagaries of network deployment plans, rather than because of excess inventory at his customers.
“I don’t see the uptick over the next quarter, but probably the following quarter. I hear the demand is there, it’s coming in, but it’s just a matter of getting qualified in some of these system providers and then they start their deployments,” Bosco said. “I think it’s more of, a lot of our customers are bidding for the projects, they’re getting their qualifications done, and then it’s a matter of how fast the networks are deployed.”
Bosco said that the company had made significant progress in earning design slots for applications at 40 Gbps and above. He said that Opnext is now qualified for 79 design slots at 28 customers at 40 Gbps and two slots at two customers for 100-Gbps CFP modules. The company is also in the process of being qualified for another 17 slots with 12 customers for the 100-Gbps CFP.
On the 100-Gbps coherent front, Bosco said that discussions with potential customers indicated that Opnext could be in a position to address 50% of the total market when it releases its upcoming DP-QPSK product. This includes system houses that have designed in their own technology in their first-generation systems.
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