Oclaro first quarter FY 2013 revenues miss guidance

As the company had announced previously, revenues for Oclaro, Inc. (NASDAQ: OCLR), in the first quarter of its fiscal 2013 fell short of previous guidance, the company reported yesterday. The$148.8 million accrued during the quarter ended September 29, 2012, fell well short of the $154 million to $168 million company management had forecasted at the close of FY2012.

The figure represented a significant sequential increase from the $104.4 million Oclaro earned in the fourth quarter of fiscal 2012. However, unlike that quarter, the most recent three months included 10 weeks of revenues from Opnext, which Oclaro acquired in July (see “Oclaro, Opnext merger completed”).

Meanwhile, GAAP gross margin for the quarter was 12%, nearly half that of the preceding quarter’s 21%. GAAP operating loss was $47.4 million for fiscal 1Q13, well up from a GAAP operating loss of $4.0 million in the fiscal 4Q12, which included an $11.7 million gain on the sale of assets and $3.4 million of net flood-related income from insurance advances, net of additional write-offs and expenses, due to the flooding in Thailand in 2011.

GAAP net loss for the quarter was $9.4 million, and included a gain on bargain purchase of $39.5 million related to the acquisition of Opnext.

"While our financial results for the fiscal first quarter 2013 were disappointing, our integration is on track and we are executing on our synergies," said Alain Couder, chairman and CEO, in a press statement. "As the new Oclaro, we were immersed in integration activities, and therefore did not fully contemplate all potential execution risks in our forecast. With the difficult market conditions facing the industry, we focused on short-term synergies and expense reduction, which will reduce our combined expenses by $9 million per quarter in the December 2012 quarter compared to pre-merger levels. In the meantime, our new organization is firmly in place and we are fully operating as the new Oclaro.

“With the continuing soft telecom market, our focus is to execute on synergies that are expected to improve margins over the next few quarters,” Couder continued in the statement. “In addition, we are also focused on ramping new products, including 100G, that we expect will position Oclaro well for a positive turn of the telecom market."

In addition to “the continuing soft telecom market,” Couder told participants on an analyst call yesterday that “our own execution issues and the intensive integration efforts during this quarter,” also affected Oclaro’s performance. Specifically, the company proved capacity-constrained for 40- and 100-Gbps module components, which led to quarter-on-quarter revenue declines in these modules, according to CFO Jerry Turin.

Meanwhile, at least one customer who had turned to a competitor when Oclaro’s production capacity in Thailand was knocked out last year by the flood has not returned its business to the company (see "Oclaro expects Thai flood to affect two quarters").

Looking forward, Couder warned that he was seeing weakness in the market heading into the quarter that will end in December. For this reason, Oclaro management is predicting that revenues for 2Q13 will range between $145 million and $162 million. Non-GAAP gross margin was forecasted in the range of 12% to 18%; on-GAAP gross margin was 13% for 1Q13. Finally, management guided adjusted EBITDA to fall in the range of negative $20 million to negative $9 million, versus the negative $20.6 million of the first quarter of fiscal 2013.

In late afternoon trading, Oclaro’s stock was at $1.60, down almost 16% from yesterday’s close.

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