Finisar hits second quarter revenue, hints at more growth

Finisar Corp. (NASDAQ: FNSR) announced December 5 that revenue for its fiscal second quarter, ended October 28, reached $232 million. This figure fell within the mid-range of its previously issued guidance (see “Finisar: Revenues down but turnaround imminent”). Despite upcoming pricing pressures the company also set a revenue expectation of flat to positive for the third fiscal quarter.

Finisar Corp. (NASDAQ: FNSR) announced December 5 that revenue for its fiscal second quarter, ended October 28, reached $232 million. This figure fell within the mid-range of its previously issued guidance (see “Finisar: Revenues down but turnaround imminent”). Despite upcoming pricing pressures the company also set a revenue expectation of flat to positive for the third fiscal quarter.

"I am pleased to report fiscal second quarter revenues of $232.0 million, which is $11.5 million, or 5.2%, greater than the prior quarter,” said Jerry Rawls, Finisar's executive chairman of the board, via a company press release. “Our growth in revenues came primarily from sales of tunable XFP transceivers and wavelength selective switches, including ROADM line cards. In addition, operating income increased at a faster rate than revenues because we were able to hold operating expenses relatively flat. This was accomplished in spite of the impact of a full quarter of operating expenses from operation of our RED-C subsidiary, which we acquired during the first quarter."

GAAP gross margin for the quarter increased to 27.5% and 30.5% on a non-GAAP basis, versus the previous quarter’s 26.2% and 30.3%, respectively, thanks primarily to the greater revenue. GAAP operating income increased $5.3 million to $54,000, or 0.0 % of revenues, compared to the fiscal first quarter’s operating loss of $5.2 million, or 2.4% of revenues.

"During the quarter, we continued to invest significantly in technology and product development and made substantial progress on a number of new products including tunable SFP+ transceivers, 100G coherent transponders, and next-generation 100G client CFP and CFP2 transponders. We expect these new products to drive our future revenue growth and market share expansion in calendar 2013 and beyond," said CEO Eitan Gertel via the same press release.

For the current fiscal third quarter, Finisar management said they foresee revenues in the range of $230 million to $245 million, GAAP operating margin between approximately 0.0% and 1.5%, non-GAAP operating margin between 6.5% and 8.0%, and non-GAAP earnings per diluted share between $0.14 and $0.18.

Despite the relatively positive forecast, some analysts remain concerned. “Unit price declines worry us,” wrote Simon Leopold of Raymond James Equity Research in a note to investors issued after Finisar’s analyst call. “Management noted that in its annual telecom customer negotiations average prices will drop 15% in CY13 (effects the last month of the current quarter and all of the April quarter). Typically, prices drop 10%-15%, and in 2012 were down nearly 15%. Our checks had suggested 2013 would revert to the mid-point of the range, which does not seem to be the case for Finisar, and this pressures both revenue and gross margin.”

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