INDUSTRY STOCKS
Footing the table for a second year in succession is the manufacturer of telecom components, Oclaro. It has seen its share price plummet in the last two years from more than $10 in April 2011 to now well below $2. Although the merger with Opnext has increased the company’s market share, it continues to operate at a loss. One of the lows of the last 12 months was the failure to meet guidance for the first fiscal quarter of 2013, which ended on 29 September, 2012. “As the new Oclaro, we were immersed in integration activities, and therefore did not fully contemplate all potential execution risks in our forecast,” explained CEO Alain Couder, when discussing these quarterly results. According to him, the company was focusing on cutting costs, and the actions that it took at that time should deliver savings of $9 million per quarter.
On 31 January this year, the company unveiled its second fiscal quarter results, and Couder claimed that Oclaro was making progress. However, he was not complacent, arguing for the need for further reduction in operating expenses and improved margins, plus the growth of revenues by capitalizing on new product introductions and strong customer relationships. This need for further improvement is abundantly clear from second quarter figures.
Gross margin was just 15 percent, and Oclaro made a loss of $12.2 million, despite netting $25 million from the sale of its interleaver product line and thin-film filter business. The company expects to generate revenues in the range of $140 million to $155 million in the third quarter, and make a loss – evaluated in terms of earnings before interest, taxes, depreciation, and amortization – of between $13.5 million and $25 million.
It will be interesting to see if Oclaro can get out of this hole and not foot the leader board again this time next year, and whether Cree, IPG Photonics and RFMD are able to maintain their positions at the top of the table. Maybe they will, but predicting that far ahead is never easy, because, as this survey shows, it’s not just about backing the right sector within the III-V industry – it’s about investing in the right company.
© 2013 Angel Business Communications. Permission required.
Cree’s share price has risen in 2013, partly due to its launch of LED bulbs
IPG’s share price jumped last summer, due to earnings that exceeded guidance and a strong outlook
Table 1. It’s been a mixed year for III-V stocks, with more companies lagging the NASDAQ than outperforming it June 2013
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