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INDUSTRY STOCKS


THEY SAY THAT when you hit rock bottom the only way is up. And that’s been the case for the optical component makers Oclaro. After footing our yearly shareprice leader board in 2012 and again in 2013, it has now managed to climb off the bottom rung – and better still, has leapt all the way to the top (see p. 34).


While fellow optical component maker Finisar can’t match this, its share price has more than doubled over the last 12 months, and together these performances suggest that the optical sector is not a bad place to invest right now. That would make sense, given demand for ever-higher bandwidth and the growth in cloud centres, which require larger data centres and an increasing number of longer, high-speed connections.


The share price of Oclaro is now at its highest point since April 2012. Historically, however, it is still far short of its recent peaks. Back in February 2011 shares were worth around $18, which is about five times what they are today, and if you look at the share prices of the two companies that merged to form Oclaro in April 2009 – Bookham and Avanex – you’ll find that shares sold for far more than that in the dot.com boom. Oclaro will never hit as high a valuation as its predecessors, but there are signs that it is


heading in the right direction, even though it is running at a loss. Although it posted a loss of $25.3 million for the fiscal quarter ending on 28 December, 2013, gross margin and revenue were up 4 percent and $6.3 million compared to the previous quarter, and this enabled sales to hit $102.9 million.


To make further improvements to operating margins and take the company to break-even and on to profitability, the board is implementing a substantial restructuring programme. In a conference call on 11 February that discussed earnings for second fiscal quarter, 2014, Oclaro CEO Greg Dougherty updated investors on the goal of halving the workforce of 3000. Reductions in staff numbers began in July 2013, by this January the company was down to 2000 employees, and the following month Dougherty said that Oclaro was on track to be under 1500 people by July.


Alongside the dramatic cull in staff numbers, the company is reducing its number of sites. Recently it operated out of 20 sites, this February it was down to 14 and it should be at just 10 by July. Included within this is the sale of Oclaro’s GaAs laser diode business to II-VI in late 2013. This transaction, which was worth


June 2014 www.compoundsemiconductor.net 31


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