Finisar Earnings Call Insights: Datacom vs. Telecom, Flexgrid

On Monday, Finisar Corporation (NASDAQ:FNSR) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.

Datacom vs. Telecom

Troy Jensen – Piper Jaffray: Just a quick question, I guess Jerry or Kurt or Eitan a little bit. If you look at your guidance it implies about down 5% sequentially at the midpoint. Could you just give us a sense for how you feel datacom versus telco is going to do? We expect datacom to be flat-to-up again and telco down more or both expected to drive sequentially?

A Closer Look: Finisar Earnings Cheat Sheet>>

Jerry S. Rawls – Executive Chairman: We actually expect both of them to drop a little bit. We have the situation where we have too fewer days in the quarter, next quarter. In datacom as you remember, our customers just pulled from just-in-time inventory hubs at, I will say, random times during the quarter, but whatever they need product they pull them. So having too fewer days is going to affect – we think will affect datacom some, and we think telecom continues to be soft. So…

Troy Jensen – Piper Jaffray: All right. I got it. Then I have a quick for Kurt, and I got one last follow-up with that. Could you give us a dollar amount for revenues on 100 G short-reach and ROADMs please?

Kurt Adzema – EVP and CFO: Yeah. We don’t break out revenue by product like that. We just break it out datacom versus telecom.

Troy Jensen – Piper Jaffray: Historically, you’ve given us some sense for just how it’s grown or declined, or is there any other color you can give us?

Kurt Adzema – EVP and CFO: Well, what I would say is in general the tele – as you know, the overall telecom revenue was down last quarter primarily driven by the ASP reduction, so I’d say WSS and ROADM was in the same ballpark with overall telecom. In terms of a 100 Gig, a 100 Gig continues to grow, and that was one of the growth drivers for the datacom business, last quarter.

Troy Jensen – Piper Jaffray: Alright. Then I’ve one last for Eitan to get him involved, how about just confidence that the second half 2012 is going to be better than the first half, do you guys have any visibility to feel that we’re going to have a better second half?

Eitan Gertel – CEO: We still want to think in the – that the network operators have to operate, because demand continues to grow. We hear from our customers. This comes from our customers, opinion that second half should be much better than the first half. Although, what we are doing is that we need to respond to what the demand actually shows up, so we decided to stay conservative until we see things start happening. That’s the feedback from end customers – from our customers that they expect second half better than…

Flexgrid

Christian Seiferth – Stifel Nicolaus: This is (Christian Seiferth) sitting in for Patrick Newton. I was wondering if you could comment a little bit on the timing of ROADM line card ramping? There has been a lot of chatter about tier 1 North American operator deploying flexible networks and is it likely that Finisar will be a beneficiary of these expected deployments?

Kurt Adzema – EVP and CFO: First of all, two things. First of all you asked about timings, we have said that our timings for line card development to production is about 12 to 16 or 18 months and we expect by midyear some time since July to start shipping initial quantity and ramp from that point on all the way to the beginning of next calendar year of 2013 and we are on scheduled to perform to what we said before. As far as Flexgrid, the number of operators that we are talking are actually doing more than talking on deploying Flexgrid and we expected it there. Currently we are the only one who has the full Flexgrid operation, full Flexgrid product line and we have had that for quite some time.

Christian Seiferth – Stifel Nicolaus: I was wondering if you could also comment on the direction magnitude of tunable XFP growth, sequentially?

Kurt Adzema – EVP and CFO: Without getting into the specifics, I will say that, our tunable XFP performance quarter-over-quarter was weaker than we expected and that was driven by our telecom customers we had for our designs. So quarter-over-quarter our tunable XFP have not grown, it slightly shrunk, but respectively we are directly tied to our – the customers, we have qualified with, and their revenue has been systematic quarter-on-quarter or their input. Although at the same time, I will say, we have been qualified at large number of additional customers, we expect that to grow actually faster than the recurring book of the telecom.

Christian Seiferth – Stifel Nicolaus: Lastly, I was wondering if you could provide some color on your development of a 100G Coherent modules. I guess talking about the market opportunity for these products, competition and also the timing of our revenue contribution?

Kurt Adzema – EVP and CFO: We have said a while ago, I think six to nine months ago that we are developing Coherent module, OIF module, and we have demonstrated our first module in the OFC Show, and right now, we have started sampling customers to the initial products. I don’t expect that to have any impact on revenue before sometime in the second quarter, first or second quarter calendar 2013, but we’re already in customer hands with fully operating modules, starting to do initial tests.