SOURCE: LightCounting LLC

LightCounting LLC

February 07, 2011 07:00 ET

Optical Components and Systems Companies Stocks -- Back From a Very Dark Place

EUGENE, OR--(Marketwire - February 7, 2011) - Earnings season is in full swing. The optical components and systems companies have been reporting solid revenues for most of 2010 and Q4 results set new records. The day after JDSU and Opnext reported earnings on Thursday 2/3/2011, their stocks increased by 30%. What is significant is virtually the entire datacenter, telecom optical components and systems group moved upwards within a few minutes of the market opening signifying big money fund movements into this area. Markets for optical components, modules and systems have been improving steadily over at least 12 months. Nothing has fundamentally changed last week apart from the broader market taking notice of the situation and Wall Street analysts raising earnings estimates.

In early morning trading on Friday 2/4/2011, Finisar popped up 13% and hit nearly $40 up from $9 a year earlier. JDSU jumped 27% to an almost 52-week high at $22.8. Opnext, who has had a difficult time in early 2010, being tied mainly to the long haul networks and 40G, was up 29% on the day to $2.57. Positive guidance from JDSU on continuously improving margins and rapidly increasing sales of LTE, 40 Gbps and 100 Gbps test equipment brightened near term outlook for the market. Improving sales of test equipment is a clear indication that network operators are committed to deployments of next generation systems and significantly expanding network bandwidth.

LightCounting had been forecasting solid growth for the optical communication market and has pointed out that the cumulative bandwidth of the network (data rates of transceivers times the volume shipped) was not keeping up with the rise in internet and data center traffic. This analysis suggests that a period of increased investment in networking infrastructure will be necessary to catch up on several years on underinvestment and balance traffic growth and network expansion rates. Steadily increasing sales of optical amplifiers, ROADMs and more recently tunable lasers and other transmission modules offer an early indication of the scale of upcoming network upgrades, which hold a promise for the whole supply chain. (http://www.lightcounting.com/reports/OpticalCommunicationsReport_Sept_abstract.html)

Massive upgrades to datacenters, which started in late 2009, accelerated in 2010. Shipments of 10 GigE and 8 Gbps Fibre Channel SFP+ modules widely used for short reach interconnects increased 3 fold in 2010. First shipments of 40 GigE and even 100 GigE interfaces were also reported by suppliers. Detailed analysis of the optical communications market, based on confidential sales data provided by 23 leading vendors, is presented in a new LightCounting Market Update report released on January 24, 2011: (http://www.lightcounting.com/reports/2011%20January%20Sales.html)

"Wow, what a day. JDSU's earnings on Thursday really lit a fire today," commented Kimball Brown, industry analyst at LightCounting and a former Wall Street analyst. Kimball recently released LightCounting's viewpoint on 10GBase-T adoption and we take a very different path that what other market research companies are portraying. The 10GBase-T report explains the Intel "tick-tock" model in depth and its effect on the "Copper versus Optical" war in the data center. Timing of wide deployments of 10GBASE-T has a significant impact on the optical markets discussed above. (http://www.lightcounting.com/reports/10GBASE.html)

About LightCounting
LightCounting is a market research company focused on in-depth study of the optical communications market. Our research covers the whole supply chain including components, modules, systems, and their applications. Most of our analysis is based on confidential sales data provided exclusively to LightCounting by leading component and module suppliers.