Oclaro, Inc.
( OCLR) recently released preliminary results for the first quarter
of fiscal 2013.
The company reported revenues of approximately $149 million in
the first quarter, below the low end of its previously provided
guidance of $154 million - $168 million.
The softer-than-expected revenues were primarily due to weak
market conditions in the optical communications space where Oclaro
serves. In addition, the slower-than-expected recovery of customer
share of certain products to pre-flood levels, this includes
certain data communications products. Moreover, revenues were also
lower than expected due to slower ramp up of new products
particularly certain customer-qualified new 40G and 100G
products.
In a separate development, Oclaro and Opnext completed their
merger on July 23, 2012. In March 2012, Oclaro announced that it
entered into an agreement to acquire its peer Opnext Inc.
Under the terms of agreement, Opnext shareholders will receive a
fixed ratio of 0.42 shares of Oclaro common stock for every share
of Opnext common stock they own.
Management stated that integration activities are underway and
the company is on track to achieve the targeted synergies. The
combined company will attain its much-needed scale of economies to
supply a wide range of products to telecom service providers.
The merged entity can significantly reduce their costs of
operations by shifting production facilities to the low-cost Asia
Pacific region. Oclaro has already started moving its test and
assembly facilities to Malaysia and Thailand. The merged
entity is expected to achieve annualized cost synergies of $35
million to $45 million within 18 months of the close of the
transaction.
These factors will strengthen the company's future performance
and hence the company expects revenues to be up in the December
quarter.
In tandem with other industries, the optical component industry
is currently going through a downtrend. We continue to
maintain a Neutral recommendation on Oclaro, Inc. Our Neutral
recommendation is supported by a Zacks #3 Rank, which translates
into a short-term rating of Hold.
OCLARO INC (OCLR): Free Stock Analysis Report
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