In order to strengthen its manufacturing model and save costs,
) entered into an outsourcing contract. Oclaro recently signed a
definitive agreement with Venture Corporation Limited whereby
Oclaro will transfer its Shenzhen, China, final assembly and test
operations to Venture's Malaysia facility.
Venture has been manufacturing optical products since 1992. The
company will transfer these products gradually in a phased and
gradual transfer of products over the next three years.
Meanwhile, to ensure a smooth transition, Oclaro will retain
control of the manufacturing facility in Shenzhen. The employes
will continue to be employed by Oclaro. In addition, quite a few of
Venture's workers will relocate to Shenzhen to supervise the
transfer along with ensuring that the products
transitioned to Venture's Malaysia facility are fully qualified by
customers before the products are phased out of the Shenzhen
Both the companies have signed a five -year supply agreement.
This transfer is expected to result in cost savings around $35
million after paying off the transition and employee retention
Oclaro already has an outsourcing manufacturing relationship
with Fabrinet. This agreement will further strengthen the company's
manufacturing model and enable it to serve its customers
Earlier, the company reported a loss of $0.36 per share in the
December quarter, better than our estimate of a loss of $0.39 per
Earnings estimates have been static in the last few days after
declining significantly earlier. The company is expected to
continue to post losses in fiscal 2012. Nevertheless, we expect
Oclaro to be profitable in 2013.
As of now, we continue to maintain a Neutral recommendation on
Oclaro, Inc. Our neutral recommendation is supported by Zacks Rank
#3, w which translates into a short-term rating of Hold.
OCLARO INC (
): Free Stock Analysis Report
To read this article on Zacks.com click here.