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Tuesday, September 11, 2007

Finisar: Analyst Comments on Q1 2007 Results

The Sept 4, 2007 7:10PM EST Press Release says:

  • Networking equipment company Finisar Corp. said Tuesday its fiscal first-quarter revenue declined slightly, but the company did not give detailed earnings results because it is reviewing past stock option granting practices.

  • For the quarter ended July 29, Finisar's sales totaled $105.7 million, down slightly from $106.2 million in the year-ago quarter. Analysts polled by Thomson Financial were expecting sales of $107.32 million.

  • The company said gross margins were lower than the previous quarter, due largely to higher costs from new product introductions. "We were pleased to see revenues bounce back from last quarter as we recovered from a number of customer supply chain and excess inventory issues," said Jerry Rawls, chief executive, in a statement. Finisar's sales in the prior quarter totaled $97.3 million.

Not stating earnings until they sort out the option backdating issues was not news. The news was they missed analysts’ expectations for earnings by $1.6M or 1.5%, which is pretty much noise. On the news, Finisar fell 24% from $3.78 to $2.87 in two days.

Assorted comments follow:

  • Sept 5, 2007: Needham & Co downgraded FNSR from “Strong Buy” to “Buy”

  • Sept 5, 2007: Deutsche Bank analyst Cobb Sadler reduced his price target on the stock to $4 from $4.50, calling the first-quarter results "disappointing" and the company's second-quarter revenue forecast "conservative." Sadler maintained a "Buy" rating the stock, and wrote in a client note, "We remain buyers of Finisar on weakness as we see medium term potential."

  • Sept 5, 2007: TSC Staff wrote ”Finisar sees revenue of $105.7 million for its fiscal 2008 first quarter -- $500,000 less than the comparable period last year and below the $108.2 million consensus estimate recorded by Thomson Financial. Shares fell 81 cents to close at $2.95.”

  • Sept 5, 2007: Ruthie Ackerman of Forbes may have hit the nail on the head with this comment linking Finisar to the subprime mess:

    “Finisar, the report stated, had negative $24.4 million in free cash flow in the
    latest fully reported fiscal year. The last time Finisar filed a complete earnings report with the Securities and Exchange Commission was on July 31, 2006, according to the report. Late earnings filings with the SEC are a potential risk because companies can be considered in technical default if they file late financial statements, giving bond holders the right to demand automatic repayment of debt. “While there may not have been many such demands in recent years, a strained credit market may test the leniency of note holders,” the report said. (See “ Subprime Spillover: Who’s Next?”)

  • Sept 10, 2007: James Altucher or The wrote:

    "The downgrade sent shares to a fresh 52-week low. Finisar provides optical components that connect local area network and storage data. Some investors feel that Finisar is losing sales to other competitors, but upon a closer look, this does not appear to be the case. With $100 million in cash on the balance sheet, Finisar is not going anywhere.ADC Telecommunications (ADCT,) a major competitor, recently reported great earnings showing the true cyclical strength in this sector. I expect similar results from Finisar next quarter. In the near term, I believe Finisar is poised to bounce back from the 52-week low list as investors and traders see a buying opportunity with the recent selloff.

I believe James Altucher and Ruthie Ackerman have it right. Opportunity knocks.

More Finisar Charts here

Disclaimer. I accumulated Finisar in my Newsletter Portfolio between $1.01 and $1.99 and still hold it today in both my newsletter and personal accounts. I may buy or sell at any time and will probably not announce it here. Of course, I have "auto sell" levels in the newsletter to take more profits and any additional buys or sells in the newsletter portfolio will be announced to subscribers via email when made.

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