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Lumpy Finisar posts record sales

Despite recovering well from a weak start to its fiscal year, the fiber-optic component maker disappoints some with its 2009 guidance.

III-V chip and fiber-optic component maker Finisar closed its fiscal year by delivering best-ever quarterly sales and a record annual revenue of $440.2 million.

That represented a 5 percent increase on the previous 12 months, but the Californian company, which manufactures VCSEL chips at a wafer fab in Texas, still suffered a net loss of $36.4 million.

Soon to join forces with merger partner Optium, Finisar is enjoying strong growth in sales of components and subsystems for 10 Gb/s and 40 Gb/s network applications. Like-for-like sales more than doubled over the 2007 figure to $96.8 million.

CEO Jerry Rawls described the year as a challenging one, even though the company set another new record for sales in the closing quarter, when revenue hit $121 million.

Investment analyst John Lau, who covers Finisar for Jefferies & Company, said that more than half of Finisar s revenue in the latest quarter resulted from applications in local and storage areas networks (LAN/SANs).

But although he sees the anticipated hook-up with Optium as a positive development, Lau had been expecting stronger guidance for fiscal year 2009.

Finisar now reckons that it will post between $485 million and $500 million in the coming year, which was slightly lower than Lau s own estimate and well below a $514 million consensus reached by other analysts.

"The Optium merger looks promising "“ we believe the two companies have little product overlap," writes Lau in his latest report on the company. "Finisar is strong in storage and data networking while Optium s niche is in telecom and cable TV."

But other challenges lie in wait. "Lumpy revenues and potential market share losses remain among our concerns," admitted Lau.

The analyst believes that the "lumpy" nature of the fiber-optic business makes supply-chain management difficult, particularly when customers are working on a just-in-time inventory system that gives Finisar a very short lead time.

Noting the "uncertain" economic climate, Rawls also appeared cautious in his 2009 expectations, despite healthy current demand.

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