Opnext Cuts Back As Cisco Takes Stock
Optical component and module supplier Opnext has kicked off its new financial year with a change of CEO and a raft of measures designed to stem its cash burn.
Taking the helm on April 1, one of new chief executive Gilles Bouchard s first moves was to cut his own pay by 10 per cent, as the company simultaneously reduced its 800-strong workforce by the same proportion.
Following Opnext s acquisition of Stratalight last year, those measures have been in the works for some time.
More recently, however, Opnext has taken a knock from inventory reductions at network-building giant Cisco Systems, which is responsible for around one-third of Opnext revenues.
According to analyst Paul Bonenfant at investment firm Morgan Keegan, the latest round of cost-cuts were "positive and necessary, given recent accelerated cash burn".
"Opnext isn t out of the red (yet)," he added.
Opnext confirmed to compoundsemiconductor.net that the restructuring will take place across all of the company s operations and manufacturing headcount.
"Through the integration [with Stratalight], we have built a stronger, more focused Opnext," said a spokesperson.
Bonenfant suspects that financial results for the final quarter of Opnext s fiscal year (ended March 31) are on track to reach the forecast of between $80 million and $90 million, with growing Stratalight sales off-setting a sharp drop in organic Opnext revenues caused by Cisco s inventory paring.
Reporting from the Optical Fiber Communication (OFC) Conference held in San Diego two weeks ago, Bonenfant said that many vendors indicated improved orders in March after a "horrible" January and only marginally better February.
In fact, he says, some components have been in short supply and subject to "rush orders".
Bonenfant suspects that this may reflect a simple re-stocking of specific inventory, rather than a sustained rebound in demand, but is much more optimistic with regard to companies selling into the Chinese fiber-optic market.
That is because of the Chinese government s stimulus plan, a $100 billion investment that includes optical back-haul and backbone build-outs to support the country s 3G wireless upgrades (see related stories).
Opnext stands to benefit to some extent, although the Chinese plan should prove more favorable to rivals Bookham, Avanex and Finisar, thinks Bonenfant.