Finisar Corp. (NASDAQ:FNSR), whose stock has taken a pounding since it was the first components and subsystems vendor to signal in March the onset of inventory correction (see “How long will the optical communications correction last?”), finally had some good news to report. The company reported revenues of $228.2 million for its first quarter of fiscal 2012 ended July 31, 2011. This was within its guidance of $221 million to $236 million.
The company also offered positive revenue guidance for the upcoming quarter, boosted by the acquisition of Ignis ASA (see “Finisar caps Ignis acquisition”). Finisar executives said they expect second quarter revenues to be in the range of $235 to $250 million.
However, not all the news was good. For example, just because Finisar beat guidance mean halt its sequential revenue slide. While the company surpassed its revenue performance in the first quarter of the previous fiscal year by 9.8%, Finisar brought in 3.7% less revenue than it received in the final quarter of fiscal 2011.
Margins and operating income also declined. Gross margin slipped to 29.1% from 34.1% in the first quarter of the prior year and from 31.6% in the preceding quarter. Operating income decreased $16.7 million to $7.1 million (3.1% of revenues), versus $23.7 million (11.4% of revenues), in the first quarter of fiscal 2011. Income the prior quarter was $21.3 million (9.0% of revenues)
Finsar Executive Chairman of the Board Jerry Rawls sounded a now familiar theme in explaining the 3.7% revenue decline. "The sequential decline in revenues was primarily driven by continued softness in demand from our telecom customers, particularly Chinese OEMs,” he said.
"During the first quarter we continued to invest in our new product development programs, including our tunable XFP transceivers, 40-Gbps and 100-Gbps products, 16-Gbps Fibre Channel transceivers, and our edge or access ROADMs,” added CEO Eitan Gertel. “We are currently qualified at multiple OEM customers for our tunable XFP transceiver and are in qualification with more than 15 additional customers. We expect production of this product to start to ramp during the second quarter of fiscal 2012. In addition, on June 29, 2011, we successfully closed our previously announced cash tender offer for the remaining outstanding shares of Ignis ASA and now hold 100% of the outstanding shares of Ignis."
The company revealed that the total cost of acquiring Ignis’s shares during the quarter was $76.7 million. Finisar also repaid Ignis debt of approximately $8.2 million during the quarter – but is still carrying approximately $9.9 million in debt associated with Ignis.