As demand for high-speed, always-on Internet access services proceeds unabated, fiber optic gear-makers continue to stuff their pockets with cash on the way to producing strong results in the third qu…
As demand for high-speed, always-on Internet access services proceeds unabated, fiber optic gear-makers continue to stuff their pockets with cash on the way to producing strong results in the third quarter. According to a recent report, despite the repeated bumbling and stumbling of Lucent Technologies Inc. (LU), fiber optics systems makers Ciena Corp. (CIEN) and Tellabs Inc. (TLAB) are expected to show substantial gains in revenue. Component suppliers like JDS Uniphase Corp. (JDSU), SDL Inc. (SDLI), ADC Telecommunications Inc. (ADCT) and Corning Inc. (GLW) are also expected to report solid results, even as the companies spend money on acquisitions and expanding capacity. Somewhat insulated from the sell-off of telecommunications stocks in general, the report said that the main players in fiber optics are benefiting from a quick shift to broadband-centric networks by the world“s largest carriers. Fiber optics, which transfer information down glass fibers at the speed of light, are now the most efficient way to move large volumes of communications traffic. And spending for the new systems seems unavoidable. As a result, highflier Ciena Corp. (CIEN) is expected to earn 12 cents a share on revenue of about US$ 280 million, according to a First Call survey of analysts, compared with 2 cents on US$ 141.4 million a year ago. The Baltimore-based concern has been the biggest beneficiary on Wall Street this year among big-cap makers of fiber optic equipment, with a stock that is up more than 800% from its 52-week low. It trails only Nortel Networks Corp. (NT) in sales of fiber optic systems. “The demand for optical networking equipment is still unprecedented,” said one analyst. Tellabs, the first major name in the sector to report results, is expected to post earnings of 45 cents a share, according to First Call, on revenue of about US$ 860 million. A year ago, the company earned 34 cents a share on revenue of US$ 595 million. Lucent continues to lag market leaders Nortel and Ciena in sales of fiber optic systems. Recently, Lucent said it would post earnings per share of between 17 cents and 18 cents on revenue of US$ 9.3 billion to US$ 9.4 billion, compared with 25 cents on revenue of US$ 8.1 billion, restated to exclude units the company spun off. Lucent had already lowered earnings expectations, which were originally at 32 cents a share for the quarter. Lucent blamed a higher cash reserve for bad debt, lower margins and sales in optical systems due to a longer-than-expected certification process and a greater-than-expected decline in sales for circuit-switching products. Two messages affecting the larger fiber optics market can be gathered from Lucent“s warning, said the analyst. The first – that Lucent“s circuit switching sales dropped faster than anticipated – signals a quicker move into fiber optics. “It shows a more expeditious migration to next-generation networking equipment,” he said. But the other message is that JDS Uniphase and SDL, which have agreed to a merger, may both see some softness in sales. Both companies sell components to Lucent. “Expect modest upside from JDSU,” Jungjohann said. “It“ll probably be held back because of Lucent.” JDS Uniphase is expected to earn 16 cents a share during the company“s fiscal first quarter on revenue of about US$ 755 million, according to First Call, compared to 8 cents on about US$ 290 million in the year-ago period, adjusted for acquisitions. Meanwhile, JDS Uniphase“s merger partner SDL is expected to earn 38 cents a share in the third quarter versus 10 cents a year ago, according to First all. Revenue is expected to come in at US$ 140 million. ADC Telecommunications, with a strong portfolio of fiber optics and broadband connectivity products, is expected to earn 17 cents a share in the company“s fiscal fourth quarter compared with 12 cents a year ago, according to First Call. Revenue is expected to approach US$ 998 million versus about US$ 634 million a year ago. Corning Inc., the world“s leading producer of optical fiber, is expected to post third-quarter earnings per share of 35 cents on revenue of about US$ 1.95 billion, compared with 19 cents a share on US$ 1.25 billion a year ago. Recently, Corning raised its estimates for the quarter, with optical fiber sales being one of the biggest contributors. “This company is currently capacity-constrained in most of its communications and display segments and is in the process of aggressively ramping capacity,” said another market analyst. That will likely be a continuing trend for fiber optic equipment makers, most of which have already announced ambitious plans to expand capacity to meet the hunger for fiber.