News

24 April 2009

 

Oplink’s revenues fall 18%, but cost cutting maintains cash generation

For its fiscal third-quarter 2009 (to end March), photonic component, module and subsystem maker Oplink Communications Inc of Fremont, CA, USA has reported revenue of $30.8m (including $500,000 deferred from last quarter, related mainly to one of Nortel’s contract manufacturers). This is down 18% on $37.6m last quarter and 25% on $40.8m a year ago, but at the higher end of the expected range.

Complementing revenue from passive optical products, which included about $4.6m from reconfigurable optical add-drop multiplexer (ROADM) products, revenue from active products was about $9m (30% of total revenue).

Most revenue came from metro core and metro edge projects, which is believed to be the fastest-growing market segment for the next-generation network upgrade.

Oplink’s 10% customers were again Tellabs and Huawei (17% and 18% respectively), with Alcatel-Lucent, Nortel, Cisco, and Fujitsu also contributing significantly.

On a non-GAAP basis (excluding $1.3m in stock-based compensation and $950,000 in amortization of intangibles), gross margin was 30.3% (up from 25.2% last quarter). This was due to product mix and lower manufacturing expenses through reducing headcount by almost 400 (to 2150), a temporary reduction in compensation for staff in North America, and other cost-cutting measures (related to temporary staff). Overall, operating expenses were cut by $840,000.

Non-GAAP net income was $2.1m, down from $2.6m last quarter, but ahead of the expected range.

“We continue to place a high emphasis on generating positive cash flow,” says president & CEO Joe Liu. “Despite the decline in revenue, we were able to generate cash from operations [of $13m] during the quarter, due to our ability to scale our cost structure to respond to changes in demand,” he adds. Cash, cash equivalents and short and long-term investments rose by $10.3m to $157.1m. The firm repurchased $1.1m of its common stock during the quarter.

“Looking forward, design-in activity with customers remains high, and we believe that revenue may be stabilizing at current levels,” says Liu. For its fiscal fourth-quarter 2009 (to end June), order activity is improving from certain customers and product lines, so Oplink expects revenue to be $28-32m and non-GAAP gross margins to also be roughly level on Q1. “We have a little bit more confidence, but we have less visibility than before,” Liu adds. “We have not seen enough solid purchase orders and therefore we have given flat guidance [for the June quarter].”

In addition, Oplink is consolidating its facility in Calabasas, CA (formerly Optical Communication Products Inc, acquired in October 2007) into the Fremont headquarters, so operating expenses are expected to fall again slightly.

Liu also comments that the current industry industry downturn will be much shorter than that of 2001. For telecoms in particular, Oplink has quickly stopped the free fall, as indicated by revenue bottoming even in the March quarter. Some of the order push-outs announced since the beginning of the year have probably already expired, Liu reckons. Oplink should benefit, if not in the June quarter, then in the September quarter “for sure”.

See related items:

Oplink’s revenues fall 12.5%

Oplink controlling costs during near-term economic concerns

Oplink’s earnings rebound as revenue falls less than expected

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