Finisar Reports Q1 Results

SUNNYVALE, Calif., Sept. 2, 2011 — Finisar Corp., a supplier of subsystems and components for fiber optic communications, has announced financial results for its first quarter of fiscal 2012, which ended July 31, 2011.

Revenues were $228.2 million, 9.8% greater than the prior year period but 3.7% less than the preceding quarter, said Jerry Rawls, Finisar’s executive chairman of the board.

Rawls said that the sequential decline in revenues was driven primarily by continued softness in demand from the company’s telecom customers, particularly Chinese OEMs.

“We achieved a non-GAAP (generally accepted accounting principles) gross margin of 32.1%, exceeding our prior guidance of 30.7% to 31.7%. This resulted from lower-than-expected manufacturing costs. Our non-GAAP earnings per diluted share were $0.21, exceeding our prior guidance of $0.16 to $0.20, as our operating expenses were also lower than expected," Rawls said.

During the first quarter, Finisar continued to invest in new product development programs, including tunable XFP transceivers, 40 Gb/s and 100 Gb/s products, 16 Gb/s fiber channel transceivers, and our edge or access ROADMs (reconfigurable optical add/drop multiplexers).

“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,” said Eitan Gertel, Finisar's CEO.

“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," Gertel said.

First-quarter revenues included approximately $7.0 million from applying consolidation accounting for Finisar's ownership interest in Ignis from May 18, 2011, the date Finisar acquired a controlling interest in Ignis, through June 30, 2011, the end of Ignis's fiscal quarter.

Compared with the first quarter of the prior year, the sale of LAN/SAN products increased by $15.6 million, or 19.7%, the sale of metro/telecom products (including WSS/ROADM line cards) increased by $5.3 million, or 4.2%, and the sale of products for analog and cable television (CATV) applications decreased by $0.5 million, or (11.8)%.

Compared with the preceding quarter, the sale of LAN/SAN products increased by $143,000, or 0.2%, the sale of metro/telecom products (including WSS/ROADM line cards) decreased $9.3 million, or 6.7%, and the sale of products for analog and CATV applications increased by $400,000, or 12.7%.

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Compared with the first quarter of the prior year, the sale of 10 Gb/s or faster products increased by $16.7 million, or 17.8%, the sale of less than 10- b/s products increased by $16.6 million, or 21.0%, the sale of WSS/ROADM line card products decreased by $ 12.5 million, or (40.9)%, and the sale of products for analog and cable television(CATV) applications decreased by $500,000, or (11.8)%.

Compared with the preceding quarter, the sale of 10 Gb/s or faster products increased by $1.3 million, or 1.2%, the sale of less than 10 Gb/s products increased by $5.5 million, or 6.1%, the sale of WSS/ROADM line card products decreased by $15.9 million, or (47.0)%, and the sale of products for analog and CATV applications increased by $400,000, or 12.7%.

Gross margin decreased to 29.1% of revenues 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, or 3.1% of revenues, compared with $23.7 million, or 11.4% of revenues, in the first quarter of the prior year and decreased from $21.3 million, or 9.0% of revenues, in the preceding quarter.

Income from continuing operations was $10.1 million, or $0.11 per diluted share, compared with $19.4 million, or $0.24 per diluted share, in the first quarter of the prior year and $16.4 million, or $0.17 per diluted share, in the preceding quarter.

The total cost for the acquisition of the Ignis shares during the quarter was $76.7 million.

The expected impact of the consolidation of Ignis on the outlook for the second quarter is approximately $14 million of revenues at a gross margin of approximately 23-24%, additional operating expenses of approximately $5 million and dilution to earnings per share of approximately $0.02.

An audio replay of a conference call on Finisar’s financial results and business outlook will be available for two weeks after Sept. 1 by dialing 1-888-203-1112 (domestic) or (719) 457-0820 and then following the prompts: enter conference ID 6630304 and provide your name, affiliation and contact number. A replay of the webcast will be available on the company's website until the next regularly scheduled earnings conference call.

For more information, visit: www.finisar.com

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