Finisar Shares Fall Due to LR4 Module Issues

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Finisar Shares Fall Due to LR4 Module Issues
Shares of Finisar (NASDAQ: FNSR) slumped on Friday after Craig-Hallum analyst Richard Shannon suggested
that it could take one to two quarters for the optical communication component maker to qualify its LR4 optical module again.
That blunder notably became a tailwind for Finisar’s rivals Oclaro (NASDAQ: OCLR)
and Lumentum (NASDAQ: LITE) — which didn’t suffer similar firmware compatibility issues.
At the time, Rosenblatt analyst Jun Zhang stated that the misstep would reduce Finisar’s annual revenues by $20 million (compared to its estimated revenues of $1.5 billion this year)
and reduce its gross margins by three to four percentage points.
In late January, Chinese networking hardware giant Huawei reportedly disqualified Finisar’s 100G CFP2 (which uses the LR4 technology) due to firmware issues
that made the modules incompatible with its other equipment.
As a result, Finisar’s revenue and earnings are expected to rise 18%
and 113% respectively this year — so the company should easily bounce back once this compatibility issue is finally resolved.
That’s because companies and data centers are in the stage of a technology super cycle
that requires them to upgrade their infrastructure to deal with the higher bandwidth demands of streaming video, cloud-based apps, app virtualization, and other data-intensive tasks.


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