Oclaro is a leading provider and innovator of optical communication solutions for the core optical, enterprise and data center markets. Oclaro’s optical components, modules and subsystems are at the heart of the fast optical networks and high-speed interconnects driving the next wave of streaming video, cloud computing, voice over IP and other bandwidth-intensive and high-speed applications.
Oclaro, Inc. designs, manufactures, and markets lasers and optical components, modules, and subsystems for the optical communications, industrial, and consumer laser markets worldwide. The company's products generate, detect, combine, and separate light signals in optical communications networks. It offers client side transceivers, including pluggable transceivers; line side transceivers; tunable laser transmitters, such as discrete lasers and co-packaged laser modulators; lithium niobate modulators to manipulate the phase or the amplitude of an optical signal; transponder modules for transmitter and receiver functions; and discrete lasers and receivers for metro and long-haul applications. The company markets its products through direct sales force, as well as through sales representatives and resellers. It serves network equipment manufacturers of telecommunications and datacom systems, and hyperscale data center operators. The company was formerly known as Bookham, Inc. and changed its name to Oclaro, Inc. in April 2009. Oclaro, Inc. was founded in 1988 and is headquartered in San Jose, California.
(Summary) (Company) (Chart)
16 April 2017
1yr Target $14.28
Payout Ratio ---
1yr Cap Gain 66.62%
1yr Tot Return 66.62%
EPS (ttm) $0.30
EPS next yr $0.82
Forward P/E 10.44
EPS next 5yr 15.00%
1yr Price Support $12.30
Market Cap $1.41 Bil
Revenues $515.60 Mil
Earnings $45.60 Mil
Profit Margin 8.84%
Quick Ratio 3.10
Current Ratio 3.70
1yr RevGR 19.52%
3yr RevGR 0.26%
5yr RevGR ---
1yr EarnGR ---
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Ocular is a supplier of core optical network technology to leading telecommunications and data communications equipment companies. The Company targets communications equipment manufacturers that integrate their optical technology into the switching, routing and transport systems offered to the global service and content providers that are building, upgrading and operating high-performance optical networks. Service and content providers are increasingly demanding greater levels of network capacity from their communications equipment suppliers, the Company's primary customers, in order to meet their rapidly growing network bandwidth requirements. This is being driven by bandwidth intensive applications and devices that are at the access or edge of the network, such as all forms of mobile devices, streaming video, social media, cloud computing and voice over Internet Protocol ("VoIP").
The optical communications market has started to expand beyond a small number of very large service providers, and is now transitioning to a variety of open and captive networks created solely for in house use by large video services, search engines and companies offering a variety of cloud computing services. Oclaro believes that the trend toward an increase in demand for optical solutions, which increase network capacity, is in response to growing bandwidth demand driven by increased transmission of video, voice and data over optical communications networks. Service providers also seek to decrease the total cost of ownership of their networks, and many of our advanced optical solutions, both now and potentially in terms of future optical technologies to enable new network architectures, can provide a level of flexibility and responsiveness that will support these goals by enabling savings in both operational and capital expenses.
The rapid development of network infrastructure underway in developing countries is also driving growth in demand for optical solutions. Increasingly, internet content providers with their own wide area networks have similar requirements and are also becoming customers for our optical network products. Oclaro designs, manufactures and markets optical components, modules and subsystems that generate, detect, combine and separate light signals in optical communications networks. During fiscal year 2016, the Company was a leading supplier of optical products at the component level, including tunable lasers, external modulators, integrated lasers and modulators and receivers. During fiscal year 2016, they were also a leading supplier of products at the module and subsystem levels, including transceivers, transponders and controlled subsystems. Many of their products enable increased flexibility in optical communications networks, making the networks more dynamic in nature. Oclaro supplies transmission products at the component level and the module level into 10 gigabits per second ("Gb/s"), 40 Gb/s and 100 Gb/s communications solutions.
Additionally, in data communications, enterprises and institutions such as data centers have grown in complexity as they manage the rapidly escalating demands for increased bandwidth and diverse types of data driven through the consumerization of information technology and the transition to Software as a Service ("SaaS") services. These next generation architectures, such as hyperscale data centers, require very high speed interconnects to support intensive data traffic within and between corporate data centers. The providers of hyperscale data centers are upgrading and deploying their own high speed local, storage and wide- area networks, also called LANs, SANs and WANs, respectively. These deployments increase the ability to utilize high-bandwidth applications that are growing in importance to their organizations and also increase utilization across telecommunications networks as this traffic leaves the LANs, SANs and WANs and travels over the network service providers’ edge and core networks. Ocular is a leading supplier of client-side and short reach optical transceivers at 10 Gb/s and 100 Gb/s into datacom and enterprise solutions.
With the increasing demand of mobile connectivity on an ever increasing range of devices, from phones to tablet computers, enabling the consumer to use bandwidth intensive applications such as video streaming requires mobile infrastructure providers to use optical solutions from the mast head to a remote terminal and/or central office. Oclaro is a supplier of optical transceivers at speeds up to 25 Gb/s into the wireless fronthaul and backhaul market.
For the years ended July 2, 2016, June 27, 2015 and June 28, 2014, their revenues were $407.9 million, $341.3 million and $390.9 million, respectively. They had net income of $8.6 million and $17.8 million for the years ended July 2, 2016 and June 28, 2014, respectively, and incurred a net loss of $56.7 million for the year ended June 27, 2015. As of July 2, 2016, June 27, 2015 and June 28, 2014, their total assets were $359.0 million, 325.9 million and 365.7 million, respectively.
Client Side Transceivers. Oclaro's pluggable transceiver portfolio includes fixed wavelength SFP at data rates less than 10 Gb/s, X2, XFP and SFP+ at 10 Gb/s, CFP at 40 Gb/s, and CFP, CFP2, CFP4 and QSFP28 at 100 Gb/s. These package form factors support different link distances based on different optical connectors and media types, in both industry standard and proprietary optical specifications. These link distances typically go from 100 meters to 100 kilometers, depending on the laser and receiver technology utilized.
Line Side Transceivers. The Company believes the photonic integration of their internal components represents a differentiator and a competitive advantage in our 10 Gb/s tunable XFP and tunable SFP+ products. They were the first company to supply coherent CFP2 transceivers at 100 Gb/s and 200 GB/s. Their internal device and sub-assembly technology enables our customers to provide coherent pluggable 100 Gb/s and 200 Gb/s solutions for metro and long haul networks.
Tunable laser transmitters. The Company's tunable laser products include discrete lasers and co-packaged laser modulators to optimize performance and reduce the size of the product. Their tunable products at the component level include a tunable optical sub assembly and a 10 Gb/s co-packaged tunable laser mach-zender modulator. They also include an integrated tunable laser assembly ("iTLA") and a 100 Gb/s or 200 Gb/s tunable laser assembly plus modulator ("iTXA"). They are in production of our micro-iTLA and iTXA, tunable laser products which are suitable for 100 Gb/s and 200 Gb/s systems.
Lithium niobate modulators. The Company's lithium niobate external modulators are optical devices that manipulate the phase or the amplitude of an optical signal. Their primary function is to transfer information on an optical carrier by modulating the light. These devices externally modulate the lasers of discrete transmitter products including, but not limited to, our own standalone laser products. They are leaders in the market for 100 Gb/s and 200 Gb/s modulators for coherent applications. They also supply a 400 Gb/s modulators for coherent applications.
Transponder modules. The Company's transponder modules provide both transmitter and receiver functions. A transponder includes electrical circuitry to control the laser diode and modulation function of the transmitter as well as the receiver electronics. They supply a small form factor tunable transponder at 10 Gb/s. We believe the photonic integration of our internal componentry can represent a differentiator and a competitive advantage in certain of these products.
Discrete lasers and receivers. The Company's portfolio of discrete receivers for metro and long-haul applications includes 10 Gb/s XMD PIN and avalanche photodiode ("APD") receivers, 10 Gb/s coplanar receivers in PIN and APD configurations and 20 Gb/s balanced receivers. They also supply distributed feedback ("DFB") laser die at 10 Gb/s and 25 Gb/s.
My Strategy Going Forward
This company doesn't fit into a Dividend Growth Strategy so if that's your strategy, you might just want to look elsewhere. Oclaro is also a relatively small company in a very competitive environment. But despite that, it's in an industry that's finally growing into its own as the need for bandwidth is increasing exponentially and spreading beyond a centralized cloud to a distributed cloud.
Now I don't pretend to have an in-depth knowledge of the fiber optics industry, but I analyze stocks based on their fundamentals, technicals or both. In this case it looks like the analysts are calling for a 66% increase in the stock price over the next 12 months. Projections based solely on the projected earnings growth rate still predict a 40+% return over 12 months. And that ain't bad.
Add in the possibility that consolidation may occur in this industry as demand exceeds the capacity of any one company and owning a piece of Oclaro starts to make sense, from a speculative view. Therefore, I intend to accumulate a small position in this company and see where it goes. As long as it continues to climb I'll hold on and perhaps even add to my position. Finally, I'll also be looking at a few other companies in this space for additional positions. This really looks like an interesting area to own a piece of over the next few years.