Acacia’s Valuation: The Street’s Cruel Joke

August, 2016

While Acacia Communications’ recent business performance has been impressive, and deserves to be rewarded, there can be no justification for a market cap that comes even close to exceeding the valuations of either Finisar or Ciena. With the limited number of tech IPOs, it appears that some institutional investors have constructed a mini-bubble based on just one optical company to quickly grab some profits before the economy in general is likely to take a steep nosedive. The IBD's 14-company Telecom-Fiber Optics industry group reached a 15-year high, of course, going back to the end of the last major bubble, after the financial community decided to treat the historically, conservatively-minded service providers, as if they would need bandwidth for an indefinite amount of time. The optical industry is still paying the price to this day for the results of overcapitalized vendors and...

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Acacia Will Likely Push 400G DSP

September, 2016

The message that the Street may be going way overboard with Acacia Communications’ valuation, let alone its new secondary offering, may be beginning to resonate. For example, one can read, “Acacia: A Company That Will Need To Be Resistant To The Ire Of Investors.” Yet, the money to be made by at least certain institutional investors with the price going up and down while still remaining above $100 a share, was obviously deemed to be insufficient. We assume that just as with the first offering, a narrative will need to be constructed in order to support the second issuing of stock, and we suspect it may be that the company will be well-positioned with funding to support and potentially dominate the 400G coherent Digital Signal Processor (DSP) space, just as it had done at the 100G rate. While some 200G applications are emerging, suppliers such as NTT Electronics (NEL) and ClairPhy...

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Acacia’s Bridge Too Far

October, 2016

The photo associated with this article shows the Arnhem John Frost bridge in the Netherlands, which became really famous with the 1977 epic film, A Bridge Too Far, which depicted the tragic and overreaching allied scheme, Operation Market Garden, in September 1944 to end the war in the European theater by Christmas. Of course, when it comes to Acacia Communications overextending itself with the second public offering, we are not talking about the loss of lives, but with the comparatively unimportant matter of making money. In actuality, with the Street’s poor reaction to what we referred to as “gall” in a previous post, may have prevented a more precipitous drop in the valuations of not only Acacia, but potentially other publicly-owned optical component vendors as well, which has occurred with the very recent, less than stellar, quarterly performance by ZTE (a large customer of...

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Inphi/ClariPhy: Solider Acquisition Aspirant

January, 2017

fibeReality believes that the factor that makes Inphi the most attractive as a buyout candidate is its recent purchase of ClariPhy Communications. With PAM4 technology yet to be sold in any kind of volume by any vendor, Inphi can potentially provide the necessary engineering and financial resources to fully develop a high-end coherent DSP to the merchant market that would provide an alternative to Acacia Communications, which has been able to monopolize the space. As we have discussed in the past, the lack of a second supplier makes differentiation highly problematic for those system vendors, which do not internally develop their own DSPs for these applications. Assuming that NEL does not come out with its own version of this kind of processor, which would be a compelling competitive solution, a duopoly situation would also help ensure that any kind of pricing wars would be kept to a...

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$2B AOI Cap Worse Than Old $3B Acacia

July, 2017

  While we would find it impossible to ever recommend securities of any kind because of the irrational ups and downs of the prices, we have a great deal of respect for many of the financial analysts to whom we provide consulting services on a regular basis, and they tend to be conscientious, informed, and trustworthy. Nevertheless, those people in the industry who have direct access to our second blog by following us there, realized that we felt compelled to publish the following article the other day: “Mind-Boggling Amount of Ignorance About Optics on the Street?” It was a directly a reflection of a “very close to an obscene” valuation of Applied Optolectronics, which has been hovering around the $2 billion mark for a while, and in our opinion, has been spurred on by too many individuals influencing optics stock prices, who are disingenuous, unknowledgeable, or unwilling to...

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