Finisar Should Play Hardball, Then Exit

October, 2015

Finisar’s current business model based on the all-encompassing optical components approach in the datacom/telecom market with a large amount of vertical integration from chips to subsystems, along with designing every conceivable flavor demanded by the space of a particular data rate, has become unsustainable. It is bad enough in a relatively slow growing business, particularly with 100G, to need to start developing the next form factor, so quickly after the supplier releases the last one, but also there is competing in a highly fragmented arena, especially against a lot of Asian manufacturers, which tend to put low prices way ahead of profits. Then to also have some of the major customers in recent years become competitors (either directly or indirectly) – probably makes it sheer insanity to continue such an operation. With Jerry Rawls taking over the reigns again at Finisar, and...

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Reactions to Ciena Based on Elusive Credibility Factor?

December, 2015

A recent blog article on Light Reading gets into whether the initial backlash on the Street against Ciena was justified based on the past quarterly results as well as on the projected performance of the vendor. In our opinion, and as we have discussed in the past, despite rather exemplary leadership on the technology portion of the company over the years, it has been held hostage for a very long time by management on the financial and marketing sides of the business with a shockingly insufficient amount of intimacy with the optical industry. We also believe that there is a serious tone-deafness when it comes to its interactions with the investment community, such as in inadequately addressing the “severe deceleration in growth rate” in its core business over about the last four years on the past earnings call. Finally, there are the “rookie” kinds of mistakes regarding strategic...

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Lumentum: Be Careful What You Wish For

May, 2016

Who could blame Lumentum Holdings for finding it desirable to move upstream in offering something close to full optical systems in order to generate higher margins? In some respects, the time to do so is somewhat optimal given the ex-JDSU’s historic position, particularly on the telecom side of the house. However, the level of competition that now exists, particularly with the hyperscale operators (including the growing amount of vertical integration by these companies) could make the move problematic for Lumentum. So, the amount of foreseeable opportunity for the firm could theoretically be greatest in supplying the service providers. However, while optimistically, there may be greenfield metro deployments with disaggregated elements supported by SDN, we maintain our strong reservations about the entire scheme of white boxes and Open Line Systems (OLS) involving public...

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Lumentum and Oclaro: Back to the Future

May, 2017

Followers of our blog on LinkedIn, which received several updates each of the five days at OFC 2017, were able to read the rather profound comment by the Chief Commercial Officer of Oclaro at the “Fireside Chat” of the OIDA Executive Forum Program concerning the importance of sticking “to internal competence, such as it is doing in the 1310nm and 1550nm wavelength space.” Similarly, he pointed out the wisdom of the company’s two major competitors, Lumentum and Finisar, “looking to take advantage of its fabs for greater profitability” in penetrating the 3D-sensing market. In the past, we commented on the risk of moving too far away from [one’s] own knitting. Despite major purchases and mergers by prominent vendors in the past in order to diversify, they have returned to their core competencies. For example, Lumentum, the former JDSU, combined with Acterna, a test and...

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II-VI & Lumentum: Struggle for Horizontal Integration Supremacy

March, 2021

A little over a year ago, this writer made a presentation to an audience of mainly CTOs and CEOs that the maturation of the traditional optics market meant that the biggest optical component suppliers would be increasingly forced to 1) enter new photonics sectors and 2) determine where exactly on the food chain to optimize profitability in each of them. Lumentum focuses more on the second goal (comprising an emphasis on outsourcing), and II-VI more on the first aim (including a greater stress on vertical integration). Despite the acquisition of Oclaro, datacom modules were not a viable business model at Lumentum, while conversely, a lot of revenue is generated by such gear at II-VI through the Finisar acquisition. In addition, a major reason for the extremely high premium II-VI paid in the deal just announced for Coherent, was to get the communications portion of its business below 50...

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