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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 transport. JDSU h ...

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Infinera’s Last Ditch: Infinity and Beyond

May, 2016

With the full realization by industry analysts, some of whom initially drank the Kool-Aid, that the potential for Infinera significantly penetrating the metro optical market will not be a pushover, the supplier’s frantic gambit is to prematurely advance a marketing message to the extreme on the Long Haul (LH) side with its Infinite Capacity Engine (ICE). With the bulk of the LH carrier space continuing to migrate to 100G, its Gen 4 technology supposes the potential for well over an order of magnitude increase in capacity deployment. A reasonable presumption is that in the vast majority of cases, it will take a very long time to reach exhaust at 100-gig with the use of DWDM. (Infinera dodged a question about the relatively low number of wavelengths at that speed during the last quarterly earnings conference.) The company’s arguments about a direct correlation between expectations of bandw ...

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Finisar Execs Should Get Out Now

December, 2016

While the CEO of Finisar has been associated with the company for over 25 years, the average time that the rest of the executive management team has been in the optical components space is around 18 years. Undoubtedly, they have to understand how terribly unique their situation has become after years of mounting obstacles that have made its business quite unattractive in the recent past. The combination of the Street inexplicably driving up the valuation of a single company, Acacia Communications, to extremely unjustified levels, which positively affected other vendors in the market, along with the exploding demand for componentry in only one country, China, could not have been anticipated. It could be said with a high level of confidence that such a confluence of events will never happen again. Although we believe that Finisar still has room to somewhat improve its financial position in ...

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Acacia’s Narrow Option Down Food Chain

May, 2017

For a while, we have been addressing the matter of what Acacia Communications can do for an encore with its DSP business. Despite Acacia introducing new products, including its CFP2-ACO and -DCO solutions, as well as a larger capacity ASIC, it has nevertheless felt compelled to offer its PIC component part separately, which one may assume could easily result in lower margin generation. Certainly, there are several factors involved in the vendor’s current situation, which have resulted in what appears to be a less than a desirable change in strategy, such as the over-the-top enthusiasm in the industry regarding the impact of Facebook’s Voyager concept on public service providers. Most vitally, the very closed nature of the ultimate decision making on capital expenditures in China results in optical component suppliers outside the country seeming to be fairly close to blind on the actual l ...

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