• March 22, 2017, 3:10 P.M. ET

Ciena, Infinera, Lumentum: William Blair Offers Tidbits from OFC Conference

http://blogs.barrons.com/techtraderdaily/2017/03/22/ciena-infinera-lumentum-william-blair-offers-tidbits-from-ofc-conference/?mod=BOLBlog

By Tiernan Ray

One of the major trade shows of the fiber optic world is taking place this week in the Los Angeles Convention Center, the The Optical Networking and Communication Conference & Exhibition, or simply “OFC,” as it’s known, and several Wall Street observers have been at the show and are now reporting back their findings.

The reports have implications for numerous fiber names, including Infinera (INFN), Ciena(CIEN), Lumentum (LITE), and Finisar (FNSR).

William Blair’s Dmitry Netis writes today that he’s met with several public and private companies at the show, and he’s “incrementally more positive” on the market overall.

He found out some stuff about Apple’s (AAPL) forthcoming iPhone, widely expected to include3-D sensing capabilities. Could be good for Lumentum and Viavi Solutions (VIAV):

We believe Lumentum will be awarded the lion’s share of the units (could be up to 70%) with Finisar and II-VI (IIVI $35.15) potentially receiving the remaining portion. Finisar noted it currently has the capacity to produce 25 million VCSEL lasers.  Viavi (VIAV $10.62; Outperform) will likely receive 100% of the initial order for the optical filter, with its share scaling down to 80%-85% over time. We believe orders will be reflected in its June-quarter results. II-VI is in a position to produce both the VSCEL laser and optical filter. Management stated it has not accepted any prepayments for its technology and is spending its own R&D dollars to increase capacity and not become contractually obligated to reserve capacity for certain clients.

For one thing, the situation in China, which has been a drag for the group, is now looking up, he writes:

Conversations with several component vendors—Fabrinet (FN) and Lumentum —suggest Phase 12 Chinese tenders are “likely to be awarded in the next several weeks,” which would contribute to strong demand in the back half of this calendar year. This was supported further by NeoPhotonics’ (NPTN) and Finisar’s commentary on their recent earnings calls, which alluded to Chinese tender awards potentially being awarded in the April time frame.

He also gleaned some nice things about Infinera:

We attended Infinera’s briefing at OFC and walked away with appreciation for its PIC road map and DSP strategy. Infinera has put its optical engines (known as Infinite Capacity Engine) road map on a path to be released every 24 months or less, with the ICE5 engine (4.8T, up to 600G/wavelength) release date in 2017-2018 and ICE6 (7.2T, up to 900G/wavelength) in 2018-2019. ICE4 (2.4T, up to 200G/wavelength) is the current generation and the foundation of all new data center interconnect, metro, long-haul, and submarine products (seven in total) being released throughout this year. Furthermore, Infinera is willing to use its own and/or merchant DSP to stay competitive in the market.

And a bit about Acacia’s (ACIA) recent stumble:

Following our discussions with industry sources, we were able to conclude that Acacia’s customer ADVA lost some business at Amazon, which forced it to build inventory and subsequently halt orders of Acacia’s 5×7 AC100 transceiver modules. We now believe Amazon’s DCI business went to Ciena in 2017.