& cplSiteName &

Should Finisar Buy Oclaro?

Craig Matsumoto

"In our opinion, Finisar needs to buy Oclaro," writes analyst Mike Genovese, calling the hypothetical deal a "make-or-break proposition" for Finisar.

No such deal is rumored -- this is not a Nokia-Juniper kind of situation -- but Genovese, who follows the optical networking market for MKM Partners , thinks it's the best way to position Finisar Corp. (Nasdaq: FNSR) for the 400Gbit/s generation.

He wrote his opinion in a research note published Monday, and the topic is sure to come up when Finisar announces its earnings on Thursday.

Merger-spotting has been a popular sport in optical transceiver circles for years; in fact, Oclaro itself came from the combination of Avanex and Bookham. Speculation about Finisar and Oclaro is nothing new either, as analyst James Kisner of Jeffries & Co. floated the idea last year. Finisar has been hypothetically linked to competitor Lumentum Holdings Inc. as well. (See Will Finisar Bid to Buy Oclaro? and Lumentum Looks to Be a Buyer.)

A Finisar-Oclaro deal would be expensive, at least in relative terms, considering these are two of the biggest independent players in optical components. Oclaro Inc. (Nasdaq: OCLR) had a market capitalization of $1.2 billion as of Tuesday. Finisar's market cap was $2 billion.

Both trail Lumentum, which has a market cap of $2.9 billion.

Genovese theorizes that Finisar would pay $1.7 billion to grab Oclaro, possibly in a combination of cash and stock, although he runs through some scenarios involving debt financing too.

The "why" of the deal comes down to lasers. Specifically, electro-absorption modulated lasers (EMLs) are a "vastly superior" option for 400Gbit/s networking, Genovese writes -- and Finisar has no such product in-house. Oclaro does.

"We expect the 400-Gbit/s Datacom cycle to take off in 2019. Finisar derives more than 70% of its sales from Datacom end markets and risks losing its strong market position if it does not add EMLs," Genovese writes.

A side effect would be that Oclaro's CEO, Greg Dougherty, could take charge of the combined company, Genovese writes. Finisar CEO Jerry Rawls has announced he'll retire at the end of 2018. (See Finisar CEO Rawls to Retire.)

Craig Matsumoto, Editor-in-Chief, Light Reading

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Featured Video
From The Founder
Light Reading founder Steve Saunders grills Cisco's Roland Acra on how he's bringing automation to life inside the data center.
Flash Poll
Upcoming Live Events
February 26-28, 2018, Santa Clara Convention Center, CA
March 20-22, 2018, Denver Marriott Tech Center
April 4, 2018, The Westin Dallas Downtown, Dallas
May 14-17, 2018, Austin Convention Center
All Upcoming Live Events
SmartNICs aren't just about achieving scale. They also have a major impact in reducing CAPEX and OPEX requirements.
Hot Topics
Project AirGig Goes Down to Georgia
Dan Jones, Mobile Editor, 12/13/2017
Verizon's New Fios TV Is No More
Mari Silbey, Senior Editor, Cable/Video, 12/12/2017
Ericsson & Samsung to Supply Verizon With Fixed 5G Gear
Dan Jones, Mobile Editor, 12/11/2017
Cloudy With a Chance of Automation: Telecom in 2018
Iain Morris, News Editor, 12/12/2017
FCC Ends Net Neutrality
Mari Silbey, Senior Editor, Cable/Video, 12/14/2017
Animals with Phones
Don't Fall Asleep on the Job! Click Here
Live Digital Audio

Understanding the full experience of women in technology requires starting at the collegiate level (or sooner) and studying the technologies women are involved with, company cultures they're part of and personal experiences of individuals.

During this WiC radio show, we will talk with Nicole Engelbert, the director of Research & Analysis for Ovum Technology and a 23-year telecom industry veteran, about her experiences and perspectives on women in tech. Engelbert covers infrastructure, applications and industries for Ovum, but she is also involved in the research firm's higher education team and has helped colleges and universities globally leverage technology as a strategy for improving recruitment, retention and graduation performance.

She will share her unique insight into the collegiate level, where women pursuing engineering and STEM-related degrees is dwindling. Engelbert will also reveal new, original Ovum research on the topics of artificial intelligence, the Internet of Things, security and augmented reality, as well as discuss what each of those technologies might mean for women in our field. As always, we'll also leave plenty of time to answer all your questions live on the air and chat board.

Like Us on Facebook
Twitter Feed