After Positively Pre-Announcing The March Quarter, Applied Optoelectronics At Bat Tonight

Oclaro reported earnings Tuesday night that beat for the March quarter, but the company lowered guidance for the current quarter ending in June. Shares of Oclaro were down 7% in yesterday's pre-market trade after being down almost two times that in post market trade the night before.

For the March quarter, Oclaro reported earnings of $0.23 per share on revenues of $162.2 million versus Street consensus going into the earnings event of $0.20 per share on revenues of $160 million.

However, for the current quarter ending in June, Oclaro guided revenues to a range between $144 million and $152 million, gross margins between 38% and 41% and finally operating income between $27 million and $31 million. Consensus revenue estimates going in to the earnings report was $164.5 million.

Not helping matters in the sector was the fact that Inphi also warned of slowing demand in the Chinese optical sector, temporarily putting paid to the China so-called "super cycle" theory in the optical component sector.

Oclaro CEO Greg Dougherty said in the company's earnings release that "during April, we saw a significant slowing of demand in China."

Inphi CEO Ford Tamer also gave grim guidance for the current quarter, citing "inventory accumulation in China Long Haul and Metro, which represents 40% of worldwide optical communications demand."

Oclaro and Imphi management teams both stated on their conference calls that the setback was temporary, and that April was traditionally a slower month for China.

Both companies management teams also stated that they feel that the back half of the year would see a strong pick-up in activity and, more than likely, would lead to resumed growth trends both sequentially and year on year as well.

Lumentum just reported their earnings this morning and guidance for the company's current quarter has also come in a bit light.

Here's what Alan Lowe, Lumentum president and CEO, said, "Late in the third quarter, we saw demand from China slow significantly, and this softness persisted through April. Despite this near-term softness, we remain optimistic about our longer-term outlook. Demand continues to grow for bandwidth across the world's datacenters and communications networks. Manufacturers are increasingly adopting advanced laser-based techniques. And, leaders in next generation consumer electronics, as well as the automotive industry, are looking to 3D sensing to enable new applications." 

Interestingly, shares of Lumentum are up almost $7.50 per share, despite the lowered guidance for the current quarter at $50.15 per share.

The next event in the sector that bears a close watch is earnings from Applied Optoelectronics tonight after the close of regular market trading. I am sure all of you remember the company's (Applied Optoelectronics's) positive pre-announcement in mid-April, which briefly popped the shares above $50 soon thereafter.

For now, I am sitting tight with my investments in Oclaro and Applied Optoelectronics, however, I might make a move prior to the latter's earnings report before the close of trade tonight.

Shares of Oclaro are down a couple of pennies at $8.15 per share while Applied Optoelectronics shares are up slightly at $46.91 per share.

(Long oclr, long and short options on oclr, aaoi,)

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