Finisar Corporation's CEO Presents At The 2012 Citi Technology Conference (Transcript)

Finisar Corporation (FNSR)

2012 Citi Technology Conference

September 6, 2012 9:30 AM EST

Executives

Eitan Gertel – CEO

Presentation

Moderator

Welcome to our presentation with Finisar. My name is Kevin Dennean. I’m the comp equipment analyst here at Citi. We are very happy to have with us CEO of Finisar, Eitan Gertel.

Eitan Gertel

Good morning.

Moderator

Thanks for joining us, thanks for your participation at the conference. So it’s a pleasure to speak with Finisar. A couple of quick housekeeping issues, one is the closure up at the front desk, we encourage you to take a look at. Two, the webcast is being – I am sorry, the, presentation is being webcast. We are going to go slide by charts. We are going to leave plenty of time for Q&A from people in the audience. The one thing we would ask you is if you have a question, raise your hand, wait for a Mic to reach you so that people listening on the webcast can have the benefit of hearing your question. Last housekeeping point, what we are doing this year at the conference is we have three questions that we want to ask all of the companies. We’re going to collate the data and we’ll share that with you. And Eitan, I guess diving into those questions.

The first question we have if you thinking about your expectations for the back half of the year and obviously Finisar have reported just a couple of days ago. But if we think about expectations for the back half of the year now versus a mid-year. Things materially have been downgraded in terms of expectations, are things – is the back half of the year shaping up about the way you would have expected or is there actually some improvement?

Eitan Gertel

So if you look at our business, obviously our business is divided to Datacom and Telecom and Datacom has been strong and growing for the last many number of quarters and Telecom has been flat for the last six quarters. So we’ve seen – last quarter we reported it was probably the lowest Telecom quarter in while, but also what we reported is we guided for Optic revenue. So we guided for Optic revenue to like $225 million and $240 million. And majority of the Optic is coming from Telecom. So we have seen demand in Telecom improving specifically the demand improvement on the Telecom side come from WSS and Tunable XFP. There are other products that are growing but those two products are substantial improvement.

So we see improvement in the Telecom. I cannot, I am not going to sit here and tell you that there’s a huge demand coming in the second half of the year. We are encouraged that the demand is improving. We’ve seen robustness on the Datacom too. Our Datacom business is obviously changing quarter-over-quarter because overall Datacom is pretty robust in growing but the prior quarter we had 9% quarter-over-quarter, which means this current quarter we had a softer quarter but that’s changing if you integrated across the year you’ll see a continuous growth in our business. So we are encouraged, we are guiding up, it’s a great thing for us, but how big the second half of the year will be, I don’t know exactly how to say …

Moderator

Is the second half kind of in line with your expectations that you had at mid-year or as the economy issues in Europe is that starting to really have more of an impact than maybe you expected say in the May, June, July timeframe.

Eitan Gertel

Obviously the issues in Europe are slowing down the recovery. Our customers in Europe are not only European customers – they are worldwide companies who reside in Europe and export. So in some cases we see improvement from all OEMs in Europe but I am not sure if that output is going to Europe itself but definitely Europe is an overhead.

Moderator

So we want to ask about geography. So I think the tough part with Finisar where your ship isn’t necessarily where you product get installed, so we’ll skip past that. But let’s talk about cash on the balance sheet. I think Finisar is really differentiated in the Optical industry in that you have a good balance sheet, you have nice healthy cash position, you actually generate some nice cash. So what are – can you rank order for us from your perspective, priorities of cash in terms of M&A, dividends, share buybacks or just status quo. Keep on generating cash and keep on putting it on the balance sheet.

Eitan Gertel

So, obviously we have a very healthy balance sheet. We just acquired a company called RED C, and even post acquired the company for cash. We actually have more than $220 million as ending last quarter on the balance sheet. We have not had a decision made to do dividend or share buybacks. We are a company that is built on growth; we always add in technology, we are investing a lot of R&D. Right now we are extending our production facilities, we are fully booked in China, we have to build another facility which we announced last quarter and that’s our Wu Shi facility. So the use of the cash for us is either to do acquisitions or basically to finance the company going forward.

Moderator

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