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Finisar: Fiber Optic Firecracker by Chris Connor In the Right MarketsAlmost every single individual investor has heard of the impact that fiber optic stocks have had on Wall Street over the last year, but they may not have heard of a highflying fiber optic company called Finisar {FNSR}. With such high-profile customers as EMC {EMC}, Newbridge Networks, IBM {IBM}, Sun Microsystems {SUNW}, Emulex {EMLX}, Extreme Network {EXTR}, and Brocade {BRCD}, Finisar definitely deserves some attention from investors. The company specializes in fiber optic subsystems and test equipment for the storage area network (SANs) and local area network (LAN) markets. FNSR's fiber optic subsystems consist primarily of receivers (convert incoming optical signals into electric signals), transmitters (convert electric signals into optic signals), and transceivers (a combination of a transmitter and a receiver) based on the Fibre Channel and Gigabit Ethernet protocols. Fibre Channel is currently the primary technology for SANs while Gigabit Ethernet is developing into the top LAN standard. It should be noted that there are several storage industry insiders that believe Gigabit Ethernet (or the versions of Ethernet that follow) will ultimately replace Fibre Channel as the backbone of SANs, so Finisar should have its bases covered if that does happen. In a Class By Itself Unlike other fiber optic companies, Finisar serves enterprises instead of telecom service providers. In other words, Finisar's products are used for corporate intranets, whose equipment is usually kept in one building, while fiber optic products from the likes of JDS Uniphase {JDSU} are used in networks that stretch across continents and oceans. This difference has allowed Finisar to avoid the financial impact caused by the reduced telecom spending that has adversely affected the likes of Nortel {NT}. In contrast, FNSR is boosted by the continuing fortunes of its three biggest customers (EMC, BRCD, and EMLX) which make up about 50 percent of Finisar's sales and are benefiting from the still-explosive storage industry. Looking ForwardBesides the obvious enormous potential of the storage industry, Finisar also should benefit from its broadband cable Digital Return Path Link product. This product allows cable operators to offer two-way Internet access without the noise problems that are usually present over fiber optic lines using analog signals (analog signals are vulnerable to noises from various sources which hinder bandwidth). Moreover, Finisar has been extremely adept at using its market leading Fibre Channel and Gigabit Ethernet test equipment to garner business for its fiber optic sub-systems because Finisar is intimately aware of the progress of its customer's product development so it can get the jump on its competitors by developing products to satisfy its customer's needs as soon as those needs arise. With that being said, investors should definitely research Finisar further if they are looking for substantial stock price appreciation from a fiber optic stock without the risk of reduced telecom spending. |
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