AAOI

[admin]

Chromatic dispersion can be one of the factors limiting performance of high-speed optical communications links. However, the effect of chromatic dispersion (often referred to as “CD”) is cumulative over the length of the optical fiber. Over a short distance, CD is not an issue. Over a much longer distance the CD effect "adds up" and could become the factor that ultimately limits the distance over which the optical link operates. For 100 Gbps data center interconnect applications, where distances are generally 10-km or longer, CD may, depending on the type of laser and the intended link distance, be a limiting factor. However, data center interconnect is not the market from which AOI derives our revenue. Our products are used in intra data center applications. This means fiber optic links within a data center. These links are much shorter than 10-km, typically 500 meters to 2-km long. At these distances, CD is not a limiting factor for performance. The BWS report completely ignores the market that we actually serve. In addition to the issues of chromatic dispersion, Murry asserts Khorsand is wrong in asserting that Applied does not make a type of laser called “EML”: This is not true. Just this year, for example, we announced a new EML type laser (see our website for the press release from March 6 announcing this product).

AOI chooses the type of laser to use in various products based on technical and cost considerations. We employ over 30 scientists and engineers with Ph.D. degrees, most of them in laser physics or engineering. We have more than 270 engineers just in our R&D functions, and all are very experienced in choosing the right optical components to do the job. We do not choose a laser as a “band aid” solution, but rather because that particular laser device is the most cost-effective device that will meet our customer’s needs. This is one of the big reasons why our gross margins are the highest in the optical industry, indeed probably the highest ever in the optics business. In the exchange, I also asked Murry to clarify whether the company provides transceivers of the so-called “CWDM4” type, for 100-gigabit optical links, in multiple forms. I have heard some people say that Applied only supplies a version that is the “relaxed” or “light” version of CWDM4, and therefore not as robust as some customers might require. Murry responds that such as not the case: AOI makes BOTH the “lite” and “full-spec” versions of our CWDM-4 transceivers. The “lite” version is less expensive, and many customer like it because it’s the most cost effective solutions. Other customers need the additional performance of the “full-spec” version and they purchase those from us. It just depends on the customer’s needs. AOI makes both types and sells both types in significant quantities.

Applied Opto CFO Rebuts Inaccuracies About Its Products - Barron's

[admin]

Piper Jaffray’s Troy Jensen today reiterates an Overweight rating on the shares, and raises his price target to $65 from $58, writing that “the upbeat Q1 results were driven by robust demand for 100G transceivers, with the ramp in 100G optics and scale efficiencies driving impressive margin expansion." His point is that the industry is struggling just to produce enough of 100-gigabit-per-second transceivers, and that should benefit Applied because it is “vertically integrated,” meaning it can make more of its own stuff itself.

Applied Opto Surges 13%: All About the Cloud - Barron's

Fabrinet (FN) has won a project involving a coarse wavelength-division-multiplexing 100G product for Amazon's (AMZN) cloud unit, Amazon Web Services, research firm Needham reported. Fabrinet's stock is rising after the note was issued, while the shares of Applied Optoelectronics (AAOI), which, according to Needham, obtains 50% of its revenue from Amazon Web Services, are falling. However, Needham is defending Applied Optoelectronics, saying that it remains poised to "solidly beat and raise" results over the next year. FABRINET PROJECT: Fabrinet is "setting up the line and sampling" for the project this quarter and expects to accelerate production of 100G multiplexers in July, wrote Needham analyst Alex Henderson. The company is using Ma-Com's (MTSI) design and components for the project, he noted. By June 2018, Fabrinet will probably obtain more than $20M per quarter of revenue from the deal, he predicted. The analyst raised his price target on Fabrinet to $60 from $56 and kept a Strong Buy rating on the stock. APPLIED DEFENSE: Applied Optoelectronics obtains 50% of its revenue from AWS, according to Henderson, who said that he previously expected Applied Optoelectronics to face competition with Ma-Com, though not necessarily at AWS. However, he still believes that Applied Optoelectronics will be able to increase the amount of revenue it obtains from AWS while signing up new Web 2.0 customers and gaining market share. As a result, he still expects the company to deliver "solid beat and raise" results this year. Henderson kept an $85 price target and a Strong Buy rating on the stock. PRICE ACTION: In morning trading, Fabrinet rose 7.8% to $43.13 and Ma-com gained 3% to $59.97, while Applied Optoelectronics gave back 7% to $61.30 per share.

Fabrinet rises, Applied Optoelectronics sinks after Needham uncovers AWS deal FN;AAOI;MTSI;AMZN - The Fly

AAOI Said to have Received a $110/Share Offer The Rumor: A report out of China says Huawei Technologies Co. has submitted an offer to acquire Applied Optoelectronics Inc AAOI 1.74% for $110 per share. AAOI has hired Goldman Sachs as and advisor, the report said. Applied Optoelectronics closed at $68.92 on Monday, up $3.08

Wall Street's M&A Chatter From August 14: Danone, Neff Corp, Huawei Technologies-Applied Optoelectronics | Benzinga

We believe that from 2Q16-2Q17, 100G prices declined by ~30%; however AOI reduced manufacturing costs by 40% during the same time, more than offsetting the price declines which allowed AOI to post industry high gross margins while aggressively capturing share. We were surprised to learn that the company anticipates to capture another 40% in cost reductions from 2Q17 to 4Q17 for its 100G designs. We believe AOI strives to bring more elements in-house to increase its degree of vertical integration. We think automating manufacturing steps has taken AOI a long way in its cost reduction. We observed its automated laser test systems, which displaced activities that a year ago were performed by technicians hunched over microscopes with tweezers. Automation hasn’t led to lay-offs, but has factored into AOI’s ability to scale production faster than headcount. In 2017, AOI expects to increase laser capacity by 150% with just a 50% increase on staff.

Applied Opto: Take Time to Understand the Story, Says Raymond James - Barron's