Shares of optical networking component maker Oclaro
The stock took a 38% hit after reporting the double error of weak first-quarter results and an even worse outlook for the coming period. The report was so distressing, in fact, that it also caused 10% drops or worse in early trading for competitors Oplink Communications
Oclaro's sales increased by 42% year over year to $121 million, but The Street had expected a couple of million more than that. The company's $0.06 of non-GAAP income per share was way less than the $0.22 analyst target. Management decided to stick with "cautious" guidance, but reminded investors that, in its opinion, "the growth prospects for Oclaro and our customers in 2011 continue to be strong."
Given the multiple buildout projects of next-generation wireless networks and the continued general growth of networking needs across the globe, I would agree with the positive long-term assessment. I remain a fan of the optical networking industry, and this severe hit looks more like an opportunity to build a position than a signal to get out.
We'll have more clarity after the Oplink and JDS reports, of course. If those guys pile on with more of the same demure forecasts, there's an industrywide slowdown going on that should eventually spread to upstream networking specialists, including Cisco Systems