Opnext Expands 40Gbps Portfolio

Opnext Inc. (OPXT - Analyst Report) recently announced two additions to its 40Gbps product portfolio. The company stated that the new DQPSK modules for DWDM transmission and its new compact VSR modules for client applications will respond better to customer demand for longer reach and smaller size 40Gbps solutions. 

Based in New Jersey , Opnext designs, manufactures, and markets optical modules and components that transmit and receive data. Opnext is a leading manufacturer of 40Gbps optical modules and continues to make innovations in laser and optical technologies and. Opnext stated that DQPSK technology offers improved performance, simplified network design and lower manufacturing cost to network equipment manufacturers. 

Management added that network equipment vendors are introducing higher bandwidth switching and routing solutions with broader reach requirements. Opnext's new 40Gps solutions deliver cost and power savings necessary to meet next generation network requirements. 

The company is one of the smaller players in the optical component and module industry which is dominated by JDS Uniphase Corp. (JDSU - Snapshot Report) and Finisar Corp. (FNSR - Analyst Report). Opnext’s relationship with Hitachi provides a competitive advantage and assists the company in fundamental semiconductor laser research for the communications market. 

Opnext has its own laser chip fab and generates 80% of its total sales from 10Gbps and faster sub-systems. Management had earlier stated that sales of 40G subsystems will vary depending on the time of carrier deployments. Visibility remains limited and management remains cautious and expects modest growth in 10G and 40G module business in the coming quarter. 

We think the underlying market fundamentals remain sluggish and expansion of carrier and enterprise network may only resume in late 2009. Opnext’s proposed StrataLight acquisition, expected to close in December 2009, may improve the company’s valuation metrics, as it will add to revenues and enhance the company’s growth prospects.