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Earlier this month, Oclaro reported preliminary results for the December quarter. The company now expects revenues of approximately $86 million, surpassing management’s previous guidance of $75 million – $85 million.
The company remains keen to restart production in Thailand following the intensive floods and minimize impact to customers. The company has already restarted production in the affected product lines.
Meanwhile, Oclaro currently expects four of the five flood-affected product lines to have restarted commercial output at Fabrinet's Pinehurst facility by the end of January. Oclaro stated that commercial shipments of high-powered lasers resumed in November and production capacity is currently at pre-flood levels.
Oclaro stated that commercial shipments of tunable dispersion compensators are expected to begin by the end of January and production capacity is expected to increase to pre-flood levels by the end of the March quarter. Commercial shipments of lithium niobate external modulators are expected to begin by the end of January and production capacity is expected to return to pre-flood levels early in the June quarter.
Commercial shipments of WSS products are expected to begin at the end of the March quarter and production capacity is expected to return to pre-flood levels in the June quarter.
Meanwhile, Oclaro expects capital expenditures of approximately $6 million in both the second and third quarter. The company will have to incur this expenditure to recover product lines lost during the flood although Oclaro believes it has adequate property and business interruption insurance to cover its flood related losses.
In addition, Oclaro expects to receive in excess of $10 million in the March quarter related to an advance payment from the insurance carrier.
We continue to maintain our Underperform recommendation on Oclaro. Our recommendation is supported by Zacks #3 Rank, which translates into a short-term rating of Strong Sell.
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