Finisar Corp (NASDAQ:FNSR)

CAPS Rating: 3 out of 5

The Company is a provider of optical subsystems and components and network performance test and monitoring systems.

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Player Avatar KMShuller (73.89) Submitted: 12/30/2010 9:22:23 PM : Outperform Start Price: $26.00 FNSR Score: -42.00

Everyone loves the optical component growth story on the back of 40G and 100G network rollouts. However, what isn't baked in is the change in ROADM (Reconfigurable Optical Add Drop Multiplexers, hence the acronym) makeup and how it impacts the components makers. The market for these intelligent modules is expected to grow 20% annually through 2015. However, the components in these modules has changed as manufacturers have increased the number of wavelength selective switches (WSS) in each multiplexer from 2-4 to 8-16. This means the market for the alphabet-souped ROADM WSSs could double annually for the next four years. In 2010, FNSR took the market share lead from JDSU. They currently sport 30% market share and are expanding capacity rapidly.

While the stock isn't cheap at 15 times next year's earnings, FNSR is positioned to be the winner in this current product cycle. Now if only management would stop diluting shareholders with all these secondaries...

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