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posted on 04 March 2008 07:14

SUNNYVALE, CA, Mar 03, 2008 (MARKET WIRE via COMTEX News Network) -- Finisar Corporation (NASDAQ: FNSR), a technology leader in gigabit fiber optic solutions for high-speed data networks, today announced financial results for its third fiscal quarter ended January 27, 2008.

FINANCIAL HIGHLIGHTS - THIRD QUARTER ENDED JANUARY 27, 2008

Financial Results
-- Revenues of $112.7 million, a new record for the Company, were up 12.0% sequentially from $100.7 million in the second quarter and 4.9% from $107.5 million in the third quarter of the prior year. These results were in line with the Company's preannouncement on February 6, 2008 wherein management indicated that third quarter revenues would be approximately $112 million.
-- Among the factors contributing to the $12 million sequential increase in revenues were:
1. Revenues from 10/40 Gbps products increased to approximately $29.1 million in the quarter, up $10.9 million from $18.2 million in the prior quarter. Of this increase:
-- Approximately $8 million was from increased shipments of the Company's SFP+, XFP and X2 transceivers for 10 Gbps Ethernet and Sonet applications.
-- Approximately $2 million was from the sale of 40 Gbps 300 pin transponders that we were unable to ship in the second quarter due to firmware problems. Those problems were corrected and the products were shipped in the third quarter.
2. Revenues from the sale of 8Gbps Fibre Channel SAN transceivers exceeded $2 million in the quarter.
-- Net loss of $10.6 million, or $.03 per share, compares to a net loss of $9.8 million, or $.03 per share, in the second quarter and breakeven, or $.00 per share, in the third quarter of the prior year. However, included in the net loss for the current quarter was a charge of $7.4 million related to the completion of the investigation into our historical granting practices and an accrual for employee and employer tax liabilities arising from that investigation. These charges affected both gross profit and operating expenses in the quarter.
-- Gross margin of 33.4% increased sequentially from 31.6% in the second quarter but was down from 36.6% in the third quarter of the prior year.
-- Cash and short-term investments, plus other long-term investments which can be readily converted into cash, increased $7.5 million from $114.9 million at October 28, 2007, to $122.4 million at January 27, 2008. The Company has classified certain of its investments as long-term based on its intent to hold these securities until maturity, although they can be readily sold if required.

Non-GAAP Financial Measures
-- Excluding certain items as described below, net income was $7.0 million, or $.02 per share, compared to $2.5 million, or $.02 per share, in the second quarter and to $11.8 million, or $.04 per share, in the third quarter of the prior year.

-- Gross margin, excluding certain items, increased sequentially to 38.2% from 37.0% in the second quarter, but was down from 41.2% in the third quarter of the prior year.

-- The Company generated approximately $15 million in EBITDA during the third quarter while investing approximately $6.7 million in capital expenditures.

THIRD QUARTER OPERATING RESULTS

Total revenues in the third quarter of fiscal 2008 were a record $112.7 million, up $12.0 million, or 12.0%, on a sequential basis, from $100.7 million in the second quarter and 4.9% from $107.5 million in the third quarter of the prior year. Total revenues from the sale of optical subsystems reached $103.0 million in the third quarter, up $12.1 million, or 13.2%, on a sequential basis, from $90.9 million in the second quarter and 5.1% from $98.0 million in the third quarter of the prior year. The increase in revenues from the sale of optical subsystems was primarily the result of increased sales of products for 10-40 Gbps applications. Sales of network test and monitoring systems of $9.8 million were unchanged on a sequential basis from the second quarter and were up $.3 million, or 2.9%, from $9.5 million in the third quarter of the prior year.

The Company's gross profit for the third quarter was $37.6 million, or 33.4% of total revenues, compared to $31.8 million, or 31.6%, in the second quarter and $39.4 million, or 36.6%, in the third quarter of the prior year.

The Company reported a loss of $10.6 million, or $.03 per share, compared to a loss of $9.8 million, or $.03 per share, in the second quarter and net income of $.4 million, or $.00 per share, in the third quarter of the prior year.

The Company's operating results include a number of non-cash and cash charges and gains or losses principally related to acquisitions, the sale of minority investments, restructuring activities and financing transactions. For the third quarter of fiscal 2008, these items resulted in net charges of $17.6 million and included, among other items, $3.3 million in non-cash stock compensation expense; $7.4 million in expenses related to the completion of the Company's stock option investigation, of which $3.2 million was related to costs associated with the investigation and the restatement of previous financial statements and $4.2 million was related to employee and employer tax liabilities arising from the investigation and cost of the tender offer to prevent any further tax liabilities in the future; $1.6 million related to charges for slow-moving and obsolete inventory; $2.2 million in amortization charges related to acquired developed technology and purchased intangibles arising from previous acquisitions; $1.3 million related to the amortization of discount on convertible notes issued in 2001; and $1.1 million related to a charge associated with employee retention related to a previous acquisition. The charge for slow-moving and obsolete inventory was largely based on an estimate of the amount of inventory that will be unused after twelve months although a portion of that inventory may in fact be used beyond this period.

The Company excludes these and certain other items for the purpose of tracking its performance on a non-GAAP basis. Non-GAAP gross profit and non-GAAP net income (loss), as reported by the Company, give an indication of the Company's baseline performance before gains, losses or other charges that are considered by management to be outside of our core operating results.

The Company's non-GAAP net income for the third quarter was $7.0 million, or $.02 per share, compared to $2.5 million, or $.01 per share, in the second quarter and $11.8 million, or $.04 per share, in the third quarter of the prior year. On a non-GAAP basis, gross margins were 38.2% in the third quarter of fiscal 2008 compared to 37.0% in the second quarter and 41.2% in the third quarter of the prior year.

Profitability in the current quarter reflects non-GAAP operating expenses of $34.6 million compared to $32.7 million in the second quarter and $30.9 million compared to the prior year. An increase of $1.0 million in research and development expenses compared to the prior quarter and $2.0 million compared to the prior year reflects an increase in the level of activity while year-over-year comparisons are impacted by two acquisitions completed during the fourth quarter of the prior year. An increase of $.8 million in G&A expense compared to the prior quarter and $1.4 million compared to the prior year primarily reflects an increase in expenses associated with the Company's ongoing patent litigation.

"It was gratifying to see our revenues reach record levels after spending the last few quarters working our way through several customer specific issues," said Jerry Rawls, Finisar's CEO. "Demand for our products for 10-40 Gbps was particularly robust this past quarter and we expect that demand to remain healthy for the foreseeable future. In addition, we will continue to innovate and introduce new products for both the data center and telecom markets."

CONFERENCE CALL

Finisar will discuss these financial statements and its current business outlook during its regular quarterly conference call scheduled for today, Monday, March 3, 2008 at 2:00 p.m. Pacific Time. To listen to the call you may connect to the investor page of Finisar at http://www.finisar.com or dial 877-407-0890 (domestic) or 201-689-7827 (international) and enter passcode 276001.

A replay will be available approximately one hour after the call for two weeks following the call's conclusion. To access the replay, dial 877-660-6853 (domestic) or 201-612-7415 (international) and then following the prompts to enter account number 2791 followed by conference ID number 276001. A Web archive will be made available at www.finisar.com until the next conference call to be held approximately 90 days following the call's conclusion.