Opnext shares take a hit after 2Q results

posted: 13 DAYS 23 HOURS AGO

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NEW YORK -Shares of Opnext Inc. took a hit Tuesday after the company posted a fiscal second-quarter loss as higher costs and charges outweighed a slight increase in revenue.

The results missed Wall Street's expectations, and the company also gave a disappointing sales forecast for the current quarter because of a slowdown in an important business segment.

Opnext, which makes fiber-optic communication network products, posted a net loss of $17.9 million, or 20 cents per share for the quarter, down from a profit of $1.2 million, or 2 cents per share, in the same period a year earlier.

Excluding charges, the company lost 10 cents per share in the latest quarter, which ended Sept. 30.

Analysts polled by Thomson Reuters had expected, on average, a loss of 7 cents per share.

Jefferies analyst William Choi downgraded the company to "Underperform" from "Buy" and said he does not expect the company to return to profitability in 2010. He lowered his target price to $2 from $3.

The company, Choi said, is a market leader in 40G optics — used by communications companies to transport massive amounts of data — but the technology is taking longer than expected to pick up demand. Opnext had said Monday it experienced a slowdown in its 40G U.S. backbone market segment, due in part to cautious spending by its customers due to the economic downturn.

On Monday, Opnext posted sales of $81 million, up slightly from $80.2 million but below Wall Street's expectations of $86.7 million.

For the current quarter, the company forecast sales between $75 million and $80 million. This is well below the $89 million that Morgan Keegan analyst Paul A. Bonenfant is expecting.

Bonenfant kept a "Market Perform" rating on the company's shares. He noted that sales at StrataLight, which the company bought in 2008, declined 25 percent sequentially. These continued weak 40G sales represent "a combination of slowed deployment at AT&T coupled with increased competition," the analyst said.

Shares of the Fremont, Calif., company fell 85 cents, or 30 percent, to $2.02 in afternoon trading. The stock has traded between $1.29 and $3.30 in the past 52 weeks.

2009-11-10 13:26:02