Friday, June 13, 2008

A solid end to the fiscal year

Finisar (common 6.6% of portfolio, calls 2.3%) held their conference call last night, and I was fairly impressed with what they had to say. They will be spinning off their NetWisdom business, which generated just $3.5M of revenue for all of fiscal year 2008 (ended 4/30/08), and which was a drag on the bottom line. Spinning it off will save about $500K per quarter.

Management projects that revenues for fiscal year 2009 should approach $500M, with improved margin due to a higher percentage of sales of 10/40 Gbps products. By the second half of FY 09, net margin could reach double digits (i.e. greater than 10%). Based on that estimate, EPS for FY 09 should be $0.15 or so. Applying a 20 P/E ratio implies a fair value of around $3.00 sometime over the next year. This of course just applies to standalone Finisar, not the combined Finisar/Optium; that merger should close later this year barring any unforeseen circumstances.