Optical Components and Systems Companies Stocks

In early morning trading on Friday 2/4/2011, Finisar popped up 13% and hit nearly $40 up from $9 a year earlier. JDSU jumped 27% to an almost 52-week high at $22.8. Opnext, which had a difficult time in early 2010, being tied mainly to long haul networks and 40G, was up 29% on the day to $2.57. Positive guidance from JDSU on continuously improving margins and rapidly increasing sales of LTE, and 40 and  100 Gbps test equipment brightened the market outlook. Improving sales of test equipment is a clear indication that network operators are committed to deployments of next generation systems and significantly expanding network bandwidth.

LightCounting had been forecasting solid growth for the optical communication market and has pointed out that the cumulative bandwidth of the network (data rates of transceivers times the volume shipped) was not keeping up with the rise in internet and data center traffic. This analysis suggests that a period of increased investment in networking infrastructure will be necessary to catch up on several years on underinvestment and balance traffic growth and network expansion rates. Steadily increasing sales of optical amplifiers, ROADMs and more recently, tunable lasers and other transmission modules offer an early indication of the scale of upcoming network upgrades, which hold promise for the whole supply chain.

LightCounting also noted a significant jump in optical back haul components used to carry wireless tower traffic to the metro access network.  Many of these devices have been traditional 3Gbps SONET transceivers but a new crop of CPRI-protocol  6 Gbps transceivers have begun to show popularity in Asia.  Next stop will be 10 Gbps.  The boom in sales of iPhones, Andriod phones, and tablets such as the iPad have forced operators to upgrade their networks.  Verizon, which just started taking orders for Apple iPhone 4 on Thursday morning, announced later in the day that it had sold all its pre-order iPhones.  Verizon also announced that it would have to restrain the data rate of high usage iPhone users.  These new phones are enabling their owners to use lots of bandwidth. This also signals that data traffic is spiking.