Alliance Fiber Optic Products Inc. (AFOP)

[swanlinbar]

AFOP Reports 2nd Quarter 2007 Results with 39% Revenue Growth and Record Profits
Wednesday July 25, 4:05 pm ET


SUNNYVALE, Calif.--(BUSINESS WIRE)--Alliance Fiber Optic Products, Inc. (NASDAQ:AFOP - News), an innovative supplier of fiber optic components, subsystems and integrated modules for the optical network equipment market, today reported its financial results for the second quarter ended June 30, 2007.
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Revenues for the second quarter of 2007 totaled $8,701,000, a 39% increase from revenues of $6,252,000 recorded in the second quarter of 2006 and 30% increase compared with revenue of $6,701,000 for the first quarter of 2007. The Company recorded a net profit for the second quarter of 2007 of $864,000, or $0.02 per share, significantly improved over $0.00 per share of the second quarter of 2006. This compares to a net profit for the first quarter of 2007 of $389,000, or $0.01 per share.

Included in the net profit for the quarter ended June 30, 2007 was $103,000 of stock-based compensation charges under FAS 123®. Included in expenses for the quarter ended June 30, 2006 and the first quarter of 2007 were $32,000 and $124,000 of stock-based compensation charges under SFAS 123®, respectively.

Peter Chang, President and Chief Executive Officer, commented, "We are very pleased with the financial progress made in the quarter ended June 30, 2007. In addition to 39% revenue growth compared with the year ago quarter, the second quarter of 2007 marked an important milestone in AFOP quarterly financial history - AFOP generated record operating profits of $375,000 and record net profits of $864,000 in the quarter ended June 30, 2007. Both are improved considerably compared with either the first quarter of 2007 or the year ago quarter."

"We believe our performance in revenue growth and profitability improvement reflects increasing demand from key customers, solid progress in product development, and continued improvement of our operations. Our balance sheet remains strong, with cash and cash equivalents increasing by almost $1 million in the second quarter of 2007 to over $32 million."

"Based on input from our customers and current backlog, we expect that revenues in the quarter ended September 30, 2007, will be above $9 million. Additionally, with our continuing focus on operational efficiencies, we believe profitability in the second half of 2007 will continue to improve," concluded Mr. Chang.

Conference Call

Management will host a conference call at 1:30 p.m. Pacific Time on July 25, 2007 to discuss AFOP's second quarter 2007 financial results. To participate in AFOP's conference call, please call 877-407-9210 at least ten minutes prior to the call in order for the operator to connect you. The confirmation number for the call is 249079. AFOP will also provide a live webcast of its second quarter 2007 conference call at AFOP's website: www.afop.com. An audio replay will be available until August 1, 2007. The dial in for the replay is 877-660-6853. The replay pass-codes (account # 286; conference ID#: 249079) are both required for the replay.

About AFOP

Founded in 1995, Alliance Fiber Optic Products, Inc. designs, manufactures and markets a broad range of high performance fiber optic components and integrated modules. AFOP's products are used by leading and emerging communications equipment manufacturers to deliver optical networking systems to the long-haul, enterprise, metropolitan and last mile access segments of the communications network. AFOP offers a broad product line of passive optical components including interconnect systems, couplers and splitters, thin film DWDM components and modules, fixed and variable optical attenuators, and depolarizers. AFOP is headquartered in Sunnyvale, California, with manufacturing and product development capabilities in the United States, Taiwan and China. AFOP's website is located at http://www.afop.com.

Except for the historical information contained herein, the matters set forth in this press release, including statements as to our future prospects, our ability to control expenses, our ability to improve operational efficiencies, our order trends and customer demand, our product development progress, and future revenue growth and profitability, are forward looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including, but not limited to, general economic conditions and trends, the impact of competitive products and pricing, timely introduction of new technologies, timely design acceptance by our customers, the acceptance of new products and technologies by our customers, customer demand, the timing of customer orders, loss of key customers, ability to ramp new products into volume production, industry-wide shifts in supply and demand for optical components and modules, industry overcapacity, failure of cost control initiatives, financial stability in foreign markets, and other risks detailed from time to time in our SEC reports, including AFOP's Form 10-Q for the quarter ended March 31, 2007. These forward-looking statements speak only as of the date hereof. AFOP disclaims any intention or obligation to update or revise any forward-looking statements.

ALLIANCE FIBER OPTIC PRODUCTS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)

Jun. 30, Dec. 31,
2007 2006
------------ -----------

ASSETS
Current assets:
Cash and short-term investments $ 32,186 $ 31,178
Accounts receivable 5,184 4,009
Inventories 5,226 4,465
Other current assets 614 601
------------ -----------
Total current assets 43,210 40,253

Property and equipment, net 4,217 4,264
Other assets 178 176

------------ -----------
Total assets $ 47,605 $ 44,693
============ ===========



LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,873 $ 2,950
Accrued expenses and other liabilities 2,999 2,909
------------ -----------
Total current liabilities 6,872 5,859

Long-term liabilities 904 930
------------ -----------
Total liabilities 7,776 6,789

Stockholders' equity 39,829 37,904

------------ -----------
Total liabilities and stockholders'
equity $ 47,605 $ 44,693
============ ===========

ALLIANCE FIBER OPTIC PRODUCTS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended Six Months Ended
-------------------------- ------------------
Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,
2007 2007 2006 2007 2006
-------- -------- -------- -------- --------

Revenues $ 8,701 $ 6,701 $ 6,252 $ 15,402 $ 11,473

Cost of revenues 5,929 4,602 4,621 10,531 8,505
-------- -------- -------- -------- ---------
Gross profit 2,772 2,099 1,631 4,871 2,968
-------- -------- -------- -------- ---------

Operating expenses:
Research and development 848 689 708 1,537 1,467
Sales and marketing 634 569 555 1,203 1,141
General and
administrative 915 861 720 1,776 1,483
-------- -------- -------- -------- ---------
Total operating
expenses 2,397 2,119 1,983 4,516 4,091

Income (loss) from
operations 375 (20) (352) 355 (1,123)
Interest and other
income, net 489 409 371 898 769

-------- -------- -------- -------- ---------
Net income (loss) $ 864 $ 389 $ 19 $ 1,253 $ (354)
======== ======== ======== ======== =========

Net income (loss) per
share:
Basic $ 0.02 $ 0.01 $ 0.00 $ 0.03 $ (0.01)
Diluted $ 0.02 $ 0.01 $ 0.00 $ 0.03 $ (0.01)

Shares used in per share
calculation:
Basic 40,825 40,539 40,086 40,706 39,930
Diluted 45,608 44,664 40,086 45,489 39,930

Included in costs and
expenses above:
Stock based compensation
charges
Cost of revenue $ 41 $ 51 $ 9 $ 92 $ 32
Research and development 17 20 6 37 20
Sales and marketing 12 12 4 24 16
General and
administrative 33 41 13 74 41
-------- -------- -------- -------- ---------
Total $ 103 $ 124 $ 32 $ 227 $ 109
======== ======== ======== ======== =========



Contact:
Alliance Fiber Optic Products, Inc.
Anita Ho, 408-736-6900 ext. 168
Acting Chief Financial Officer

--------------------------------------------------------------------------------
Source: Alliance Fiber Optic Products, Inc.

[ChartFreak]

Nice comeback.

All buys. Check money flow. Its been going up since a month ago. All accumulation. Believe me, smart investors know...

[ChartFreak]

Fiber-to-the-home conference in Europe right now

This article makes for some interesting reading:

"Fiber To The Home Warms Up in Barcelona"
February 8, 2007

http://optics.org/blog/ftth/

To travel from London to Barcelona this week is to travel from deepest winter to balmy spring, which complements the sunny mood at this, the fourth FTTH Council Europe Conference. With a reputed 1200-plus attendees this is the largest such event, having grown from under 500 visitors in Amsterdam in 2004.

Spanish entertainment The conference is entitled Europe At The Speed of Light, which is rather an optimistic identity when one considers that the FTTH revolution has been scheduled across Europe for at least 10 years. But even if the pace of change is slower than a speeding photon, many people here are quietly confident that the photonic tortoise may yet catch the electronic hare, if one considers the hare to be a ductile reddish metal.

Cheerleading from the speakers aside, the “putting its money where its mouth is” evidence of such optimism is apparent in the complementary exhibition, which features most of the potential suppliers of any such FTTH revolution that might break out sometime soon.

The exhibition – which, it must be said, is always thronging between the equally bustling conference sessions – features 40 companies including Alcatel-Lucent, Ericsson, Nexans, PacketFront and Prysmian (designated “Gold” sponsors), JDSU, Cisco, Draka, 3M (“Silver”) and other hopefuls.

As far as the opportunities for significantly higher sales of optical technologies are concerned it is generally agreed that the necessary laser-based technologies are pretty much already here but, as ever, volumes and price points will be key factors.

Europe’s Growth of FTTH
If he had been asked about fiber to the home in Europe, Confucius may well have said something like “a salesman not selling much has a great opportunity for growth”.

Today we have Hartwig Tauber, the president of the FTTH Council. His wisdom is that Europe’s rate of growth in deploying FTTH is about 30% year on year. “That sounds good, but I want to see it going much faster,“ he said. “The Council has a new mission statement, in which we say we want to see network deployers choosing fiber to the home to give us 10 times the current growth rate.”

“This could equate to Europe having approximately two million fiber connected households in the next three years or so,” Tauber added.

Alcatel-Lucent Targets FTTH
Alcatel-Lucent estimates that Europe has about 150 million households. Jean-Pierre Lartigue, VP marketing and communications at the company’s access networks division and a FTTH Council Europe board member, puts the figures another way. “Currently FTTH reaches less than 1% of European Households but in four years it could be about 6%,” he says, with optimism.

Alcatel-Lucent and Freescale Semiconductor yesterday announced a plan to facilitate the adoption of FTTH technologies by making available jointly developed G-PON (gigabit passive optical network) technology and interoperability specifications to vendors of terminal equipment worldwide.

Through an agreement with Freescale, terminal vendors will be able to license critical technologies for G-PON compliant with Alcatel-Lucent’s established 7342 ISAM “fiber to the user” range of equipment.

Competition to FTTH
It is not as if fiber to the home is marching across the European market without competition. VDSL, which may deliver broadband at as much as 50 Mbit/s, is already established in certain territories, notably Germany, and despite its finite bandwidth, higher electrical power demands and aesthetic drawbacks (unattractive street cabinets, apparently) it is also undergoing development and continues to be widely deployed.

But copper may yet be running out of steam, if that is not a technical impossibility. Wolfgang Fischer of Cisco, another FTTH Europe Council technical representative, drew my attention to a graph published in June last year in the FTTH Worldwide Market & Technology Forecast in June 2006 by Heavy Reading. This plots connection rates (log) against the time period 1990 to 2020 and gives almost exactly an upward, linear relationship, which suggests copper-based communications could become redundant within five years, all other factors being equal.

Fischer said, “A communications equivalent of Moore’s Law [which links computing power with transistor density on a chip] means that today’s typical 1 to 10 Mbit/s broadband definition, depending on where you live, will nudge 100 Mbit/s by 2010, 1Gbit/s by 2015 and 10 Gbit/s by 2020.”

One has to be wary of people brandishing graphs at you, but Fischer is confident that it bodes well for optical solutions providers, like Cisco, although Cisco now buys in its necessary laser technology.

Is Europe Embracing FTTH?
Despite many repeated grumbles about the continent’s apparent indifference to FTTH, voiced by a cross section of Europeans at this Barcelona event – whether suppliers in the exhibition or the president of the FTTH Council Europe Hartwig Tauber himself – there is an undeniable atmosphere of expectation.

Several announcements at the event serve to support the idea that FTTH will progress significantly beyond the current community projects and tentative national-level plans for roll-outs. What do we have and what is in the pipeline? Tauber gave me a thumbnail sketch of some of the busier (and less busy) FTTH territories around the continent.

Sweden: There are many municipalities and especially remote communities relying on FTTH networks - even paying for it and putting it in themselves in some cases. Sweden and other Nordic countries generally have a history and culture of embracing the latest telecoms technologies because of the combination of remote and distant communities and generally prosperous economies.

A fascinating parallel session entitled Case Studies from Round The World featured Hasse “H” Ericsson, md of Sweden’s ByNet, who explained that his company works with many remote communities who literally finance and put in their own FTTH links including digging the trenches. This DIY culture is ultimately empowering these villages and must be a good thing for economic emancipation of the boondocks.

In The Netherlands price and bandwidth competition between fixed networks and cable companies may yet open the door for FTTH with its relatively unlimited bandwidth and oft-touted lower operational costs.

In France, Free announced at the end of 2006 that it plans to deploy new FTTH access nationwide (starting with the Paris area, naturellement). Its aim is replace the ADSL 2+ networks.

Germany: Deutsche Telekom is still very strong and planning to develop VDSL – that is fiber to the kerb. There I apparently a European-level wrangle ongoing between the EC and DT, which wants to have a “regulatory holiday” to release it from the required unbundling obligations. Further pressure to change is likely to come from the impending switchover in Germany (and Austria) from analogue to digital TV.

In Spain – this year’s conference venue, remember – there is apparently increasing pressure from municipalities, regional, city and town councils to the national government demanding an active policy on deploying FTTH to develop the communications infrastructure.

Generally, it is instructive if somewhat galling, to compare the still relatively small scale and sluggish rate of European FTTH development with say Japan, where FTTH customers are signed up at a rate of around 280,000 per month.

FTTH should become policy
Tauber says it is necessary for Europe’s national governments to embrace and push the idea of FTTH. “The situation we have at the moment is what I call ‘missing vision’. People in Asia and North America involved in larger scale FTTH developments are not asking the question ‘will we ever need this bandwidth?’; they are getting on with it. But in Europe, in many cases, the technology drivers are the actual policy makers.”

He adds that one of the many explanations for complacency about FTTH across Europe is regional and national authorities’ misguided satisfaction at having achieved what they regard as significant broadband penetration -- when their definition of broadband is hopelessly low.

“A few years ago in my home state of Nieder Osterreich [an south Austrian region near Vienna] the policy makers responded to public wishes for broadband provision but they decided that broadband meant 384 kbit/s,” he told me. “So now a lot of people in that area have 384 kbit/s but it is not what I would now call broadband, when the South Koreans are defining it as 10 Mbit/s.

“Looking at OECD figures, using this type of standard, means that eight of the world’s top 10 broadband-enabled countries are in Europe. But that would certainly not be true if we used even 5 Mbit/s as a more realistic broadband standard.”

[ChartFreak]

CISCO earnings today extremely positive

And AFOP serves those kind of companies. All fiber infrastructure companies should do well over the next year or so.

[ChartFreak]

They haven't diluted this stock at all

Amazing. I play the pennies sometimes, and that's all you end up paying attention to. AFOP will attract attention very soon, as the fiber industry heats up due to online video. Increased demand + limited supply = rising PPS.

I like that.

[pugdog]

March 1st 2001 = 34.7 million shares outstanding
March 8th 2006 = 39.7 million shares outstanding

company is profitable in growing fiber optic industry - what else is there to say?

[pnnymn]

Nice to see this on ihub