The Black Box

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Finisar Results

Total revenues in the third quarter of fiscal 2004 of $46.4 million were up 9% on a sequential basis from $42.8 million in the second quarter and 20% from $38.7 million in the third quarter of the prior year. Total revenues from the sale of optical subsystems of $40.7 million in the third quarter were up 12% on a sequential basis from $36.4 million in the second quarter and were up 28% from $31.9 million in the third quarter of the prior year. Sales of network test and monitoring systems of $5.7 million in the third quarter were down 11% on a sequential basis from $6.3 million in the second quarter and 17% from $6.8 million in the third quarter of the prior year.

"We saw strong demand within our optical subsystems business last quarter driven by double-digit sequential growth for both LAN/SAN and Metro applications. Based on continuing strength in our incoming orders and backlog we believe that we should see a sequential increase in revenues next quarter, both in optics as well as network tools," said Jerry Rawls, Finisar's President and CEO. "In addition, we expect to pick up two months of operating results from the acquisition of Honeywell's VCSEL Optical Products Business which should add to our top and bottom line."

OPERATING RESULTS

The Company reported a net loss of $15.5 million, or $0.07 per share, for the third quarter of fiscal 2004, compared to a net loss of $32.6 million, or $0.15 per share, in the second quarter and a net loss of $32.8 million, or $0.17 per share, in the third quarter of fiscal 2003.

The Company reported a gross profit of $9.0 million, or 19.4% of revenues, during the third quarter of fiscal 2004, up from a gross profit of $6.1 million, or 14.2% of revenues, in the second quarter and a gross profit of $3.2 million, or 8.2% of revenues, in the third quarter of fiscal 2003. The increase in gross profit from the second quarter was primarily due to the use of material previously classified as slow-moving and obsolete inventory.

Interest expense, net of interest income, of $2.5 million for the third quarter of fiscal 2004 includes a non-cash charge of $1.0 million associated with the amortization of discount on our older convertible notes as well as a full quarter of interest expense associated with the issuance of $150 million in new convertible notes in the second quarter of fiscal 2004.

Amortization of acquired developed technology, amortization of purchased intangibles, other acquisition costs and the cumulative effect of a change in accounting related to the adoption of SFAS 142 consist of merger-related costs associated with several acquisitions completed during fiscal years 2001 through 2003.