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Finisar Falls

For the past several months, suppliers of storage area networking
products have been trying to burn off component inventories the way weight
watchers attempt to burn off fat. Meanwhile, down the food chain, parts
purveyors, such as Finisar
Corp.
(Nasdaq: FNSR), which reported earnings yesterday (Tuesday), are
only hoping that such discipline is working and purchases will soon pick up.

Finisar, a maker of components for SANs and optical networking gear,
reported a painful quarterly sequential revenue drop from $52 million in its
fourth fiscal quarter 2001 ending in May, to $34 million during its first quarter 2002
ending July 31. Compared with year-ago revenues of $27 million, however,
sales were up 26 percent (see Finisar Reports on Q1).

CEO Jerry Rawls said he expects revenues for the second fiscal quarter to
be flat to up slightly” on a sequential basis. But he refused to forecast
beyond that due to “limited visibility” and the fact that his customers are
refusing to forecast their own prospects. Rawls said orders are already up
in the Gigabit Ethernet and Fibre Channel SAN business. But he hedged on how
quickly these orders will be booked as sales. He added he expects

“substantial revenues for 10-gigabit products” in the third fiscal
quarter.

The sorest spot during the quarter was the bottom line, with an $8.3
million pro forma loss, or a nickel a share. That compares with a pro forma
profit of $4.9 million, or three cents a share, for the corresponding quarter last year.
The pro forma results exclude one-time charges for deferred
compensation, merger costs, and inventory write-downs.

The company’s actual loss (according to generally accepted accounting
principles) was $69 million, or 40 cents a share. That compares with a $3.2
million profit, or 2 cents a share, for the quarter last year.