SAN FRANCISCO (AP) â€" Finisar Corp.'s shares lost more than a third of their value Tuesday after the maker of optical equipment used in high-speed data communications warned of a litany of factors that are hurting its business, particularly slowing demand in China.
The commentary alarmed investors because it suggests that China's aggressive rollout of new telecommunications networks is slowing. That deeply damaged other, related stocks. Finisar executives said what it is seeing is an industrywide problem.
The penalty for Finisar's worse-than-expected outlook was so severe, in part, because its explanation for what went wrong was so pointed.
Growth markets, particularly China, have been crucial for many technology companies as the Great Recession has taken its toll on spending in the U.S. and Europe. Any serious problems in those markets have ramifications across many industries.
Finisar's stock dropped 36 percent, or $14.23, to $25.81 in extended trading, after it reported the outlook. The grim guidance cast a pall over other optical-equipment makers.
For instance, JDS Uniphase Corp. took a 14 percent hit, its stock falling $3.48 to $21.90, while Oclaro Inc. shares dropped 11 percent, or $1.90, to $14.72.
Building out telecommunications networks costs billions of dollars, and the industry's spending tends to come in waves. Finisar's guidance shocked investors because it suggested that the industry could be in for a prolonged slowdown.
Finisar executives said on a conference call with analysts that the slowdown is part of an "industrywide phenomenon." They said they've seen the dramatic reduction in orders in China for a couple of months and weren't sure when it would ease. They emphasized that the weakness was with multiple customers in China, and that Finisar isn't losing market share.
The company, based in Sunnyvale, makes optical gear that connects pieces of networking equipment, such as Internet switches and routers and antennas and base stations, to each other.
Other factors the company identified in its guidance were price cuts for customers, a 10-day long shutdown at some customers for the Chinese New Year last month, and the fact some telecommunications customers are reducing how much gear they buy and keep in their inventories.
For the fiscal fourth quarter, which ends April 30, the company said expects earnings of 31 cents to 35 cents per share, excluding items. Analysts had expected 48 cents per share, on that same basis, according to FactSet.
It expects revenue of $235 million to $250 million. Analysts had expected $267.2 million.
The guidance overshadowed Finisar's better-than-expected numbers for the fiscal third quarter, which ended Jan. 30.
In that period, Finisar's net income more than tripled to $18.8 million, or 22 cents per share, versus $5.6 million, or 8 cents a share, in the previous year.
Excluding items, the company earned 47 cents per share, matching the average estimate of analysts polled by FactSet, on that basis.
Revenue was $263.0 million, a 58 percent increase over last year. It topped the analysts' expectation of $257.3 million.
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