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Finisar Drops as Jefferies Says Sell Stock

Finisar Corp. (FNSR), a maker of optical data transmitters and receivers, fell the most in more than a year after Jefferies & Co. advised clients to sell the stock because it may face competition from Intel Corp. (INTC) and Cisco Systems Inc. (CSCO)

Sunnyvale, California-based Finisar declined 10 percent to $13.98 at the close in New York, its biggest one-day decline since Dec. 1, 2011. The stock was down 4.4 percent this year before today.

The commercialization of silicon photonics technology is “bad news for manufacturers” of traditional fiber-optic gear such as Finisar, analyst James Kisner wrote in a report today. He cut his rating on Finisar to underperform, the equivalent of a sell rating, from hold.

The affected portion of Finisar’s business represents about 6 percent of the company’s total revenue, said Alexander Henderson, a Needham & Co. analyst in New York who has a buy rating on Finisar with an $18 target price.

“This is not an easy subject for anyone,” Henderson said in a telephone interview. “When a company like Jefferies runs it up the flagpole, you’ll get a visceral reaction.”

Silicon photonics promises to lower the cost of some optical gear used in data centers by reducing their size and power consumption. Intel, the biggest maker of semiconductors, said Jan. 16 it had moved its work on silicon photonics “beyond research and development.”

Products from Cisco and others using the technology may be available in 2014, San Francisco-based Kisner wrote. Still, there is “significant uncertainty” around the timing, pricing and breadth of customer adoption, he said. Kisner didn’t immediately respond to a phone call seeking comment.

Kisner placed a 12-month target price of $7.50 a share, down from $14.

To contact the reporter on this story: Vivek Shankar in San Francisco at vshankar3@bloomberg.net

To contact the editor responsible for this story: Jeffrey Taylor at jtaylor48@bloomberg.net

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