Oclaro, $OCLR, CFO Turrin speaks at Morgan Stanley Conference

Oclaro's CFO Jerry Turrin spoke tonight at the Morgan Stanley Tech, Media, and Telco conference tonight.
You can listen here:  http://investor.oclaro.com/events.cfm

Jerry was interviewed by Ehud Gelblum, telco analyst at MS.  Jerry begins by talking about the floods impact on revenue in 2011 which ended up being a sluggish year for telco spending.  Jerry expects revenue to be at about $110m by end of June quarter and, he said, "we are in process of matching out expenses to that level so that would be about breakeven for us."  Last quarter we were at $86m and that was because of the capacity issues caused by the floods.

Next he was asked about demand.  So if demand is the same as when the floods happened, then when revenue levels dropped, you should see some backlog, unless your customers went elsewhere. Jerry says his customer want to restore share. "speaking on Thailand, I don't see anything on products that suggest a profound share change and if you think about our business, they tend(customers) to have multiple sources of supply and tend to have a well managed supply chain, where they've got the right balance, and they want to get back to the right balance they had going into the floods, its in their interest because they have optimized their suppliers.  And we think it gets right back to normal.

Interviewer says "So, in the June quarter, there should be some backlog"?
"logic dictates we should see a little bit of backlog", and in going from $85m to$110m runrate as June quarter, "I believe we get there, and I believe we get there before I predict that we get there."

Oclaro will collect business continuation insurance and interruption insurance to offset some of the capex spend to get up to capacity. Also, Jerry mentions they are due insurance proceeds over the next several quarters to reimburse lost revenue, lost inventory, and damaged equipment.  Oclaro is also negotiating to sell a plant in China and will get a net 30-40 million which will help their balance sheet.

In summary, I think Oclaro has a set of customers that like doing business with Oclaro. I think March quarter earnings will beat, probably not by much, but I think they guide above $110m.  I think this represents a great risk reward profile.

JWells