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Thursday, August 10, 2006

Finisar Defies Gravity

Stocks: (FNSR)(JDSU)(CSCO)

Shares of Finisar rose 11% to $2.97 yesterday. Today the maker of optical subsystems and components is up another 7.5% to $3.20.

Finisar can rightly claim that it is in a business closely associated with Cisco's network operations, so the success of the tech giant which just announced a stellar quarter might rub off on the smaller company. The company's products connect local area networks, storage networks, and metropolitan networks around the world.

Finisar does OK, but just OK. Revenue in the quarter ending April 30 was $102 million. Operating income as $5 million, which would not cover the costs of Cisco's private jets for a year. According to Yahoo!Finance, Finisar also has $238 million in long-term debt. Cash and securities are about $100 million.

The company's stock traded as low as $.79 over the last year, so a run to $3.20 is quite an increase. The company still trades at a price-to-sales discount to competitor JDSU which has a ration of 3.5x. Finisar is just above 2.5x. On that basis, the stock might trade a little closer to its 12-month high of $5.49, but if its approachs that figure, it starts to get pricey.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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