Focus Company: Alliance Fiber Optic Products Inc. (AFOP)
By: Max R. Bowser - The Bowser Report - Date: August 11, 2007
Introduction
This is a comparatively young company in a young industry. In 1976, the first commercial fiber-optic cable was installed for telephone signals. Alliance Fiber Optic Products Inc. was founded in 1995.
The Business
AFOP manufactures a broad range of high-performance fiber optic components and integrated modules for leading and emerging communications equipment makers.
Optical fiber is being deployed in all aspects of the communications business. One interesting development is the creation of long-haul networks that connect cities around the world and transport large amounts of data/voice traffic.
To solve congestion problems, service providers have invested significant resources in the deployment of optical infrastructure including high bandwidth for transmitting data over long distances.
In nearly all fiber optic networks, the passive optical components and active devices must be joined. Providing these interconnection systems is where Alliance Fiber excels. The Company offers:
- Optical connectors, adapters and cable assemblies are precision devices that connect fibers together. Optical cable assemblies are used to bridge relatively short distances with optical paths.
- Fused and planar fiber optical splitters and couplers are branching devices used to split optical power from a single fiber, or set of fibers, into a different set of fibers. They are often used to distribute optical signals to multiple locations.
At the end of 2006, AFOP had 50 U.S. patents and 31 new ones pending. The U.S. patents expire between September 2011 and August 2024. But, in addition, there are 40 foreign patents, expiring between October 2018 and August 2022.
As of December 2006, there were 684 employees, 44 in the U.S., 359 in Taiwan and 281 in mainland China. However, the primary product development center is in Sunnyvale, CA.
Marketing
The company's direct sales force operates primarily in the U.S. However, the firm also maintains a sales support staff in Taiwan to service the Asia Pacific region.
In 2006, $18.594.000 in revenue came from North America, $1.930.000 from Europe and $6.268.000 from Asia, with each area showing an increase over the prior year.
Finances
To say that Alliance Fiber has a strong balance sheet is putting it mildly. For every $6 in current liabilities, there are $41 in current assets. In fact, it is asset rich, with, as of March 31, $3.2 million in cash or cash equivalents, and $28 million in short-term investments.
The Company only recently turned profitable as evidenced by the second quarter results, ending June 30, 2007.
| Second Quarter 2007 | Second Quarter 2006 | Six Months 2007 | Six Months 2006 | |
| Revenues | 8,701,000 | 6,252,000 | 15,402,000 | 11,473,000 |
| Earnings | 864,000 | 389,000 | 1,253,000 | (354,000) |
| Earnings/Share | 0.02 | 0.00 | 0.03 | (0.01) |
| Shares_Outstanding | 45,608,000 | |||
Revenues for the second quarter of 2007 totaled $8,701,000, a 39% increase from revenues of $6,252,000 recorded in the second quarter of 2006 and 30% increase compared with revenue of $6,701,000 for the first quarter of 2007. The Company recorded a net profit for the second quarter of 2007 of $864,000, or $0.02 per share, significantly improved over $0.00 per share of the second quarter of 2006. This compares to a net profit for the first quarter of 2007 of $389,000, or $0.01 per share.
Peter Chang, President and Chief Executive Officer, commented, "Based on input from our customers and current backlog, we expect that revenues in the quarter ending September 30, 2007, will be above $9 million. Additionally, with our continuing focus on operational efficiencies, we believe profitability in the second half of 2007 will continue to improve".
General information
| Market | NASDAQ |
| Symbol | AFOP |
| Price | $2.04 |
| Contact: | Alliance Fiber Optic Products Inc. - 275 Gibraltar Drive - Sunnyvale, CA 94089 |
| Telephone | 408-736-6900 |
| Website | www.afop.com |
© Max R. Bowser - The Bowser Report
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