Aiming to become the global leader in chip-scale photonic solutions by deploying Optical Interposer technology to enable the seamless integration of electronics and photonics for a broad range of vertical market applications
Message: Mark Lutkowitz on Applied Optoelectronics latest earnings report
https://www.linkedin.com/feed/update/urn:li:activity:7166848278142132224/
As fibeReality indicated in a post a couple of weeks ago, following Applied Optoelectronics likely offers the promise of being on pins and needles, regarding its future performance (please see: https://lnkd.in/eEGQvMS2). According to https://lnkd.in/eW5NWVwg today, “The company provided a ‘surprisingly weak’ Q1 outlook, the [B. Riley] analyst tells investors in a research note....[and was] ‘surprised and disappointed’ to hear that Microsoft has yet to meaningfully step up in terms of 400G [AOC] procurement...." Once again, the association with the supplier is tenuous, as fibeReality described it as “an insurance policy" by the large user. At the earnings conference yesterday (https://lnkd.in/esD4WANd), AOI’s leadership couched future purchases ambiguously, such as “we think it'll be ramping to exit the year on a run rate that would support that $100 million per year.” One analyst seemed to be unaware of the matter of the bean counters at Microsoft leading to an emphasis on 400G, in that they fail to adequately appreciate the unique challenges with optics development, in demanding a relatively quick roll-out of successive generations of equipment without the costs and power (comparable to servers, etc.), scaling upwards with capacity (please see: https://lnkd.in/eFcyQ6yE). No hyperscaler will be overly concerned about the well-being of any of the major optical components suppliers, and when it comes to AOI at the opposite extreme, even less, including with Microsoft already enormously benefiting the supplier with the permission to announce the $300M contracts (also, likely resulting in exceptional pricing for the cloud service provider).
A positive aspect is that Microsoft has agreed to allow AOI to use its secret sauce on active optical cables at the 800G rate (please see: https://lnkd.in/gmN27Ybp). fibeReality has also discovered that the team members on the technical side of the vendor come across impressively to engineers at other suppliers, contemplating working with the firm. AOI should consider including the CTO or other high-level technologists on these calls. Conversely, it remains an open question as to whether the 800G solutions would be sufficiently attractive to overcome resistance from large users in the past which had moved on from deploying gear from the company. Additionally, NVIDIA would need to be convinced that AOI can be counted on to provide high-volume, 800-gig devices (please see: https://lnkd.in/eMYSKg6T).
A positive aspect is that Microsoft has agreed to allow AOI to use its secret sauce on active optical cables at the 800G rate (please see: https://lnkd.in/gmN27Ybp). fibeReality has also discovered that the team members on the technical side of the vendor come across impressively to engineers at other suppliers, contemplating working with the firm. AOI should consider including the CTO or other high-level technologists on these calls. Conversely, it remains an open question as to whether the 800G solutions would be sufficiently attractive to overcome resistance from large users in the past which had moved on from deploying gear from the company. Additionally, NVIDIA would need to be convinced that AOI can be counted on to provide high-volume, 800-gig devices (please see: https://lnkd.in/eMYSKg6T).
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