By Steven Russolillo Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Finisar Inc. (FNSR) lost more than a third of its market value on Wednesday after the fiber-optic equipment maker offered a weaker-than-expected outlook because of slowing demand in China. The weak forecast sent tremors through the fiber-optic sector, which has experienced surging stock prices since the recession ended and demand has risen. Finisar shares, which had tripled the past year through Tuesday, recently fell 37% to $25.12. Chief competitor JDS Uniphase Corp. (JDSU), which hit a five-year high last month, slid 11% to $22.59. Finisar blamed its outlook on a 10-day shutdown at certain customers for the Chinese New Year in February as well as expected inventory adjustments. "I don't think either one of those are long term, but nevertheless it's just the reality that we're facing in this next quarter," Executive Chairman Jerry Rawls said late Tuesday on a conference call with analysts. But Rawls isn't certain whether the China slowdown will be temporary or more of a long-term phenomenon. "I don't know how to explain it," he said, noting the company's forecasts for expected orders and capacity demands heading into 2011 have "all of a sudden have been reduced dramatically." Analysts are concerned the slowing demand in China won't abate overnight. Finisar's relationship with telecommunications equipment maker Huawei Technologies Co., which supplies 4G wireless technology to China, is particularly troubling, especially because Finisar has double-digit percentage revenue exposure to Huawei, according to Hamed Khorsand, an analyst at BWS Financial. "We do fear that optical components are not the only group at risk in seeing softness from China because of orders softening, but optical components are the one industry that is heavily reliant on orders from Huawei," Khorsand said. "We remain negative on the industry and expect the shares to decline further as more companies warn of similar distress from China." Finisar said current-quarter per-share earnings would likely be between 31 cents to 35 cents on revenue of $235 million to $250 million. Analysts surveyed by Thomson Reuters expect earnings of 48 cents a share on $269 million. Rawls maintained that the underlying demand for bandwidth and the company's position as the industry leader remain strong and will manifest in coming quarters. But Finisar's weak near-term outlook comes as Ciena Corp. (CIEN) earlier this week said its fiscal first-quarter loss widened as operating expenses surged. The company, which manufactures optical lines that allow for the delivery of voice, video and data over long distances, also predicted a weak revenue outlook due to supply-chain constraints. Ciena shares were recently down 3.9% at $24.70 and have dropped 13% this week. Oclaro Inc. (OCLR) shares dropped 16% to $14 and Oplink Communications Inc. (OPLK) fell 16% to $21.56 amid a broad selloff in the fiber-optic sector. -By Steven Russolillo, Dow Jones Newswires; 212-416-2180; steven.russolillo@dowjones.com
