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Oplink Communications (OPLK) – A Profitable and Growing Optical Company

Oplink Communications (OPLK:NASDAQ) is a company focused on designing, manufacturing and supplying fiber optic products and services that serve as critical building blocks for the telecommunications industry. The company started in 1995 as purely a component supplier, but has since expanded business to also providing integrated optical subsystems, design services and custom solutions for telecommunications equipment makers. The company’s customers include telecommunications, data communications, and cable TV equipment manufacturers around the globe.

Oplink Communications does have an advantage over some competitors in the optical space. The company has recently moved much of its manufacturing capability from California to low-cost facilities in China. These facilities, located in Zhuhai and Shanghai, manufacture optical-electrical components and subsystems. The company also has research facilities in Zhuhai and Wuhan, China and Hsinchu Science based Industrial Park in Taiwan.

Oplink Communications is a survivor of the telecoms bubble and bust. Many of its competitors are either gone or still struggling mightily and bleeding red ink. Oplink is unusual among the optical components companies, as the company actually has a $140 million cash balance on its balance sheet. Big telecom network spending has recovered in the past couple years and Oplink has benefitted with orders from its biggest customers – Nortel, Tellabs,and Huawei. In the past several quarters, Oplink has enjoyed double-digit sales growth and rising net margins. The transfer of much of the manufacturing capability to China should further enhance the company’s profitability in the years to come.

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