Finisar Corp (FNSR.O), a maker of fiber optic components used in network communication equipment, forecast current-quarter profit well below expectations, citing higher capital expenditures in China.
Finisar shares fell about 22 percent in extended trading on Thursday.
Chief Financial Officer Kurt Adzema said on a post-earnings conference call that the company expected first-quarter capital expenditures of about $40 million, driven mainly by construction at its manufacturing site at Wuxi, China.
Finisar also reported a lower-than-expected profit for the fourth quarter, as gross margins fell due to higher sales of lower-margin products. The company's gross margin fell to 31.7 percent in the fourth quarter ended April 27 from 35.9 percent on a sequential basis.
"GAAP gross margin decreased ... driven by the impact of the full three months of the annual price reductions for telecom products ... as well as the impact of the u2t Photonics AG acquisition whose products carry a lower than corporate average gross margin," the company said.
The company also said it expected to keep selling more lower-margin products in the first quarter.
Finisar forecast an adjusted profit of 30-34 cents per share for the quarter ending July. Analysts on average were expecting a profit of 41 cents per share, according to Thomson Reuters I/B/E/S.
Net income attributable to Finisar rose to $28.4 million, or 27 cents per share, from $3.9 million, or 4 cents per share, a year earlier.
Excluding one-time items, the company posted a profit of 36 cents per share. Revenue rose 26 percent to $306.0 million.
Analysts on average expected a profit of 38 cents per share on revenue of $303.2 million.
Finisar shares closed at $25.25 on the Nasdaq on Thursday.
(Reporting by Sampad Patnaik and Soham Chatterjee in Bangalore; Editing by Savio D'Souza and Simon Jennings)