Infinera Dampens Q2 Expectations

Infinera Corp. (Nasdaq: INFN) continues to pick up customers but is again saying revenues won't meet expectations.

The company is seeing sales of tributary adapter modules (TAMs) -- linecards, in other words -- sag even though customer networks are growing. Early in 2008, Infinera was shipping more than 2,000 TAMs per quarter, but in the last two quarters, that figure has fallen quite a bit, officials said during today's earnings call.

Specifically, for the current quarter ending in June, TAM shipments could be 25 percent fewer than the per-quarter average of 2,100 Infinera was seeing a year ago.

That means sales will be around $70 million for the second quarter, compared with the $86.2 million analysts were expecting, according to Thomson First Call .

Infinera officials believe this is all the effect of customers buying less due to the recession. But new customer build-outs are popping up "at a robust pace," which should lay the foundation for more sales -- at better margins -- to come, CEO Jagdeep Singh said during the earnings call.

The margin factor comes in because the common equipment -- the box that holds the linecards -- is sold at much lower margin than the linecards themselves. (See Infinera Anchored by New Wins.) "As we start filling those empty slots, we clearly would expect the margin to start going up. We can't tell you when," he said.

Infinera says it picked up three new customers in the March quarter, all three in Europe, two of them PTTs. Deutsche Telekom AG (NYSE: DT) is the company's flagship customer in Europe. (See Infinera Wins DT, Loses the Day.)

For its first quarter, which ended March 28, Infinera reported losses of $24.3 million, or 26 cents per share, on revenues of $66.6 million (cue ominous music).

Revenues were on a par with Infinera's forecast from a few months ago. Sales were down from $86.2 million the previous quarter and $95.5 million in the first quarter last year.

The company's non-GAAP losses of 18 cents per share were a penny deeper than Wall Street was expecting. Infinera officials noted a couple of surprises during the quarter, including one customer using more of a one-time discount than expected. (The discount was supposed to be spread across the year but now looks as if it will be used up by the end of June.)

— Craig Matsumoto, West Coast Editor, Light Reading