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Infinera Confirms Level 3 Deal

Dan O'Shea
4/25/2014
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Following its quarterly earnings report this week, Infinera is looking even less like a company licking its wounds after losing out on the 100G business at Verizon Communications. During the earnings call, the company reported 15% year-over-year revenue growth, and revealed it began realizing revenue from Level 3 Communications' 100G upgrade during the quarter.

"I don't think this was a surprise to anybody," said Infinera Corp. (Nasdaq: INFN) CEO Tom Fallon on the call regarding Level 3. He declined to attach a monetary value to the Level 3 business. Infinera has long been rumored to be a primary candidate for the Level 3 business, and has worked with the carrier before. But after Infinera missed out on the rumored Verizon deal, it was worth a getting some confirmation on the Level 3 deal from Infinera. (See Analyst: Infinera Loses VZ Deal to AlcaLu and Infinera: We're Fine, ThanksÖ)

Infinera also said its list of top customers during the quarter included a Tier 1 operator, a cable MSO, and a company described as an "Internet content provider." Infinera declined to identify the Tier 1 operator, but some analysts speculate it's CenturyLink Inc. (NYSE: CTL).

On the call, Fallon also was very upbeat about the market overall, the company's first quarter results, and near-term outlook. (See Infinera Reports Q1 Growth.)

He added that both capacity upgrades and new network build-outs -- and not always by the usual suspects -- continue to drive growth in the optical sector. "We've said for a long time that the industry is too focused on the top two Tier 1s, and not enough on other providers, including the Web 2.0 providers, which is where a lot [of] the future growth will be."

ó Dan O'Shea, Managing Editor, Light Reading

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DOShea
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DOShea,
User Rank: Blogger
5/2/2014 | 10:50:47 AM
Re: Level 3
Yes, the quote above I think answers the earlier question to some degree, though I think it was Fallon who said that, wasn't it? There were very specific this time about Level 3, not dropping hints at all, as they had previously. Of course, they didn't specify the contract value, but I believe he said the revenue woul play out over several quarters.
tojofay
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tojofay,
User Rank: Light Sabre
4/29/2014 | 3:09:13 PM
Re: Level 3
Brad Feller - Chief Financial Officer INFN Q1 CC

"Yes. So they have been a very substantive part of our business in the past, they have been a long-term partner of ours and they now reselected to go to market with a 100 gig. That revenue started in Q1 and we anticipate it ramping over the next several years. I'm not going to quantify the size of the deal, I think they -- and appreciate that. But, if you look at level 3's business model, they drive to be the largest provider of ways in the world and provide them at the lowest dollar per bit."

 

 
SachinEE
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SachinEE,
User Rank: Light Sabre
4/29/2014 | 2:09:01 PM
Re: Level 3
If the deal is on (and it must be considering that Infinera is still able to post such impressive figures even in the face of what most of us considered a major blow with Verizon, my question is what game are they playing really. They don't want to give the information (on their official capacities) but can't seem to stop dropping hints and rumors about the deal and its benefits! Why all this secrecy?
SachinEE
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SachinEE,
User Rank: Light Sabre
4/29/2014 | 2:06:26 PM
Re: Future Growth right on the money
I think the real credit to Infinera should be awarded because of the company's foresight. When most companies forecast on their expected earnings, they usually factor in deals that they feel most confident about even though they may not have been formalized. Considering how rife the rumor about the Verizon deal with Infinera was, it came as a surprise to me that the deal did not fall through. And yet Infinera does not look like it even took a scratch from that blow meaning they had left room for that too.
rgrutza600
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rgrutza600,
User Rank: Light Sabre
4/27/2014 | 9:00:40 PM
Web 2.0 companies
Google is spending almost $10 billion a year on infrastructure.  Though they were not mentioned by name, I would assume they are one of the "3 of the top 4 internet content providers" talked about.
DOShea
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DOShea,
User Rank: Blogger
4/27/2014 | 4:47:08 PM
Level 3
Level 3 told LR last fall said it was getting close to 100G upgrade. It has never said anything more specific since, to my knowledge, but Infinera did drop some heavy hints during its Q4 earnings call that it was in on this business. What Fallon said this time around was that Infinera had gotten permission from Level 3 to talk about it, although apparently not in great detail.
thebulk
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thebulk,
User Rank: Light Sabre
4/25/2014 | 3:30:23 PM
Future Growth right on the money
I really like the last statement about web 2.0 providers being a sizable chunk of future growth. Nice to see that shift. 
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