Infinera Shifts Up a Gear
Why? I'm basing that opinion on a combination of evidence, third-party opinion, and gut feel.
And, perhaps ironically, it comes on the back of what might seem like a major setback for the company, as it recently missed out on a transport equipment tender at Verizon Communications Inc. (NYSE: VZ). (See Analyst: Infinera Loses VZ Deal to AlcaLu.)
Word on the show floor here at OFC, though (and not, I should say, from anyone at Infinera), is that the Verizon deal was not as lucrative as many might have thought, although that is just conjecture.
The thing is, Infinera is doing pretty well without that deal, and it looks like the company's financial health might be on course to improve.
CEO Tom Fallon, who is known for being cautious when talking about Infinera's business potential, noted during the company's most recent earnings call that he was confident of picking up new deals, including business from new Tier 1s, this year. (See Infinera: We're Fine, Thanks and Windstream Taps Infinera for National Buildout.)
Those financials, announced in late January, gave the vendor's share price a lift, sending it north of $9.00 on January 30.
The stock got another boost this week when Goldman Sachs upgraded Infinera to a "buy" rating, sending the stock up by almost 15% Wednesday to $9.71.
And while it dipped again during Thursday trading, an after-hours surge took Infinera's share price back to the $9.71 mark.
Other analyst firms here at OFC, including Jefferies & Co. Inc. and MKM Partners , have also reported positively on the vendor's prospects, and overall analyst consensus is that the company will increase its annual revenues to more than $613 million this year from $544 million in 2013, a rate of nearly 13% (if the forecasts are accurate).
And then there's the metro market. Infinera, which has a reputation for developing systems that are easy to deploy and enable fast service provisioning, has long talked about how it might develop a photonic integrated chip (PIC) for a metro platform. Now that time has nearly come: The company has now developed a PIC for the metro, Senior Director of Corporate Marketing Mark Showalter told me here this week, though exact plans for a metro product, and the timing around the launch of such a product, have not been announced.
That product, which some here have dubbed the DTN-M, looks set to be a significant addition to the metro transport systems market, which the optical sector expects to take off this year and hit its stride in 2015 as demand for network capacity continues to grow, driven by intra-data center traffic, video, and consumer fixed/mobile broadband usage.
In his recent report, The Rise of 100G & Terabit Transport Networks, Heavy Reading Senior Analyst Sterling Perrin notes that the market for 100G metro systems is set to grow from about $400 million this year to more than $2.1 billion in 2018.
The metro market is highly competitive. But if Infinera can take the best features of its PIC and build an affordable system that retains the company's core customer-friendly strengths (ease of use and speedy provisioning), it stands a very good chance of grabbing a healthy slice of that fast-growing metro 100G sector.
I wouldn't bet against it.
Ray Le Maistre, , Editor-in-Chief, Light Reading