So, what's next for Infinera Corp. (Nasdaq: INFN)?

The company's had a good year, with a successful IPO, a series of customer wins, and continued revenue increases -- although its math draws some serious questions. (See Reading Between the Lines at the Infinera Time Machine.)

But analysts say Infinera has plenty of opportunity still available -- or, depending on how you look at it, a big piece missing.

"Being only a long-haul player leaves a big hole. They need a metro product," says Heavy Reading analyst Sterling Perrin.

Infinera seems to already realize this. In a note published yesterday, analyst George Notter of Jefferies & Company Inc. writes that Infinera "is working on a metro product with expected delivery in 2009."

Infinera declined to comment.

Here's the problem: Infinera's DTN system is well suited for bandwidth wholesalers and long-haul backbones, since it offers densities of 100 Gbit/s per line card, in the form of 10 10-Gbit/s channels. (See Infinera Declares WDM War.) But for smaller deployments, that's overkill.

The consequences can be seen at Level 3 Communications Inc. (NYSE: LVLT), Infinera's flagship customer. Level 3 deploys Infinera gear in places where it will need six or more wavelengths and uses ADVA Optical Networking in situations requiring less than six, Notter says.

A scaled-down DTN might be suitable for those small jobs, but it would also lose the density that gives Infinera its cost advantage. Moreover, the metro market is more sensitive to price than the long-haul market. "The question becomes, 'Can they drive down the cost of the DTN by redesigning the PIC [photonic integrated circuit] interface or the PIC chip?'" Notter tells Light Reading.

Another avenue that Infinera could take to address the metro market is through acquisition, analysts say. Many believe that Infinera's secondary offering announced last month -- which boosted its cash stash to $300 million -- was a way to shore up for a possible purchase. (See Infinera Aims to Raise $113M.)

One rumored target is ADVA, due to its place in the metro market and its large accounts in Europe. But it might make more sense for Infinera to acquire a company for its technology than for a product portfolio, says Mark Lutkowitz, an analyst at Telecom Pragmatics Inc.

"They wouldn't necessarily want to sell anyone else's products, but they might be able to acquire technology that they could integrate into their own system," Lutkowitz says.

"They're not going to buy another PIC company, because they're the only ones doing it. They could try and create a PIC for that product. That might be one way of going about it," says Ehud Gelblum, an analyst with JP.MorganChase . The problem is that it could take Infinera up to 18 months to integrate another company's technology into the PICs.

Whether a metro system is in Infinera's future or not, the company's got another notable vacancy: no Tier 1 carrier wins.

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Now that it's solidified a position among bandwidth wholesalers, ISPs, and MSOs, Infinera is beginning to look at larger accounts. "We expect to see the organization also allocate some resources to the Tier 1s. We note, for example, that Infinera -- over the past several quarters -- has been building out its sales force to address Tier 1 customers," Notter writes in his recent note.

Lutkowitz says one of the main reasons Infinera went public was to fund the Osmine certification process. But there are still questions about whether Infinera could serve a Tier 1 player, he says. "They're asking, 'Is this company big enough? Can they support us?'"

"Getting into a Tier 1 RBOC is not easy," Gelblum says. "Obviously they're trying very hard to get into one. But I expect more breakthroughs to come overseas first before they capture an RBOC account."

Even without a metro play and a Tier 1 win, Infinera's having a pretty good run. It's been shipping WDM systems only since 2004 but has managed to grab a lead in the market for long-haul WDM ports. Notter notes that Infinera owns "a 30 percent share of the worldwide market for long-haul WDM 10-Gbit/s ports."

That number could be a bit misleading, since Infinera's DTN system forces network operators have to buy ten 10-Gbit/s ports at a time, whether or not they will all be used. Even so, the company has captured 6.1 percent of the WDM market by revenue, according to Gelblum. He expects that to increase to 9.4 percent share by 2011.

– Ryan Lawler, Reporter, Light Reading