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DWDM

Infinera Revenues, Losses Widen

Executives at Infinera Corp. (Nasdaq: INFN) used their debut earnings call to preach the benefits of measuring "invoiced shipments," instead of revenues, when looking at the company.

The company reported net losses of $26.1 million, or $1.10 per share, on revenues of $58.4 million in the second quarter. That compares with losses of $19.8 million, or $2.62 per share, on revenues of $49.2 million the previous quarter. (See Infinera Reports Q2.)

For its second quarter in 2006, Infinera incurred losses of $18.2 million, or $3.23 per share, on revenues of $4.1 million, according to its SEC filings.

On a pro forma basis, Infinera beat analysts' expectations. It reported a pro forma profit of 4 cents a share. Analysts were expecting a pro forma loss of 11 cents per share, according to Reuters Research .

"Invoiced shipments," which Infinera describes as the revenues it really collected during the quarter, were $69 million, outpacing analysts' expectations of $61.4 million. The trick is that Infinera spreads the revenues of each sale across multiple quarters. So its GAAP revenue number will usually be lower than its "invoiced shipments" -- and that gives analysts an idea of what's to come in the months ahead.

Alongside its earnings, Infinera reported a contract with Cox Communications Inc. to build a nationwide transport network. That's a job separate from some metro DWDM work Infinera said it had previously won with Cox. (See Cox Picks Infinera.)

But despite having grabbed Cox along with some 30 other customers, Infinera so far has taken in the most money from Level 3 Communications Inc. (NYSE: LVLT), one of its investors. And its invoiced shipments, while steady, haven't yet grown past the $70.5 million reported in the fourth quarter of 2006.

For its third quarter, which ends in September, Infinera says it expects invoiced shipments of $68 million to $72 million. Analysts were expecting $64.1 million.

That quarter will include some new deployments, Infinera expects, some of which might not get invoiced until the fourth quarter. Included in the deployment mix will be some metro wins for the 19-inch chassis that Infinera announced in June. (See Infinera Spews News.) All told, Infinera thinks it will report a per share loss of between 0 and 2 cents.

Shares of Infinera rose $1.20 (5.3%) to $24.00 in early after-hours trading.

— Craig Matsumoto, West Coast Editor, Light Reading

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Pete Baldwin 12/5/2012 | 3:04:47 PM
re: Infinera Revenues, Losses Widen Couldn't squeeze this in by deadline, but - the largest customer (probably Level 3) represented 48% of invoiced shipments, vs. 57% the previous quarter.

The CFO said margins could get up to 50%, but for now they're in the 35-37% range -- ALU territory!

CFO also gave a warning that sales are going to be lumpy. I'm still curious how investors will react if and when that first bad lump hits ... even if they believe in Infinera long-term, it might be an excuse for a selloff.
Mark Sebastyn 12/5/2012 | 3:04:46 PM
re: Infinera Revenues, Losses Widen Ninja:

Your comments are non-constructive and ridiculous.

Craig wrote a piece that reflected some critical thinking on his part that results in healthy skepticism. This is what reporters should do - challenge statements made by companies - not simply transcribe them.

There is no fair and balanced news. There is no independence, lack of bias, and neutrality in the world. All media is editorial. Critical thinking is a must when reading anything. Get used to it, teach your children well, and embrace the conflict.
tmc1 12/5/2012 | 3:04:46 PM
re: Infinera Revenues, Losses Widen ninja-turtle,

you go girl!

I have to say. I was at a tier 3/4 SP customer last week and they were really impressed with the infinera product and it sounded like they were going to use it for metro/regional transport.
ninjaturtle 12/5/2012 | 3:04:46 PM
re: Infinera Revenues, Losses Widen Craig are you a reporter or an investor that wants to short Infinera. What a terrible and totally bias article. You should go back to the Wal-Mart School of Journalism and learn how to report news. If I were the editor for Light reading you'd be fired tonight.
dujac2006 12/5/2012 | 3:04:45 PM
re: Infinera Revenues, Losses Widen With all due respect to the management at Light Reading, this message board is merely a gathering point for a bunch of negative don't-have-a-life types who are out to spew poison right and left. How often does one see constructive and useful comments? It's all about dirt and it is downright disgraceful.

I think it is time for Light Reading to reconsider its policy of the message board. Either get rid of it, or insist on disclosing the true identify of those who post so that people like "ninjaturtle" aren't hiding behind their shell and spewing personal attacks against a respectable and respectful person like Craig. Why don't you critique what he had to say rather than attacking him?

I know what some of our are thinking: Don't read! Of course, I don't have to read and neither do you. But if we wrote constructively, we just might read more, and more will read too.

Ugh!
lcdfbr 12/5/2012 | 3:04:45 PM
re: Infinera Revenues, Losses Widen As I am not very sure of the different types of accounting principles, can anyone clarify the differences in the Infinera numbers? Does the pro forma pro profit mean they are cash positive?

According to Wikipedi:

There was a boom in the reporting of pro forma results starting in the late 1990s, with many dot-com companies using the technique to recast their losses as profits, or at least to show smaller losses than the GAAP accounting showed. The U.S. Securities and Exchange Commission requires publicly traded companies in the United States to report GAAP-based financial results, and has cautioned companies that using pro forma results to obscure GAAP results would be considered fraud if used to mislead investors.

Critics note that pro forma numbers always look more profitable than GAAP numbers, and state that many companies intentionally use pro forma results in order to mislead investors into believing the company is in much better financial shape than it is; that there is no defined meaning or accounting standard for "pro forma" and that it is therefore impossible to make an "apples to apples" comparison between companies with pro forma results in the way that GAAP accounting allows; and that most "unusual events" reported as such are part of the ordinary course of business and should be reported as such.
hyperunner 12/5/2012 | 3:04:45 PM
re: Infinera Revenues, Losses Widen ninjaturtle,

Try the decaff dude! But you have a point.

In his defence, I have to say that Craig Matsumoto has two disadvantages when it comes to a story like this. One, he's not a financial analyst. Two, he works for an organization that tends toward negative and sensationalist headlines.

I can picture Craig thinking up the headline for this story...gee should it be "Losses widen" or "Revenue soars"? Why look on the bright side when you work for Light Reading? And why bother to try and understand the difference between GAAP and pro forma when you have a dealine to meet?

Actually I thought of a third reason. Craig is from a components background and that likely explains the way he jumped on the "lumpy revenue" comment as though its news to anyone that Infinera deals tend to be big.

It makes me glad I didn't invest in INFN now because the share price is very much affected by this kind of uninformed reporting.

hR.
Stevery 12/5/2012 | 3:04:44 PM
re: Infinera Revenues, Losses Widen
One poster would have fired Craig for writing such a bearish article?

fwiw: I would have fired him for not ridiculing the accounting like it REALLY needed to be ridiculed.

Which probably puts Craig's article into the range of middle of the road.

C'mon, VSOE for hardware? That's just throwing easy fish to the lawyers. But most insider stock sales will have already taken place by then, so no worries.

Wake me up when they've started generating cash flow.
twill009 12/5/2012 | 3:04:44 PM
re: Infinera Revenues, Losses Widen I think the article was not overly bearish. Infinera has highly unusual accounting (name two other companies that report "invoiced shipments") and it would be irresponsible for LR to gloss over that fact.

Accounting rules are sometimes arbitrary and debatable, but one thing is usually telling: cash flow from operations. INFN had slightly negative cash from operations in the quarter, and has only had one positive quarter in its history. Without positive cash flow, the company will need to keep returning to the capital markets for funding.

I hear good things about management's technical know-how, but it remains to be seen whether there is a sustainable business here.
ninjaturtle 12/5/2012 | 3:04:44 PM
re: Infinera Revenues, Losses Widen I still stand by my position... Prior to the Infinera IPO everyone and their uncle assumed INFN would be a huge flop. As it turns out all those negative comments blew up in their faces. Out of the entire tech IPOs this year INFN by far has the most potential. Craig, I believe, and only you will know, was trying to cater to those many negative readers of the past. These writers must get paid by the numbers of discussion responses they get on their articles. So why not continue the negative spin from the CC. It will bring out the naysayers. I just don't think it makes for good reporting here or in any reporting format. The press loves to seize the opportunity to spin the negative. That is what sells. We live in a very "bash the guy down" world and this is what we are teaching out children? Sorry I am not playing into that game. If you donGÇÖt think INFN is a good investment then donGÇÖt buy it. I bought AAPL back in December 06GÇÖ for $79. If I listened to all the shorts on the Yahoo message board on how AAPL would be a $40 stock I wouldnGÇÖt have made the serious $$$ I have made on that stock. I still hold AAPL and will until next year when they come out with blow out Christmas season numbers. But between now and then I am sure there will more shorts pounding their fists on the table convinced AAPL is a $50 stock. I agree but after a 1 for 4 stock split.
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