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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brick&mortar 12/5/2012 | 3:04:23 PM
re: Infinera Revenues, Losses Widen I thought the whole reason for the "funny" financials was centered around software support contracts that [might last as long as five years and] INFN was trying to recognize as revenue now.

Granted I work in this space and compete with INFN occasionally, but in doing so I see the CAPEX for their DWDM hardware to be extremely low, while the OPEX (including fees paid for warrenty or support) to be quite high. They often win or lose deals as a result of either circumstance.

For instance the 12,000 mile network they referenced on their conference call, about which several analysts queried the monetary value -- recieving no answer... this could sell for an initial hardware cost in the $7-15 million range. Not sure if this represents any actual positive margin. The profit is intended to come from annual hardware support and software license fees, and is usually termed for five or more years. Again I think the "soft" part of their financials is the recognition of all or part of this revenue in the current quarter.

This is dangerous accounting for two reasons. One, (credited to an earlier posting) one has no idea of the cost ot provide this kind of support. Two, these contracts are usually discounted later, say in year two or three as a practice of winning other new business. Either scenario would require a restating of past financials (something INFN actually did before their actual IPO).

I am not discounting their different approach to DWDM and how it can be better in some applications of 10G transport. I am concerned about the flexibility of this solution in metro applications when carriers need to transport ITU signals between adjacent routers or other ITU capable devices. Also not much said on the call about 40G...

Again, my opinion is biased. I chose not to work for this company. I just wanted to bring the conversation back to what I thought this was supposed to be about. Questions on accounting, and viability of a new technology.
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