Infinera Revenues, Losses Widen

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litereading 12/5/2012 | 3:04:41 PM

re: Infinera Revenues, Losses Widen My guess is INFN offered L(3) free SW upgrade for 5 yrs or free training in excess of an insignificant amount (as interpreted by acctg guidelines) or both, or committed to a future feature. Extended warranty by itself, under SAB104 would not cause revenue deferral. They probably got some bad acctg advice, which may be why the CFO at the time is their former CFO. Then, QIV of last year, with a plan to go IPO in 1H '07, they renogtiated to a one year term, which allows them to recognize the revenue on initial system sales ratably over one year. Now, I wonder, how much price concession did they give L(3) to get them to re-nog that term (an remember, L(3) had INFN warrants).

INFN use of "invoice shipments" is intended to show investors revenue growth and a GM in a more acceptable range. But... as the SEC warns, be cautious of pro-forma... They state they sell initial systems below cost, their revenue (as they measure it using invoiced shipments) is flat for three quarters, L(3) is 50% (what if they build out and stop ordering?),Operations is not yet generating cash (very key indices as mentioned earlier), and they spend a high % of revenue on R&D to stay ahead of competition (40G/100G?). How long before the gap between their costs and competitions costs closes? Any Tier 1 wins? Is a $250M-$300M/yr concern sufficient to support +$20/share price (what would they have to earn to achieve a PE ration of say 20:1)?

Just rambling, sorry...

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lcdfbr 12/5/2012 | 3:04:41 PM

re: Infinera Revenues, Losses Widen So they lost ~ $0.25/share in cash over two quarters. The GAAP loss for the latest quarter was 26 million, about 2x the cash burn rate. Do people know the specific areas what the additional losses are classified as?

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hyperunner 12/5/2012 | 3:04:41 PM

re: Infinera Revenues, Losses Widen Jeez, I know it was a long post and you probably lost the will to live halfway thru, but I did try to explain that here:

http://www.lightreading.com/bo...

This was presented to us by Infinera sales pukes a few months ago. I get the impression it's something they have to deal with regularly.

What are they different from other companies? If you want my personal guess, I'd say a rogue salesguy offered Level 3 a 5 year S/W warranty to seal the deal, and now the company is reaping the consequences. Remember Level 3 still represents a big chunk of the companys business so it might explain how a mistake on a single deal could cause such a mess.

hR.

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DCITDave 12/5/2012 | 3:04:41 PM

re: Infinera Revenues, Losses Widen re: "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."

ninjaturtle, I haven't seen a post like that since the Corvis board petered out.

Anyway, I AM the editor of Light Reading, and you can suck it.

ph

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Mark Sebastyn 12/5/2012 | 3:04:40 PM

re: Infinera Revenues, Losses Widen ROCK ON PHIL

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DCITDave 12/5/2012 | 3:04:40 PM

re: Infinera Revenues, Losses Widen re: How long before the gap between their costs and competitions costs closes? Any Tier 1 wins?

Great questions. Hopefully we'll find out soon.

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litereading 12/5/2012 | 3:04:40 PM

re: Infinera Revenues, Losses Widen BTW - The Street wasn't very impressed today with their earnings announcement. Wonder why?

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Stevery 12/5/2012 | 3:04:40 PM

re: Infinera Revenues, Losses Widen My guess is INFN offered L(3) free SW upgrade for 5 yrs or free training in excess of an insignificant amount ...

Your scenario might be right, but I think the bigger worry is: L(3) owns a chunk of infn, so the purchase is not an arm's length relationship.

Even if you believe that their "ratable revenue" is not a arbitrary work of fiction, then notice that their present gross margin is with the vast majority of revenue coming from a customer who receives a stock multiple on the cost of buying a system.

Oddly, I couldn't find that as risk factor in their 10Q. Hope Milberg-Weiss notices too.

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ninjaturtle 12/5/2012 | 3:04:39 PM

re: Infinera Revenues, Losses Widen Hey Phil... I will give you the benefit of the doubt and assume you're 12 years old. Keep up the great work at LightReading.

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meaty_urologist 12/5/2012 | 3:04:39 PM

re: Infinera Revenues, Losses Widen For the guy in msg#20, Stevery, who had a brain fart when he tried to calculate cash burn & induced a similar brain fart in msg#22 lcdflr:

You should look at the press release and see that $30.9 million of the cash from the IPO was used to pay off loans (as seen in the section on cash flow statement from financing). As you would expect, a company with ample cash will pay down loans if doing so is in the companyGÇÖs interest. If looking to see whether the operations are generating cash or burning cash, you need to focus on the GÇ£Cash flow from operationsGÇ¥ section.
In the past 6 months, InfineraGÇÖs operations have generated $6.21 Million in cash flow --much different from your statement. This company has really come a long way. Just a short time ago people said Infinera could never make the PIC, could never get enough yield, would run out of money, would find no one to buy their systems, could not generate cash from operations, etc. All those claims have come out false. Great to see Infinera have calculated the same item analysts track (non-proforma earnings), and have earned a +$0.04/sh when analysts had expected -$0.11/sh [a $0.15/sh positive surprise] for their first quarter as a public company. Congrats to those involved. Keep up the good work.

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