re: IPO Alert: Infinera Files Its S-1Actually MG, the "hard costs" of material purchases and fabrication MAY be included, but to the extent that wafer fabrication (the KEY part of Infinera's technology) is period costed or allocated to R&D would make any cost figures of the PICs a guess. Furthermore, depending on the cycle times in the fab, it is possible to arrive at any CoGS number you wish to justify.
You are also missing a few points...not the least of which is the amount of accrual for installation, warranty, certain upgrades contemplated in the purchase agreements, etc. None of these costs will be included until the revenue is recognized.
You are certainly right about the software...but only to the extent that the system is unbundled....and Infinera is a solution provider on its own hardware, so the chances of unbundling the software are nil.
Your description is the kind of sale that everyone wants. However, lets say to get a sale that Ininera has to develop some new features. This creates risk in being able to get paid and not having the equipment ripped out. Given that, the auditors may require that revenue not be recognized until all contracted development items are completed. The auditors can maintain that stance even if a letter of product acceptance is obtained, the product is paid for, service is turned up, and further orders are placed.
If you want to go defend your financials to the SEC when your auditors disagree with whether you can take revenue, be my guest. I, for one, will not be doing so. It is a risk assessment on the auditor's part and their incentive is to tell you to not take revenue.
VSOE should not be a problem for an optical transport system as their product resembles the 20 other optical transport systems that have already been made and sold for a decade.
The deferred revenue is most likely part of a ongoing contract which includes "everything".
The reason it is deferred is some percentage of it has yet to ship. The most likely GM from those deferred sales is the one they have been realizing to date.
IOW, there is not enough GM here to break cash positive. Just like almost everyone else in the sector.
The way I would put it is: they just finished selling their technology (kudos to all), now they have to sell the company (just when they thought they could take a break).
Selling the company means there has to be at least a good chance of strong net positive cash flow in the foreseeable future. But in this case, that's at best a chicken and egg problem.
I for one don't see it happening; the strong net positve cash flow in the near future, that is. At best, INF might achieve a weak positive cash flow, by slashing and burning R&D, sales, marketing, etc. I'm not interested nor impressed with MBA (management by accountants).
re: IPO Alert: Infinera Files Its S-1Dear Seven: Perhaps the VSOE mention implies that INFN is doing something new and different with their system, say in muxing signals via their OEO conversions, coupled with their OAM software. Perhaps they plan to charge for this but first need to establish a track record of value.
re: IPO Alert: Infinera Files Its S-1When would you expect the Infinera officers to begin making the rounds of the inventment houses? (End of this quarter or sooner?) Then we will have real answers
re: IPO Alert: Infinera Files Its S-1 OEO environments that mux signals and OAM software already exist.
There are potentially LOTS of reasons for them to have deferred revenue. They need to tell us. I think speculating is just that. No point in guessing. If they want investors, they will have to tell us.
re: IPO Alert: Infinera Files Its S-1As far as we can see from a supplier side, Infinera is doing very well. Certainly, a very strong and smart team, which will make it, probably much better than their neighbors from PA.
re: IPO Alert: Infinera Files Its S-1Infinera (I still think 'Zepton') has had this ora about them for a while. We've heard about how they'll revolutionize the world, and maybe they are doing it and maybe they aren't. As a privately funded company, the outside world was left to wonder what was going on and spend lines and lines of dialogue on LR about it...
But that's all about to change...
Going public, IMO, is a big risk in this market. You see tech companies looking to go PRIVATE because the scrutiny of being a public company often times dictates you do the best for your stock price, not for the company. Infinera has benefited by being a private company and doing everything under the radar. As a public company, they're going to have to tell everyone about the good (new deals, etc) AND the bad (revenue, or lack thereof!).
It seems odd Infinera would choose to go public in a market that has a LOT of capital in the private equity space willing to spend... My guess is their current investors are tired of waiting and want to cash out at whatever they can right now. I see a mild IPO, followed by a slow decline in stock until they get bought.
re: IPO Alert: Infinera Files Its S-1Tier 1 telcos can't in the US can not buy from "small" private companies. A company needs to be public before it can pen deals with the T1s. Google is offering online software are they not,need bandwidth do we not read about rumored relationships between them and Infinera? Humm. The IPO will be good, the follow on will be even better. Infinera market cap 2 billion plus in 24 months after IPO. Don't bet against it. Oh and didn't Quest buy OnFiber (I read that here) which gives them access to Infinera technology through the back door? Keep your money in your wallets if you will, but I would be happy to bet on Jagdeep Singh and the Infinera team. Too smart, too good to bet against.
re: IPO Alert: Infinera Files Its S-1I believe they made a couple of useful M&As recently. I think they are moving in right directions. They can have a pretty good solution for 40G and 100 G by the time the employees can sell their stocks if they move fast.
You are also missing a few points...not the least of which is the amount of accrual for installation, warranty, certain upgrades contemplated in the purchase agreements, etc. None of these costs will be included until the revenue is recognized.
You are certainly right about the software...but only to the extent that the system is unbundled....and Infinera is a solution provider on its own hardware, so the chances of unbundling the software are nil.
Follow the cash.