re: IPO Alert: Infinera Files Its S-1Pretty sure that's what the S-1 is indented to do. I would hope the SEC would do their job. As far as investors only time will tell. ThatGÇÖs what quarterly statements are all about. Let's just let it run the course. No one knows what will happen in the next 6-24 months. Lets just hope we are all around to see whatever happens everywhere.
re: IPO Alert: Infinera Files Its S-1"According to all the Engineers turned CPA"
Some of us have formal training in engineering and finance (accounting is the "mathematics" of finance).
".....on this thread Infinera is doomed"
No, Infinera is not doomed as long as there are investors ready, willing and able to provide it with more cash, since it is currently incapable of generating cash.
"I think the best way to approach this issue is to see how they do over the next 2 years."
At a declining burn rate, it will cost new investors $100-150M to answer this question....got your checkbook handy?
"I simply wish them good luck"
As do I, I have quite a few professional friends there....but I won't be buying the IPO.
There claim about the revenue was there was some status change at some customer. That certainly could have been negotiated around the IPO. I think you and I are in agreement that looking at the income statement with that much deferred revenue just makes the company hard to read. I wish there was more history of actual revenue business and I would be happier just sticking to the cash flow statement and balance sheet.
re: IPO Alert: Infinera Files Its S-1I think you will find the SEC has given all the financial a real going over BEFORE the S1 was filed. The reality of Infinera will be apparent to all when they begin making presentation to the investment community and they can define the numbers in a much cleaner way. Then we will know if they are a boom or a bust. (My guess is boom!)
re: IPO Alert: Infinera Files Its S-1Actually, thats not the way the process works at all. The process STARTS with the filing of an S-1, and as the SEC comments, and responses are filed, you will see S-1/A (Amendment) docs filed in response.
If, by "cleaner" you mean the use of non-GAAP accounting, then "caveat emptor."
re: IPO Alert: Infinera Files Its S-1 I think df and I are telling everyone is that the focus on Income Statements by the sell side analysts and reporters is greatly overdone. It is a wonderful and convenient encapsulation of many things. But I implore all of you to read the Cash Flow Statement and the Balance Sheet prior to investing in anything.
re: IPO Alert: Infinera Files Its S-1The GM mystery probably lies in their VSOE (Vendor Specific Objective Evidence) of value problem. SONS had a problem with this, as did the analysts who follow the company.
In a new new market, if you are selling something that has no historic value, you cannot recognize revenue on it because it lacks VSOE. In the INFN case, as with SONS, the VSOE-effected parts seem to be software and service, the high-margin parts of the system.
Only after a history of value has been developed, can these revenues be recognized. Hence, they do recognize "all the costs under the factory roof" when they ship a box, but none of the "good stuff". That would explain the gross margin gap. It also implies that those deferred revenues have a high margin attached.
re: IPO Alert: Infinera Files Its S-1VSOE: There really is no mystery in the concept of revenue or cost or what or when to recognize: the answer is always follow the cash.
Systems are sold with a warranty on the throughput and uptime of the hardware (and software). They are also sold with a service contract stipulating the cost of service item by item.
Performance less than that contracted comes out of the hardware providers pocket, and that is downside. Damage during install, or flooding, that sort of thing, tailoring of software, lead to service revenue, and that is income. The service contact can be listed as deferred revenue, but it may never be recognized. There should hpowever also be a discussion of the potential exposure due to warranty claims.
I think this S-1 will get a very thorough going over by the SEC.
Some of us have formal training in engineering and finance (accounting is the "mathematics" of finance).
".....on this thread Infinera is doomed"
No, Infinera is not doomed as long as there are investors ready, willing and able to provide it with more cash, since it is currently incapable of generating cash.
"I think the best way to approach this issue is to see how they do over the next 2 years."
At a declining burn rate, it will cost new investors $100-150M to answer this question....got your checkbook handy?
"I simply wish them good luck"
As do I, I have quite a few professional friends there....but I won't be buying the IPO.
OSX,
There claim about the revenue was there was some status change at some customer. That certainly could have been negotiated around the IPO. I think you and I are in agreement that looking at the income statement with that much deferred revenue just makes the company hard to read. I wish there was more history of actual revenue business and I would be happier just sticking to the cash flow statement and balance sheet.
seven
If, by "cleaner" you mean the use of non-GAAP accounting, then "caveat emptor."
Follow the cash....
I think df and I are telling everyone is that the focus on Income Statements by the sell side analysts and reporters is greatly overdone. It is a wonderful and convenient encapsulation of many things. But I implore all of you to read the Cash Flow Statement and the Balance Sheet prior to investing in anything.
seven
That is what I was going to say. (yeah right)
That is a good insight. Thanks
In a new new market, if you are selling something that has no historic value, you cannot recognize revenue on it because it lacks VSOE. In the INFN case, as with SONS, the VSOE-effected parts seem to be software and service, the high-margin parts of the system.
Only after a history of value has been developed, can these revenues be recognized. Hence, they do recognize "all the costs under the factory roof" when they ship a box, but none of the "good stuff". That would explain the gross margin gap. It also implies that those deferred revenues have a high margin attached.
Systems are sold with a warranty on the throughput and uptime of the hardware (and software). They are also sold with a service contract stipulating the cost of service item by item.
Performance less than that contracted comes out of the hardware providers pocket, and that is downside. Damage during install, or flooding, that sort of thing, tailoring of software, lead to service revenue, and that is income. The service contact can be listed as deferred revenue, but it may never be recognized. There should hpowever also be a discussion of the potential exposure due to warranty claims.
-Why