If you're in the 100G optical systems or components sector, here's some good news: Infinera Corp. (Nasdaq: INFN) had an OK fourth quarter and is very upbeat about 2014. (See Infinera Reports Q4, Full Year .)
Why is that so good? Well, the optical vendor, which has been betting on demand for its 100G technology for some time, had prepared the market to expect a grim fourth-quarter report and had something of a cloud hanging over it after news leaked that it hadn't landed the much sought-after transport gear engagement at Verizon Communications Inc. (NYSE: VZ). (See Analyst: Infinera Loses VZ Deal to AlcaLu.)
But its fourth quarter was solid (revenues of $139.1 million), and for the full year the vendor it grew its sales by 24% to $544.1 million, while cutting its operating loss for the year to $24.2 million from $83 million in 2012.
In its earnings release, CEO Tom Fallon noted that Infinera's growth was well ahead of the overall market for DWDM systems of about 12%, driven by demand for its DTN-X platform, which now has 42 customers from all corners of the communications networking world (wholesale carriers, cable, mobile, web services firms) where 100G is now in strong demand. (See Subsea Surge: Telstra Upgrades 3 Routes, Infinera: SDN Can Master Optical Layer, and Rostelecom Deploys Infinera's DTN-X .)
And on the company's earnings call, Fallon admitted that, while the Verizon opportunity was no longer an "opportunity," he expects to sign up new Tier 1 customers this year and benefit from "rapid bandwidth growth in business opportunities in the other markets." He said Infinera is well positioned to gain new business from cable operators and Internet services firms, which are building their own long-haul transport networks, and become even stronger in the wholesale networks market.
The CEO also noted that Infinera had recently landed a "significant" new deal with a long-standing wholesale operator customer and hinted strongly on the call that it was Level 3 Communications Inc. (NYSE: LVLT).
And with the 100G market growing and "not anticipated to peak until 2018… I am increasingly optimistic about our short, intermediate, and long-term opportunity," the CEO added.
And as if to back up that statement, CFO Ita Brennan announced on the earnings call that there is greater urgency amongst customers to push ahead with deployments and activations, and that, instead of the normal slow start to the year, Infinera is expecting revenues of between $137 million and $143 million for the first quarter, higher than Wall Street had predicted.
That outlook and the bullish talk lit a fire under Infinera's share price, which climbed more than 28% Thursday to $9.06.
It also had a knock-on effect on rival 100G systems vendor Ciena Corp. (NYSE: CIEN), which saw its stock rise nearly 3% to $23.56.
That all spells good news for any companies active in the 100G market, which is where the hot transport network demand is right now, says Heavy Reading senior analyst Sterling Perrin. "The overall optical market is a slow burner and will probably grow a few percent this year, but 100G is a huge bright spot, though competition is very intense," he notes. "The top vendors in 100G should all do well."
And that, of course, also spells good news for the 100G optical components market, which has already been seeing a positive knock-on effect during the past year and is expecting a further surge in demand. (See 100G Revenue Drives 400G Investment, Finisar Buys Its 100G Buddy, and Will Optical Suffer From Thailand's Political Unrest?)
— Ray Le Maistre, Editor-in-Chief, Light Reading