Is Infinera Set for Verizon 100G Deal?

It's been talked about for some time, but current chatter amongst the optical networking community suggests that Infinera is set to become the second 100G transport supplier at Verizon Communications, joining incumbent supplier Ciena. (See How Infinera Could Get a Shot at Verizon.)

Word has been circulating for a few weeks now that Infinera Corp. (Nasdaq: INFN) is "the chosen one" ahead of Alcatel-Lucent and the speculation has been stoked even further by Infinera management's reference during the company's third-quarter earnings conference call to anticipated "strategic" customer deals in North America.

MKM Partners analyst Mike Genovese noted in his report on Infinera's third-quarter results that there appears to have been "recent positive competitive changes at one or more major US strategic accounts where management seems to have increased confidence in their likelihood of winning significant deals," though George Notter at Jefferies & Company Inc. noted that industry sources say Verizon Communications Inc. (NYSE: VZ) has not yet made a decision but that the carrier will likely choose before the end of this year.

The US carrier reiterated that position. "A final decision has not been made," said Verizon spokeswoman Lynn Staggs in an email to Light Reading in response to questions about a second 100G equipment supplier.

Infinera says it doesn't comment on rumor or speculation. But for some in the industry, the vendor's name is all but on that deal.

If confirmed, that news would undoubtedly give the transport equipment specialist's stock price a boost. Unfortunately for Infinera, which has been touting its software-defined networking proposition to carriers in recent weeks, its share price was heading south following the publication of its third-quarter financials, dipping 9 percent Thursday to end the day at $10.40. (See Infinera Reports Q3 Profit and Infinera: SDN Can Master Optical Layer.)

The vendor's numbers looked strong: revenues up 27 percent compared with a year ago at $142 million and its earnings after one-time costs stood at 10 cents, much higher than expected. But its fourth-quarter guidance of revenues between $130 million and $140 million left investors dissatisfied, while the vendor's expectation for 2014 gross margins in the low 40 percent range failed to excite.

Even at $10.40, Infinera's stock is still at the high end of its 52-week range. And any confirmation of a deal with Verizon would certainly help the vendor's stock head north instead of south.

Ray Le Maistre, Editor-in-Chief, Light Reading

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