Carrier Bug Bypasses Infinera, Bites Acme Packet

"So, for once, it's actually a good thing you don't have Tier 1 exposure," analyst Ehud Gelblum of Morgan Stanley told Infinera Corp. (Nasdaq: INFN) Thursday.

Well, it seems to be true. This quarter's earnings from equipment vendors are looking bleak, in some cases because of tepid carrier spending, often attributed to big carriers in North America -- which everybody takes to mean AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ).

Juniper Networks Inc. (NYSE: JNPR) and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) had already claimed they were succumbing to that trend, and Thursday afternoon Acme Packet Inc. (Nasdaq: APKT) joined them with the most brutal (or conservative) outlook of the three.

But Infinera hasn't yet managed to snare AT&T or Verizon as customers, and to paraphrase Gelblum, that's currently not a bad thing.

"We are seeing relatively strong demand across all of our markets," Infinera CEO Tom Fallon told analysts on Thursday afternoon's conference call. "There's a question in North America about AT&T and Verizon -- I don't have anything to add about that."

Acme Packet was another story. "We're just not counting on any kind of robust service provider growth in North America in 2012," CEO Andy Ory said on his company's earnings call, also held Thursday.

That led to a brutally conservative forecast. Acme Packet thinks the markets it serves will grow about 20 percent in 2012, but the company is expecting its own revenues to grow just 10 percent. Asked why, Ory said Acme was just trying to avoid being overly optimistic.

Before Thursday, analysts polled by Thomson Reuters were expecting Acme Packet's revenues to grow 20 percent in 2012.

Acme Packet shares were trading down as much as 12 percent after-hours on Thursday.

For all its happy demeanor, Infinera is still losing money. For its fouth quarter, which ended Dec. 31, Infinera reported losses of US$19.4 million, or 18 cents per share, on revenues of $112 million. Non-GAAP losses of 6 cents per share beat analysts' estimates of 12 cents.

Infinera is predicting revenues of $102 million to $108 million for the current quarter; analysts were expecting $102.5 million.

Acme Packet, meanwhile, is profitable. The company reported fourth-quarter profits of $8.7 million, or 12 cents per share, on revenues of $83 million. Non-GAAP earnings of 26 cents per share missed analysts' predictions for 28 cents.

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— Craig Matsumoto, West Coast Editor, Light Reading

tojofay 12/5/2012 | 5:43:38 PM
re: Carrier Bug Bypasses Infinera, Bites Acme Packet

"I am also happy to report that one of our Tier 1 customers is one of our top 5 for the second consecutive quarter."

" On the trial front, we have scheduled 4 DTN-X lab trials in our current quarter. All 4 of these trials are with Tier 1 carriers,"

Thomas Fallon

Pete Baldwin 12/5/2012 | 5:43:37 PM
re: Carrier Bug Bypasses Infinera, Bites Acme Packet

Infinera is definitely not selling to AT&T or Verizon yet. That's "Tier 1" in the Gelblum comment (which I found hilarous, by the way, and that's why it's the lead.)

"Tier 1" in Fallon's statements refers to cable MSOs and European service providers.

You're running into a problem with the vernacular -- analysts persistently ask Infinera about AT&T and Verizon and use "Tier 1" as shorthand for that. Meanwhile, Infinera has picked up some cable and Euro wins that would definitely count as Tier 1 in a wider sense.

joanengebretson 12/5/2012 | 5:43:36 PM
re: Carrier Bug Bypasses Infinera, Bites Acme Packet

Infinera has picked up quite a bit of business from the broadband stimulus program, most of which went to Tier 2 & 3 carriers. Perhaps that is what made the difference in terms of Infinera's performance.

Mark Sebastyn 12/5/2012 | 5:43:31 PM
re: Carrier Bug Bypasses Infinera, Bites Acme Packet

Unless they are an outlier the BB stimulus so far has been a no show for vendors, at least for the access guys.

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