Infinera Picks Up the Pace

4:50 AM -- It was easy at first for Infinera Corp. (Nasdaq: INFN) to claim its photonic integrated circuit (PIC) was revolutionary and would storm the market. Making that actually happen is turning out to take a lot of hard work. That's why it was such big news last week when the DTN-X got announced essentially on time. (See Infinera Unleashes Coherent 100G.)

Note that the system isn't actually available yet. Investors were just "starved for good news," as analyst Mike Genovese of MKM Partners wrote Friday. The stock went up 15 percent last week, basically on the realization that Infinera wasn't going to miss this target. (See Interoute Checks Out Infinera's DTN-X.)

As we quoted Andrew Schmitt of Infonetics Research Inc. saying, carriers might love Infinera's technology, but Wall Street doesn't like the results. The earnings haven't been predictable, and the company missed some opportunities by not catching the 40Gbit/s generation in time.

About that: Schmitt says Infinera had to abandon 40Gbit/s not because of yield problems, as many people assumed, but because executives realized they had to speed things up and just go for 100Gbit/s.

"I told them: You've only got one bullet in the gun, and you can shoot it every five years," he says.

Think about it. It's been seven years since Infinera announced the DTN switch. Only now is the company coming up with its next major product. (I'm not counting the ATN metro switch as "major.") DWDM isn't the speediest of markets, but it's still not comforting to realize that Infinera needed that long to build its next-generation product.

Infinera is trying to fix that impression. The company started talking about the next PIC, with ten 100Gbit/s lanes, back in March. It's as if Infinera is trying to convince us that it's on track for that "tick-tock" product progression, as Schmitt puts it.

So, will that make Wall Street any happier? Infinera knocked it out of the park by actually beating its initial DTN-X schedule by a few months, but the company has other questions to face -- such as whether it can start reaching out to a bigger market.

"Our sense is that the company’s traditional bandwidth wholesaler customer base isn't large enough to really drive attractive economics for Infinera -- even if they deployed the DTN-X en masse," analyst George Notter of Jefferies & Company Inc. wrote last week.

The addition of MPLS transport could help and might be a key to getting into Verizon Communications Inc. (NYSE: VZ). But Infinera didn't provide a timeline for the addition of MPLS transport capabilities to the DTN-X. (See Verizon Teases at Infinera Event.)

So, the company is still on the spot. That might never change.

— Craig Matsumoto, West Coast Editor, Light Reading

gordonzola 12/5/2012 | 4:53:02 PM
re: Infinera Picks Up the Pace

1. 100G Optics is very risky as it is new. AT&T-NSN had to go thru 3 versions of 40G to finally get a practical technology. This challenge applies to all vendors and operators.

2. Infinera will regen at shorter distances. This is a key differentiator. If 100G has performance problems for large numbers of span hops this would give infinera an technological advantage.

3. Is PIC cheaper than single wavelength regen at 100G? If yes then infinera will have an economic adavantage(if 2 is true). 

4. Will 100G(PIC or non-PIC) be cheaper than existing 40G(non-PIC) solutions. Existing(QDPSK) 40G systems have yet to see significant volume price reductions as seen for 10G systems. If 40G volume picks up then it will move down on the price-volume curve.

5. What will be the impact of 40G coherent. Technically a risk as it is new. Technically a winner as it will increase span hop count significantly.

A conservative evolution scenario that would act against infinera could be;

a) Existing(QDPSK) 40G volume picks up and dominates for 3 years as price volume kicks in.

b) 40G coherent becomes ready for the market in 2-3 years and starts to ship for network scenarios where it can beat QDPSK.

c) in 3-5 years 100G becomes ready and starts to ship for network scenarios where it can beat the 40G variants.

d) Infinera and its' customers are mopped up by Ciena in 3 years.











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