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Infinera Prepares for a Big 2013

Craig Matsumoto
4/25/2013

Infinera Corp.'s stock climbed 12 percent in after-hours trading Wednesday night after the company said it's likely to increase revenues by close to 20 percent this year. The company had previously indicated that 2013 revenues would be 10 to 20 percent higher than 2012's. In delivering first-quarter results Wednesday afternoon, Infinera CTO Ita Brennan said she's "comfortable with the upper range" of that forecast. It was a pretty safe statement, given that Infinera's first-quarter revenues were 19 percent higher than a year earlier. Infinera also predicted second-quarter revenues of $130 million to $140 million; analysts had been expecting more like $124 million, according to Thomson Reuters. Infinera shares were up 79 cents (12%) at $7.45 in after-hours trading. Infinera's year is riding on the fortunes of the DTN-X long-haul DWDM system, which so far is doing well as the 100Gbit/s generation emerges for optical transport. The system has 27 customers, Infinera CEO Tom Fallon said on Wednesday's conference call with analysts. That's up from 24 as of OFC/NFOEC a little more than a month ago. "The DTN-X rollout is hitting on all cylinders," analyst Mike Genovese of MKM Partners wrote in a research note late last week. As sunny as all that sounds, Infinera is still losing money. Its gross margins will remain relatively low while the DTN-X is still in initial rollouts with customers, because the chassis itself carries lower margins than the line cards that eventually fill it. Infinera's gross margins for the first quarter were 36 percent. The last time Infinera's revenues got up to about $130 million -- which was the third quarter of 2010 -- its gross margins were 51 percent, as Juda Group analyst Natarajan "Subu" Subrahmanyan alluded to at one point on the earnings call. For its first quarter, which ended March 30, Infinera reported revenues of $124.6 million and net losses of $15.3 million, or 13 cents per share. For the same quarter a year ago, Infinera had reported revenues of $104.7 million and net losses of $20.6 million, or 19 cents per share. Non-GAAP losses (after one-time costs) of 6 cents per share were slightly better than the analysts' consensus expectation of 7 cents, according to Thomson Reuters. For more

— Craig Matsumoto, Managing Editor, Light Reading
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ninjaturtle
ninjaturtle
4/26/2013 | 7:01:14 PM
re: Infinera Prepares for a Big 2013
"I formerly competed with Infinera and I think an important issue is being missed, namely their SGA". I personally agree with this statement. I worked there. It was like a freaking Bank. Everyone was a "VP". I wish that was indeed reviewed by Tom F. & Co. Not needed and agree some are useless leftovers from companies that failed miserably. I could rip off about half dozen in my head in a second. All in Engineering BTW.
tigre
tigre
4/25/2013 | 11:11:13 PM
re: Infinera Prepares for a Big 2013
I formerly competed with Infinera and I think an important issue is being missed, namely their SGA. They are easily the most top-heavy company I have ever seen, with an incredible number of VPs and senior Directors. This might be OK if they were quality people, but they were mostly people who had washed out of other places, but had convincing stories on why it was not their fault
southernlight
southernlight
4/25/2013 | 9:32:49 PM
re: Infinera Prepares for a Big 2013
Ninja, I think they covered the GM get-well plan pretty well by stating "Its gross margins will remain relatively
low while the DTN-X is still in initial rollouts with customers, because
the chassis itself carries lower margins than the line cards that
eventually fill it."

But, big picture: this company is 13 years old and has been trading since 2007. How long should it take to turn a profit?
ninjaturtle
ninjaturtle
4/25/2013 | 7:16:09 PM
re: Infinera Prepares for a Big 2013
"Infinera's gross margins for the first quarter were 36 percent. The last time Infinera's revenues got up to about $130 million -- which was the third quarter of 2010 -- its gross margins were 51 percent, as Juda Group analyst Natarajan "Subu" Subrahmanyan alluded to at one point on the earnings call". But as always Lightreading does not pay attention to detail. The reason for the 51% GM was during that time a large amount of TAMs were being shipped to populate line cards. That will repeat itself with the DTN-X this year. Overall INFN still has the most compelling product with DTN-X capable of scaling to 500Gs. Why do you even mention ALU. Do they pay the bills at LR with ad $$$?
Craig Matsumoto
Craig Matsumoto
4/25/2013 | 1:54:29 PM
re: Infinera Prepares for a Big 2013
It will be interesting to see what all this means in terms of market share. Ciena and AlcaLu have been pretty vocal about their own 100G activity.
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