Infinera Prices IPO

Startup Infinera Corp. (Nasdaq: INFN) plans to raise about $140 million through its initial public offering, according to an amended S-1 filed with the Securities and Exchange Commission (SEC) today. The company intends to sell 14 million shares of common stock priced between $10 and $12 a share.

Infinera filed its initial S-1 in February. No date has been set for the IPO, but when it goes public, the company plans to trade on Nasdaq under the ticker symbol INFN. After the offering, Infinera will have 83.1 million shares outstanding. (See Infinera Builds in Q1.)

Goldman Sachs & Co. , Citigroup , JP.MorganChase , Lehman Brothers , and Thomas Weisel Partners will serve as underwriters on the IPO. In addition to the 14 million shares that Infinera plans to issue, an additional 2.1 million shares will go to the underwriting companies.

The company says that it will use proceeds of the IPO for working capital and other general corporate purposes, including financing growth, developing new products, and possibly expanding its business through acquisitions. It also may use some of the funds to repay certain credit facilities.

Infinera, which makes a highly integrated DWDM system, had raised more than $315 million in venture capital financing since it was founded in 2000. Its most recent funding round, for $110 million, came in July 2006.

The IPO pricing comes just a few weeks after Infinera filed its first-quarter earnings with the SEC. According to that document, filed on May 10, Infinera reported a second consecutive quarter of strong revenues. (See Infinera Builds in Q1.)

For the first quarter, Infinera reported a loss of $19.8 million, or $2.62 a share, on revenues of $49.2 million. That compared with a loss of $25 million, or $3.55 a share, on sales of $43.8 million in the fourth quarter of 2006.

While the increasing revenues are a positive sign, the company is still unprofitable, posting a combined net loss of $89.9 million for fiscal year 2006.

Table 1: Infinera in the Red
    2002   2003   2004   2005   2006 
Revenues ($M) 0 0 0.6 4.1 58.7
Net loss ($M) (34.1) (50.2) (66.5) (64.6) (89.1)
Net loss per share ($17.05) ($16.10) ($15.30) ($13.76) ($14.55)
Cash & equivalents ($M) 50 54.2 40 37.1 29.6
Source: Infinera Corp.; figures as of Dec. 31 of each year

Another concern is that some of Infinera's best customers, so far, are combining. The restated S-1 reports that Level 3 Communications Inc. (NYSE: LVLT) and Broadwing, which Level 3 acquired in January, accounted for 75 percent of its revenues in 2006.

Infinera's challenge, as it grows up as a public company, will be to win a big carrier contract, perhaps at the expense of competitors such as Alcatel-Lucent (NYSE: ALU), Cisco Systems Inc. (Nasdaq: CSCO), Nortel Networks Ltd. , or Siemens AG (NYSE: SI; Frankfurt: SIE).

So far, its recent customer wins include Global Crossing (Nasdaq: GLBC), Integra Telecom Inc. , Internet2 , Mid-Atlantic Broadband Cooperative , and FPL FiberNet LLC . (See Global Crossing Picks Infinera, Integra Picks Infinera, Internet2 Picks Infinera, MBC Selects Infinera, and FPL Selects Infinera.)

— Ryan Lawler, Reporter, Light Reading

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lpskeptic 12/5/2012 | 3:08:12 PM
re: Infinera Prices IPO A few other notables:

1. They expect to lose money for the forseeable future
2. Looks like initial investors have been diluted substantially and maybe losing money on the investment
3. $20m in net quarterly losses
4. Co-founders like Jagdeep are down to 3.8% of the company which indicates the level of dilution

For a company that has raised 330m so far, and 470m including the IPO, just 2x money raised is not a great return so far. Hopefully the bankers have priced the IPO to go up after it hits the market or else the pain could be substantial. The main hiccup for them is that they have no clear path to profitability. Think Clearwire, which is run by a highly regarded management team and has very influential backers in Intel and Motoroal, has had a poor post IPO performance.

Lets hope for the best for INFN

Stevery 12/5/2012 | 3:08:12 PM
re: Infinera Prices IPO
Let's see: $900M valuation on a loss of $89M. And 75% of revenue is from a customer that might qualify as a related party because it was granted options.

I wonder how they feel taking money from the 401k grandmothers and grandfathers to fund that sort of enterprise.
gzkom 12/5/2012 | 3:08:11 PM
re: Infinera Prices IPO XO bought and uses Infinera gears for their newly deployed backbone/longhaul.

XO just announced today the wins of wavelength services from:

o China Netcom (One of the largest Internet service providers)

o NTT (Japan's largest Internet service provider)

o PCCW (Hong Kong's largest telecom) (announced a week ago)
DCITDave 12/5/2012 | 3:08:11 PM
re: Infinera Prices IPO re: "I wonder how they feel taking money from the 401k grandmothers and grandfathers to fund that sort of enterprise."

They'd feel fine. But fund managers should be skeptical of making too many telecom IPO bets.
DCITDave 12/5/2012 | 3:08:11 PM
re: Infinera Prices IPO Yeah, but...

Considering they're running a one-product equipment company, do their numbers really look that bad?

leftbehind 12/5/2012 | 3:08:09 PM
re: Infinera Prices IPO the structure of the equipment business has changed fundamentally since the 2000 bubble. consolidation has increased competition by driving down equipment margins - if you compete with AlcaLu and they buy $8B of components a year and you are INFN and buy $100M you will not be able to compete. A lot of the cost of a DTN is the chasis and backplane and power supplies and capacitors that have no IP differentiation. So does their fancy chip offset those costs - probably not. The reason AlcaLu, Nokia Siemens etc. are emphasising and investing in services is because its the only way to protect margin. A combination of bundling products and integration services with custom software is offseting the margin erosion in the core equipment businesses.

Its not a startup game anymore. A single product company, in a market with strong customer concentration, with no purchasing leverage is unlikely to succeed.
tsat 12/5/2012 | 3:08:09 PM
re: Infinera Prices IPO
"Growth like hotcakes"...

So far, other equipment vendors are not selling at bubble levels. They are hanging in there, making some steady gains, but nobody is exploding in the market. I would expect the same from INFN.

materialgirl 12/5/2012 | 3:08:09 PM
re: Infinera Prices IPO If we are just getting into Web 2.0 rich clients and the growth of video on the Net, won't demand for the cheap BW that INFN supports grow like hotcakes?
paolo.franzoi 12/5/2012 | 3:08:09 PM
re: Infinera Prices IPO

You miss the points of your own arguments. Since these products are dumb pipe providers, what is the reason for Web 2.0 residential plays that they would upgrade their networks? For business services, it makes sense. For residential services, their is no additional money to be made by upgrading your backbone. So, it is hard to see why one would want to build a better network unless Google, Yahoo, Microsoft, etc are paying enough to cover the costs of it.

Sisyphus 12/5/2012 | 3:08:09 PM
re: Infinera Prices IPO
certainly there will be a lot of growth - in the access network, which will be based on ethernet, and not traditional transport architectures. SPs want easy to manage, and the transport-sdh/sonet-ip overlay does nto deliver that. thus ethernet as an easy to manage layer.

as far as core networks go - that's where infinera may see growth given its value proposition, but the core is about few sites and few nodes with lots of bandwidth. i don't see the core in itself growing exponentially because of video adoption - there'll be some efficiently distributed big pipes to some well defines locations, and from there the distribution happens via ethernet, which in some cases will run over infinera gear, but in many metro deployments may not.
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