Infinera Surprises, Targets Metro Access
In fact, Infinera's invoiced shipments for the quarter ended June 30 came in right around expectations, at $90.8 million versus a predicted $89.2 million, according to Reuters Research . That's down from $95.5 million in the previous quarter.
Infinera says its business condition is better described by invoiced shipments than by revenues, due to the way the company records its sales. (See Infinera Smooths Out the Lumps.)
But Infinera turned in a pro forma profit of 11 cents per share, whereas Wall Street was expecting just 1 cent. (See Infinera Scores.)
Nobody's complaining. Infinera stock rose $1.51, 16.8 percent, to $10.50 in after hours trading.
But the earnings surprise reveals yet another way that Infinera -- which, despite having 44 customers, still gets about half of its invoiced shipment sales from three main customers, Level 3 Communications Inc. (NYSE: LVLT), Cox Communications Inc. , and Global Crossing (Nasdaq: GLBC) -- can be hit with lumpy and unpredictable results.
Infinera sometimes gets last-minute orders for its Tributary Adapter Modules (TAMs), cards that fit in its DTN optical transport system. This happens because Infinera offers a "just-in-TAM" promotion (go ahead, groan) that promises the cards will arrive within 10 days. (See Infinera Touts TAMs.)
The second quarter happened to be one of those times when some last-minute TAM orders beefed up the books.
But isn't it a worry that, even with last-minute TAM orders, Infinera beat invoiced shipment expectations by little more than $1 million? Not really, Infinera says. While not significantly incremental to revenue, "a few TAMs here or there can augment the gross margin percentage pretty heavily," said CFO Duston Williams during the company's earnings call.
That's because Infinera, like most equipment vendors, makes better profits on the line cards than it does on system chassis.
Growth and expansion
Back in June, Infinera noted that its 2008 revenues -- er, invoiced shipments -- would be about 10 percent higher than the previous year's, which is fine until you consider Infinera was supposed to grow 25 percent. The problem? North American carriers delaying their network buildouts. (See Infinera Wins DT, Loses the Day.) So, the $95.5 million in invoiced shipments recorded in the first quarter looks like being a high-water mark for some time. Infinera expects its third quarter invoiced shipments figure to be between $75 million and $80 million, and, according to Reuters, analysts don't expect Infinera to hit the $95 million mark again until the second quarter of 2009.
One way Infinera could expand further is by scaling down into the metro network. Infinera's DTN is used for long-haul and metro core situations, but a smaller box -- one tuned for the lower bandwidths and smaller wavelength counts of metro access -- could help get the company into more networks.
On the earnings call and in an interview with Light Reading, CEO Jagdeep Singh said Infinera is, indeed, working in that direction.
"We haven't said anything about products, but we've got a number of initiatives on the way," Singh tells Light Reading. "We've got a lot of customers who'd like us to move into lower-bandwidth environments."
— Craig Matsumoto, West Coast Editor, Light Reading