Infinera Reports as the Market Awaits New Products

Bandwidth equipment manufacturer Infinera (NASDAQ:INFN, news, filings) filed it’s first quarter numbers yesterday.  Revenues declined sequentially to $92.9M from $117.1M in the prior quarter, which roughly matched composite analyst expectations and reflected as always the lumpiness of this business.  The company’s non-GAAP earnings per share dipped to a loss of $0.04, which was nevertheless better than the loss of $0.07 that they turned in during the same quarter last year and had been projected to repeat.  Here is a quick table of their results in the context of the prior four quarters:

$ in millions	Q1/10	Q2/10	Q3/10	Q4/10	Q1/11	Q2/11 (guidance)
Revenue	$95.8	$111.4	$130.1	$117.1	$92.9	$92-97M
Non-GAAP EPS	-$0.07	$0.03	$0.18	$0.07	$-0.04	$(0.10)-(0.12)
Non-GAAP GM%	41%	44%	51%	51%	48%	40%

Level 3 was the only 10% customer during the quarter.  Infinera saw slower ‘footprint activity’, meaning they saw good demand for TAMs but their customers are waiting for the new 40Gbps and 100Gbps solutions for new rollouts.  And in fact, they announced their intention to introduce the 40G product during the third quarter at last and their 5x100G product during the fourth quarter with production ramping up early in 2012.  When they do we will see just how the economics work out.  Infinera disrupted the 10G market with its PICs long after that market was mature, and they will hit the 40G market and 100G markets at an earlier stage — albeit a later stage than investors might have preferred.

Guidance for the second quarter is for revenues consistent with the first quarter and for an increase in expenses as the company ramps up its 40G and 100G product preparations which will drag EPS downward for now.  Both of those numbers were a bit on the light side according to analyst projections, but at this point it’s all about the 40G and 100G timing.  Level 3 is expected to continue to lead the pack in terms of largest customers.

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Categories: Financials · Telecom Equipment