Yes, according to the event calendar it's time for another dose of financial reality in the internet infrastructure and telecom sectors. Because earnings are a lagging indicator, actual second quarter results seem likely to remain relatively dismal and the story there will be how well the recession has been managed. What everyone will be looking for is signs of life in guidance for the second half of the year. Will the purse strings loosen up a bit? With that in mind, we will hear on Tuesday from Infinera (NASDAQ:INFN, news, filings) and on Wednesday from Equinix (NASDAQ:EQIX, news, filings).
Amongst telecom equipment providers, Infinera is still the upstart. The recession has hurt their revenues just like everyone else, but the pressure to lower costs has brought them new contracts as well. Continuing bandwidth growth means that a recovery in DWDM sales is inevitable, the question is who will benefit the most when it happens? Will natural conservatism from tier-1 providers mean that the giants win by default, or that the door is open a crack and the challengers are now powerful enough to push through it? Jeffries has apparently downgraded the company this morning so we know which side they come down on, however I like Infinera's chances overall in a recovery. First quarter revenues of $66.6M were down from $86.2M while loss per share increased from $0.16 to $0.19. The market seems to be expecting the second quarter to check in at $70M with a loss of $0.20 per share. As hurdles go, I think they can jump that one. But what will the second half look like? I wish I knew. Infinera's comments will give us a first look.
Equinix has been a shining light in the internet infrastructure sector for several years now. Rather than cause revenues to fall, the recession has managed only to trim its growth rate back a bit so far. Paolo over on Nortia Research gives a great preview of what we might expect from Equinix in Q2 and especially what lies beneath the raw revenue and profit numbers, I recommend a read. The colocation and data center business has such powerful underlying growth factors and such predictable revenue streams that I don't expect anything other than the usual fireworks this quarter. That predictability does mean greater visibility, i.e. that we are more likely to get interesting actual numerical predictions for the second half from Equinix whereas from most others we will be parsing words. That alone makes their release worth watching.
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