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24 October 2008


Infinera’s invoiced revenue falls 11%

For third-quarter 2008, Infinera Corp of Sunnyvale, CA, USA, a vertically integrated manufacturer of digital optical network systems incorporating its own InP-based photonic integrated circuits (PICs), has reported revenues of $120.5m, almost double $62.2m a year ago and up from $161m last quarter. However, on an adjusted GAAP basis, revenue for invoiced shipments (excluding deferred ratable product revenue and related support and services) was $80.9m, up slightly from $80.4m a year ago but down 11% on $90.8m last quarter.

Excluding non-cash stock-based compensation and on an invoiced shipment basis, gross margin was 42%. This is down from 43% a year ago and 47% last quarter after being negatively impacted by about 4 percentage points due to initial shipments to Deutsche Telekom.

Operating expenses rose from $32.3m in Q2 to $35.9m due to R&D headcount increases as well as additional project and prototype expenses as Infinera continues to fund next-generation programs.

Compared to net income of $10.9m a year ago and $10.7m last quarter, Infinera just broke even in Q3. 

Nevertheless, revenue was ahead of the $75-80m guidance provided in July, points out president & CEO Jagdeep Singh, while cash generated from operations amounted to $9.9m (boosting cash, cash equivalent, restricted cash and investments to $324.6m).

“Both existing and new customers continue to turn to Infinera’s PIC-based solution to build out their networks as they address their bandwidth growth needs,” he adds. “We added five new customers in the quarter [bringing the total to 49] — including our fifth of the top five major cable MSOs [multi-system operators] in North America and two additional European customers.”

Singh says that the firm saw strong reception from the installed base and new customers to the new Infinera Line System 2 (ILS2), which began shipping in August. ILS2 provides extended reach and increased capacity for the existing DTN system and is designed to allow it to scale to 8Tb/s in the future. “We are pleased with the resumption in new customer-win momentum, and we believe that this will continue into Q4 with the addition of at least another four new customers [including Deutsche Telekom],” Singh says.

During the quarter, Infinera also completed the migration of the Deutsche Telekom (DT) Western European network to its equipment in a five-week timeline, highlighting the speed of service advantage that Infinera’s architecture provides, claims Singh. Traffic was migrated from the previous incumbent DWDM platform on to Infinera’s equipment using only the existing single pair of fibers without requiring additional fiber, as would have been the case with the conventional WDM solution. DT is now running live traffic on the new network. “This represents a significant achievement for the Infinera and DT teams, and it is serving as a strong reference account for our new business efforts,” says Singh.

Also during the quarter, Infinera achieved two key milestones. Its photonic integrated circuits (PICs) surpassed a cumulative total of 100 million hours of operation in live networks worldwide without any PIC failures, evidence of the high reliability of the firm’s photonic integration technology. Also, more than 10,000 Infinera DLM line cards shipped since the firm began commercial shipments in late 2004 (accounting for about 40% of all of the 10Gb/s long-haul ports shipped by the industry in this timeframe, and equating to a total DWDM network capacity of 1Petabit per second).

Singh says that so far Infinera has not seen any significant changes in spending plans on the part of our customers that it can attribute directly to the current uncertain macro-economic conditions, but he expects this to change. Nevertheless, Infinera is maintaining June’s guidance for full-year 2008 revenue growth of 10%, based on its Q4/2008 revenue forecast of $75m.

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