Twin press releases came out from Infinera yesterday, first came the bad news and then came the good news (and they didn’t even ask which we wanted first!)
The bad news was that while Q2 remains on target, the company’s Q3 and full year guidance got lowered substantially. The reason given was that US carriers were going to buy less than expected, which is another way of saying that LVLT and XO are buying less. XO probably is just conserving cash after their recent buildouts, and LVLT is likely not going to start decommissioning legacy acquired routes as earlier planned. Neither is a terribly large surprise, perhaps Infinera needs to be a bit more cautious in its assumptions. I do wonder though if anyone is delaying purchases in favor of their new ILS2 product later in the fall and if that was a factor.
The good news though is that Infinera finally cracked the Tier-1 market with a big win at DT in Europe, an event ought to quiet at least a few critics. It does make sense that Infinera’s first tier-1 win would be in more densely populated Europe, their advantages are probably greatest in that environment. Equipment revenues tend to be erratic, one can’t help but think the bad news is the bump in the road, whereas DT is the trend. Bandwidth growth is not going away and they have an installed base to sell to while it grows. The PICs will get sold, all else is timing.
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Down 30% so far today. The revised numbers only indicate 10% revenue growth in 08. They do have a solid balance sheet w/plenty of cash. Be nice to see some insider buying around these levels.