Infinera Corp. (INFN)

sales expenses are outpacing revenues significantly...something sounds fishy

stock to outperform S&P because of it's technology lead over competitors and its aquisition of new, large customers.

My foolish analysis on the best-buy-time for Infinera:
- Continue to land new/big customers
- The profit margin will be boosted by the blades sales in the near future
- Nice fit with the Obama stimulus package and infrastruture projects

Lots of razors have just been sold. Now it's time for the high margin recurring revenue of the blades (while still selling more razors).

Underpriced

During the March 9 bottom of our seeming financial armageddon, this stock traded for $5.69. It ran up to $10.53, before coming back down to its present price of $7.40. While I am no telecom expert, the upcoming stimulus and data shortages(thanks Iphone & company) made this one even more intriguing.

The Pitch

From my limited understanding, it looks like Infinera is a best of breed low cost operator in optical communications networks that also possesses unique technological advantages. I’ll concede that Huawei (a Chinese private company) might beat them on price, but I wonder what corners they cut in doing so. From its business model, it seems that Infinera sells low margin units first followed by higher margin goods as its customers upgrade and expand. Additionally, they keep up a steady pace of new client orders including NTT, which is the largest telecom operator in Asia and second largest in the world in terms of revenue. INFN is also a busted IPO, meaning when it started trading in the market in 2007 it fell from its $25 starting price, which probably means some people still have negative sentiment towards Infinera.

The Bottom Line

Roughly 37% or so of its market capitalization is made up of CASH. With the stock currently marked underperform by many analysts, now would be a great time to jump on before the big boys and let them drive the price up for us. Though Infinera hasn’t turned a profit since the 2nd quarter of 2008, I suspect that will change soon and the share price will follow.

Disclosure: I am long INFN @ $7.36. I am not a financial advisor and the above is solely my opinion, NOT advice. Do your own research and contact a financial professional for help if necessary. My opinions do not take into account your specific situations or needs.

I like their current revenue streams and their sales are increasing to large customers. They are in a good position to meet the demands of the next few years in terms of their technology.

Long term buy/ green thumb

They have great management; technology that we need and expansion. Good technical and valuations-need to work on fundamentals. Should outperform w/less risk of loosing $ is only my opinion though.

Charts indicated the stock is under modest accumulation. However, the 50 & 200 day moving average is currently weakening=bearish. If the Dow continues to rise this will change.

A good sign:

Infinera added to its optical networking research and development team with the opening of a new design center in Ottawa, Ontario. Ottawa is a longtime center for optical networking development, and Infinera's new center of excellence will tap into the deep pool of experience and expertise available there.
Infinera's 400 Gigabit/second (Gb/s) photonic integrated circuit is in development today at Infinera's development centers and fab facility in Sunnyvale, California. Future generations of Infinera optical systems will be designed to take ever-increasing advantage of advanced signal processing technologies to process vast amounts of data transmitted and received by these and higher capacity PICs. Dr. Kuang-Tsan Wu, who has joined Infinera to lead the Ottawa team, is one of the world's foremost experts in designing optical systems using high-speed electronics and advanced modulation formats.
Prior to joining Infinera, Dr. Wu led the team that architected Nortel's 40 Gb/s coherent receivers with advanced signal processing technologies. Infinera is currently advertising for a small number of additional engineers to join the Ottawa team.

These people are wicked-smart.

Unique 400 GB/s optical solution

Oversold recently and now on the way up again. I hold a LOT of this in real life though, so maybe I'm just rooting for it here. When it goes up, it goes up fast and I'm looking at a two or three bagger in a couple of years, hopefully.

contrarian position. Either the company is mis-understood and will continue to be so, or market correctly anticipates loss of significant revenue in short term (keep an eye on L3). Either way S&P500 will run higher faster.

Not sure when, but eventually optical networks will take off. So putting this on 2-4 year explosive growth.

When they get their 10 x 40GB line cards out the door next year, this stock is going to soar. It is greatly oversold right now and technically a sound investment.

Clearly the future of this company is absolutely dependent upon leveraging its operating expenses. This is true for most industries, but especially true in the case of INFN. For example, their most recent trends indicate that when quarterly sales are > $100 MM, they generate positive operating income... when the are < $100 MM they have negative operating income (almost, but not quite at a dollar for dollar rate).
Just when the company was breaking past the $100 MM / quarter barrier, the recession hits, and their sales fall below $100 MM again. That being said, I think their sales will quickly rise in the next quarter or two, which should result in them generating income again. In the meantime, they have approx. $300 MM in cash and investments to help carry them through the money losing quarters (which is quite a bit, considering their cash burn rate is only $25 MM per quarter for a bad quarter.
There are already articles describing the potential of this company, including one here http://www.fool.com/investing/high-growth/2009/04/22/infinera-cheap-today-huge-tomorrow.aspx?source=itxsitmot0000002
In the end, I am going to pick up some shares of this MF Rule Breaker stock today in MRL portfolio (so wait to buy them until I do so I can get a better price).
2 thumbs up out of 3, because I am not a networking guru by any means, but since this stock is about a 1/3 of its price only 2 years ago, I think there is some cushion (and potential) in this pick.

INFN's technology sounds like the stuff of rule breakers. At this price it looks like a bargain. I think the set backs will be temporary but it is still a bit risky.

they are doing what they have to to grow and they still have no debt. they dropped about 35% a couple of weeks ago just a dollar or so off their march low. I picked up a few in the mid 7s another set in the low 7s and than doubled down when they came down to the mid 6s. I'm nearly back to even.

Disruptive technology in a razor & blade model...razors still being deployed so good shot at future revenue growth. I believe a good value proposition for their customers. Relevant industry going forward...fiber optic networking. Good price right now. Recommended by fools. Definitely a competitive industry with a lot of risks, not for everybody.

I work in the technology sector however not in the telecom domain. Even though I have studied electronics in school, its still hard for me to comprehend everything about this company. Hows that for a disclosure.. If I dont understand it so well what can you expect from analyst whose only claim to fame is the ability to read the financial statements instead of business. And look how good a job they have done rating all the financial products.

Rant aside. I did try to understand this one since I am invested in it and came away impressed with their technology. The essential thing that gives Infinera advantage over so many other companies in this space is their photonic integrated circuit. Essentially they have been able to integrate photons required for optical transmission on to a silicon type (its actually a different material) chip. This ability gives them the advantage that they can provide higher bandwidth while at the same time reduce energy and space foot print. Also, due to the reduced size they can easily scale up faster. Another advantage is that their technology is able to provide faster transmissions and at greater distance.

Big companies generally go with established players instead of new company with nascent technology. Since they are in a very competitive landscape with entrenched players they had to discount their products for new customers to get the foot in the door. As their number of customers increase they may not have to give out so much discount but thats another story. Infinera sells their initial setup at a discounted price with certain bandwidth capacity. To scale up to higher bandwidths the customers need extra TAM modules that Infinera charge much higher price for. This is the actual gravy. Now think about a new computer which can scale upto 16GB memory. You buy the computer with 1GB ram but to actually perform at its peek you really need the remaining 15GB of RAM. Companies dont have to pay upfront for the capacity that they may not use. But ultimately when the demand increases, which it eventually does, they will have to pay for extra TAMs. Companies dont mind paying for extra modules when their bandwidth demand is increasing (this is the scalibility factor).

The catalyst for Infinera with be the 40GB/s bandwidth module that they are still testing in the Labs. If and when they release that their solution will be much better than the existing competition. Infact, Companies are still buying their old machines since scaling up to 40GB/s will essentially mean swapping the TAM module I think ( I am not 100% sure on this and educated response will be appreciated). As I have already mentioned these TAMs are the actual gravy for the company so any new customers today is an advantage in the long run. Once the momentum gets built, I am pretty sure they will not even have to spend so much to acquire new customers.

- MFRB101