Posted a message but I don't see it here.
I thought TER would get massacred today, since it looked to me like off hours it was down around 16.2. Anyway, glad it didn't get hammered too badly.
This is a great company and any hiccups are in my opinion bound to be temporary.
I would imagine a lot of the Q and A will be: How come the dismal outlook for next quarter?
Opened in high 18.xx. Looking at off hours price I thought it was going to be around 16.20 or so.
Just goes to show, a company with a great business and excellent balance sheet can have some depressing news and not necessarily get whacked too badly on stock price.
Enterprise value to gross profits ratio about 7, AFTER today's drop. Yahoo shows estimated growth rate going forward of 8%.
Without even reading their report yet, it doesn't seem very surprising to me this stock dropped. There are a lot of tech stocks sporting EV/GP ratios of 3-4 with projected growth rates going forward of about 10%.
By that standard, XLNX looks quite expensive.
INFN clearly has some leading edge technology. And they have a good balance sheet.
However, it appears that does not necessarily make them the winner in this market. CIEN seems to be getting a lot of business lately and even though they lack INFN's pic technology, their expertise in packet switching seems to allow them to provide something pretty competitive at the systems level. On the other hand, their balance sheet is not very good for a tech company so I can't see owning CIEN.
Another thing that concerns me somewhat is I don't see a steady stream of new customer news announcements like we were seeing a year or so ago.
Bottom line, while INFN's technology appears to be very impressive, not all the evidence seems to support INFN necessarily being a winner.
I am an adherent of the Jesse Jackson school of investing: "When in doubt, get out."
So I sold my INFN. Now that probably means it will skyrocket, since the stocks I was right on the borderline as to whether to own and decided not to have shot up, while the ones I have stuck with have just plodded along.
But I have to go with what seems to make sense based on the pros and cons. If they show a disappointing quarter and the stock drops a bunch, then I might decide the reward to risk ratio is more attractive once again and I might get back in. If they show a good quarter and the stock goes up, then I will figure the horse is out of the barn and I will need to look for the diamonds in the rough that have not yet been recognized.
They've got excellent products, but if they lack critical mass business-wise, then semiconductor manufacturers are not going to trust that the company will be around for the long haul, and will consider it too risky to buy their products.
Being best of breed should help assure they are still around when after their weaker competitors have died off. In the long term there are all sorts of perils, China competition, disruptive new technologies. But I feel pretty comfortable with FNSR for the medium term.
Their balance sheet is indeed one reason I own INFN stock and not CIEN. Balance sheet isn't everything, but I do believe the odds tend to be tipped in favor of those companies that have the stronger balance sheets.
Noticed the article about Goldman Sachs saying some of these comm hardware companies are prime buyout candidates. OK, sure Goldman Sachs sucks as a company but that doesn't mean they don't have some smart people here and there within their organization.
I bought some Calix. There are a lot of techs that I like as companies but their stocks are up a lot and I am a value investor. Calix looks like a good buy. Listened to their conf call, one of the callers mentioned Adtran is their largest competitor. Adtran was also mentioned in that GS article. Calix looks like a somewhat better value to me but I bought some Adtran as well.
Seems like the main upside for companies in this biz is if they can tap heavily into the hitherto virtually untapped international market.
Any grizzled veterans who have followed CALX and ADTN a while who know who their foreign competitors might be and how formidable you feel those are in competing with them for market share?
The bottom line: High speed data transmission is a growth industry, yet companies in that business have stocks that are not at particularly lofty valuations. I don't feel real confident on which are the best prospects, but I do have a feeling that in the aggregate these are going to do very well.
That Goldman article is also of interest to me because it provides some new investment ideas. Silver Springs, Adtran, and Calix.
Those all look interesting to me. Pretty good values in terms of financial ratios and they all are projected to have about 10% annual revenue growth according to Yahoo's figures. That is similar to the projected revenue growth of INFN.
I didn't buy any Silver Springs since they are in the business of using power lines as conduits for broadband which I am concerned may prove to just be a novelty item in the long term. Adtran and Calyx I have a harder time figuring out exactly where they fit into the comm world. However, they both seem like intriguing stock possibilities to me. I bought some Calyx and will study Adtran a bit more and possibly may buy some.
One thing that leads me to prefer INFN is its far better balance sheet. On the other hand, I believe when Micron was about 5 bucks I shied away from it partly based on balance sheet, and since then it went up something like 500%.
Looked at CIEN's chart, wish I had bought some at 18. At 22 I am not inclined. These are clearly the two promising plays in optical transport and I feel like I shouldn't have all my bets on one horse. It would be handy if INFN and CIEN merged, then the investment decision would be easy. I imagine that would run into antitrust obstacles, however.
I am not an expert in this field but I get the impression that INFN has the superior technology at the optical transport level but that CIEN is big in packet switching so that they appear to have a more comprehensive offering system wise.
Market could go down and stock could hit dirt. I don't think that would dampen business much, business that relies on shuffling data around must continually migrate to bigger pipes or die.