At the time Infinera announced the merger Transmode had 650+ Customers and 50,000+ systems deployed. Below from an Infinera viewgraph that was part of the merger announcement package:
281 employees worldwide 2014
•Packet-Optical metro network solutions
•650 customers, 50000+ systems deployed
•History of profitability
2014: $120M Net Sales, 50.7% Gross Margin, 7.6% Operating Margin
2009-2014: 50.3% Avg. Gross Margin, 13.4% Avg. Operating Margin
•#1 Packet-Optical in EMEA
•Applications: Business Ethernet, Mobile fronthaul/
backhaul, Broadband Aggregation
Transmode Customers common with Infinera:
Other Transmode major Customers:
- Virgin Media Business
- 3 SurfTelecom
- UPC Cablecom
Transmode Customer Geographic Distribution:
- EMEA 82%
- Americas 14%
- APAC 4%
Not obvious where the Transmode Customer in question that totally paused purchases in Q1 (and so far in Q2) is located but most likely in the Americas, since Mr Fallon was so emphatic in correcting the analyst that assuming it was a EMEA Customer wasn't correct.
Transmode has been around since 2000 and as of Feb 2012 had installed 30,000 systems for 400 Customers in 40+ countries.
Below, from an Infinera article discussing the debut of their XTC-2, XTC-2E, and XT-500:
"Infinera also announced that the Transmode TM-Series metro packet-optical transport systems can interoperate with its DTN-X systems, thanks to a new range of hardware and software features. For example, new hardware modules for the DTN-X XTC Series enable direct 100-Gbps WDM line-side interoperability with the former Transmode platforms. The company says it has tweaked its Infinera Digital Node Administrator (DNA) network management system to enable unified control of the DTN-X and the TM-Series platforms.
Infinera also unveiled a new PT-Fabric for the TM-Series to extend the line's capabilities to terabit switching and metro 100 Gb/s networking. However, it did not unveil PIC integration into the TM-Series. Pravin Mahajan, director of product and corporate marketing at Infinera, said the company wasn't discussing when it might add PIC-based capabilities to the line. But such a move appears inevitable."
Jefferies analyst George Notter reiterated a Buy rating on Infinera (NASDAQ: INFN) today and set a price target of $18.
Notter wrote, “The Q1 print (and Q2 guidance) were disappointing in our view – particularly the reduction in June expectations associated with a particular Transmode customer. While we still like Infinera’s business longer term, it’s apparent they have lower near-term visibility of business than we previously thought. Spoiled Lingonberries… We Can’t Pay the Same Multiple Anymore. Infinera printed an in-line March quarter and guided for Q2 results below consensus. The most significant component of the reduced expectations comes from a single customer situation on the Transmode side of the business. Slower-than-expected cross-selling opportunities with Transmode are also a new concern. On the positive side, the Long Haul and Cloud Xpress pieces of the business seem to be performing well. Moreover, the strategic rationale behind the company’s purchase of Transmode and their entry into the Metro DCI market remains very much intact. We remain encouraged on these fronts. We’re adjusting our Price Target from $22.50 to $18.00.”
Currently, the analyst consensus on Infinera is Moderate Buy and the average price target is $18.50, representing a 18.8% upside. In a report issued on April 18, Deutsche Bank also maintained a Buy rating on the stock with a $26 price target.
Seem like Infinera has things covered right now, except for maybe putting oPIC-100 into their TM-Series 3000/II
to improve power consumption
Doesn't seem like there should be any inertia against at least Infinera Customers cross-buying Metro systems, like somebody else here already pointed out... to upgrade 1G - 10G on low traffic spokes and 10G - 100G on higher traffic spokes/hubs.
TM-Series (NEC is one of its channel partners)
- 3000/II (high capacity CO, gang up to 8 chassis together, 680W max per chassis + 160W for AC PS)
- TM-301 (medium capacity CO)
- TM-102/II (single CPE)
Transmode has its own pluggable CFP-based line card approach that will get replaced by oPIC, at some point.
DTN-X XTC-2 (oPIC-100 on each line card)
DTN-X XTC-2E (oPIC-100 on each line card)
DTN-X XT-500 (sliceable ePIC-500)
DA... Website providing clarification, not me
I wonder what happened to Turbo and his usually timely analyst clips... probably sold and moved on, too.
MKM Partners didn't phone into the Q1 conference call, but the analyst publicized this comment, to align with their downgrade from Buy to Neutral along with their second PT downgrade to $15 (was $27 mid 2015 and then at some point got reduced to $21)
Genovese explained, "We are downgrading Infinera to Neutral from Buy because the new Metro-focused Transmode acquisition is performing worse than expected. The solid long haul business is no longer enough to justify a Buy rating, in our view, as the company has become a show-me story in Metro 100G. Transmode is doing worse because one of its largest customers has not been making any purchases. Also, we do not sense any change in the time line for Transmode revenues synergies from the incumbent Infinera customer base. This still remains a 2017+ event with only an outside chance of meaningful positive surprise in 2016. Finally, while the recent CloudXpress performance has been strong, management sounds cautious about sequential growth over the next couple of quarters due to competitive entries in the market"
From SeekingAlpha conference call transcript:
Jeff Hustis - Head-Investor Relations
Thomas J. Fallon - Chief Executive Officer & Director
Brad D. Feller - Chief Financial Officer
David F. Welch - Co-Founder, President & Director
George C. Notter - Jefferies LLC
Alex Henderson - Needham & Co. LLC
Vijay K. Bhagavath - Deutsche Bank Securities, Inc.
Simon M. Leopold - Raymond James & Associates, Inc.
Sanjiv Wadhwani - Stifel, Nicolaus & Co., Inc.
Douglas Clark - Goldman Sachs & Co.
Stanley Kovler - Citigroup Global Markets, Inc. (Broker)
Rod B. Hall - JPMorgan Securities LLC
Jess Lubert - Wells Fargo Securities LLC
Tim Savageaux - Northland Capital Markets
Dmitry G. Netis - William Blair & Co. LLC
Meta A. Marshall - Morgan Stanley & Co. LLC
severe interest in pounding this stock the last two days to the tune of 27M total shares traded so far.
Hopefully these dry heaves subside soon, and the Markets in general hold an even keel through the rest of this year.
I really hope management steps up to the plate and buys on the open market, here. That should signal to the short term trading community acting up that good things are coming over the next hill (for sure), so stop with the fooling around in the back seat. At the least, management can double their investment in less than a year, if analyst previous PT are reached.
It's interesting that all the current brouhaha apparently may be over a legacy significant Transmode Customer totally pausing on purchases for Q1 and probably all of Q2. It probably didn't catch Infinera's eye until late in Q1 and then confirmed enough going into Q2 to warrant a phone call to this Customer to see if there's an issue with the Company, for some reason. Seems a little ominous that a Transmode Customer would totally stop buying and respond that they're waiting for the go ahead on a contract win to continue purchases.
Maybe Infinera needs to speed up the cadence on shoving their 100G and 500G PIC's into Transmode hardware. Transmode Customers, among others, might be pausing in-wait for the better product.
Needham & Company analyst, Alex Henderson, cut estimates on Infinera Corp. (NASDAQ: INFN) after a disappointing guide for the June quarter. The majority of the problem appears to be at Transmode, where one of Transmode’s top customers stopped purchasing, temporarily causing a hole in the numbers. No change to Buy rating but the PT goes to $20.
CY16 revenues drop to $1.05B from $1.11B - Street at $1.12B
CY16 EPS to $0.83 from $0.94 - Street $0.92
The analyst thinks this is an INFN-specific problem that does not reflect on the component names. He also prefers components companies to systems companies since the systems companies only participate in one of the three main drivers in the Optical Cycle. The Systems names benefit from the back half ramp in Metro Core, but do not participate in the Data Comm upgrade cycle ramping in CY2H nor do they benefit from the exceptionally strong demand out of China.
Price Target is cut from $25 to $20.
MKM Partners Michael Genovese must be really tee'd off at the Company, to lower his price target from $27 in mid-2015, to $21, and now $15.
I found a more complete version of his comment:
"Infinera downgraded to Neutral on reduced Transmode outlook at MKM Partners As previously reported, MKM Partners downgraded Infinera to Neutral from Buy. Analyst Michael Genovese said the new Metro-focused Transmode acquisition is performing worse than expected and the solid long haul business is no longer enough to justify his Buy rating. The analyst lowered his price target to $15 from $21 on Infinera shares."
back in mid 2015:
MKM Partners reiterates a Buy rating and $26.00 price target on Infinera Corp. (NASDAQ: INFN) after spending time with INFN management. Analyst Michael Brockway believes that the best of the story is yet to come.
Brockway commented, "We are strongly reiterating our Buy rating after spending time on the road with CFO Brad Feller last week. We believe there are still major legs left to the story and the best is yet to come. Infinera is entering an entirely incremental $5bn Metro Optical market in 2015/2016 via CloudXpress, a new Metro Aggregation platform, and Transmode. The Metro market is forecast to grow ~15% per year to $10bn by 2020. We (and the company) believe it can match its 15% global Longhaul market share, implying a $1.5bn annual new Metro revenue opportunity."
The partial comment from MKM is interesting... analyst not liking Transmode's performance post merger
It'll be more tough rowing for INFN when Jefferies, Northland, and Raymond James bring down their PT and IF they also feel compelled to downgrade... I hope the latter isn't in the cards
Mr Rod Hall and Mr George Notter typically have been the most optimistic about the Company.
MKM Partners downgrades from Buy to Neutral with PT of $15 (Michael Genovese)
Citigroup downgrades from Buy to Neutral with PT of $20 (Stan Kovlar)
Needham and Company maintains Buy with PT of $20 (Alex Henderson)
Stifel Nicolaus maintains Buy with PT of $20 (Sanjiv Wadhwani)
Partial comments from MKM associated with downgrade (have to pay to get the entire statement)
MKM Partners notes, "We are downgrading Infinera to Neutral from Buy because the new Metro-focused Transmode acquisition is performing worse ..."
before Q1 earnings release and CC
DATE ANALYST LATEST RATING LATEST TARGET ANALYST
04/15/16 Goldman Sachs neutral $16 (Doug Clark)
04/08/16 Drexel Hamilton buy $22 (Greg Mesniaeff)
01/12/16 Deutsche Bank buy (Vijay Bhagavath)
12/04/15 Raymond James outperform $27 (Simon Leopold)
11/11/15 William Blair buy (Dmitry Netis)
10/09/15 Morgan Stanley equal-weight $21 (James Faucette)
09/23/15 Stephens overweight ( ??)
08/18/15 Northland Securities outperform $30 (Tim Savageaux)
07/23/15 Jefferies buy $30 (George Notter)
Other Analyst Coverage:
Wells Fargo (Jess Lubert)
JP Morgan (Rod Hall)
Boy, they are still really hiring, maybe some to replace the usual employment churn
Customer Service: 5
-Channel Sales Director for Federal Government
-majority of manufacturing jobs at their Allentown PIC foundry
Bangladore, India: 22
Stockholm, Sweden: 6
majority of the ramaining engineering-related openings located in Sunnyvale
those folks that bought all those Call contracts are more than a little annoyed at today's reaction to the conference call and Q2 guidance.
There obviously is a huge amount of money buying into short term prospects for the Company. If the outlook looks staid more than just a few months out, they are jamming the doorways trying to escape this stock, only further accelerating and accentuating the stock price collapse. At some point, I hope very soon, long term hands will prevail and calm down all the selling.
It's just amazing how this stock price can collapse over a decent Q1 and somewhat recovering Q2, albeit what the f is going on with Q2 non-GAAP earnings decline, except I hope it just signals the last cherry bomb end to Transmode integration expenses before moving forward relatively baggage-free of more write-offs.
Definitely stock that's been traded over 9 years has no direct association with the Company anymore and we're just placing our bets.
I just wish the Execs would mosey on up to the Infinera #$%$ table and place a decent bet along side the rest of us slobs to signal they've got the mojo to roll the dice and force a long winning streak to evolve and it's not all just chance associated with how the macro environment ebbs and flows.
revenue $1097.9M (+3% YoY and -17% sequentially)
GAAP net income $0.23/share (+14% YoY and -54% sequentially)
revenue $1190M +/- $30M (including $10M to $15M from BTI acquisition)
revenue $245M (+31% YoY and -6% sequentially)
GAAP net income $0.08/share
revenue $255M +/- $5M (+23% YoY growth)
GAAP net income $0.04/share
Unless I heard/read it wrong, CFO guided Q2 GAAP earning to be only $0.04/share... half of Q1.
Non-GAAP earnings dipping from $0.21 to $0.17, sequentially was the cause.
The difference between non-GAAP and GAAP was about the same, sequentially
148M shares x $0.13 = $19.24M expense hit to earnings in one quarter... about the same as 4Q2015
"Brad D. Feller - Chief Financial Officer
We currently project the diluted share count to be approximately 148 million shares and project non-GAAP EPS to be $0.17 per diluted share plus or minus a couple of pennies. As for GAAP EPS, we project it to be lower than non-GAAP EPS by about $0.13 per share primarily related to stock-based compensation expense and amortization of intangibles."
Back in 4Q2015:
"Brad D. Feller - Chief Financial Officer
The difference between our GAAP and non-GAAP results was attributable to approximate $9 million in stock based compensation, $8 million of intangible amortization and other acquisition-related costs, and $2 million in amortization of debt discount.
One concern may be that Q2 guidance was $255M with GAAP net income of $0.04
non-GAAP net income of $0.17
Their stock compensation and amortization expenses are creeping up... was around $0.07/share
Wow... 20.4M shares trade hands. That's record selling pressure for sure and no wonder the stock tanked 23%. About 14% of outstanding shares getting dumped, regardless of price.
There's no guarantee that the stock doesn't take significantly more from here, especially with the markets starting to struggle somewhat, again.
I hope instead of letting the analyst have the last word ("fine...") in response to clarifying that the significant Transmode Customer wasn't necessarily in Europe, Infinera exec's vehemently pull out their checkbooks and buy a decent block of shares. Let's do this thing, guys. The analysts and sellers have you back pedaling on your heels and it's time to back up the talk and show confidence in being winners, LOL.
Tomorrow's another day.
True, but I would prefer them opening their own checkbooks... a more decisive signal that they believe their own confidence, looking past Q2, that doesn't put the Company out on a legal limb.
It could happen, given past gestures. If I was CEO I would take this kind of stock price behavior and downgrades from analysts as a mild affront to my team's technology vision, aside from the Q-to-Q lumpiness of Customer buys. They've stated in the past that they're there to be winners, but the Markets are responding that they're just filler to keep equipment monopolies from forming.
What a day...
It's obviously naive thinking of mine to imply that Infinera management could do much more to win beyond the sales opportunities that are out there to win. Their TAM will buy only when they feel like it and only with who they think gives the best value. Only the latter is under Infinera's control.
That said, the US economy is doing okay... stock markets are doing okay... submit that terrific proposal bid to capture a decent portion of those billion dollar capital expenditure budgets.
That's gotta be a record, for this sad puppy.
9 years later and the stock dips decisively below it's IPO price yet again.
This stock and executives really get zero respect for knowing their market sector and being able to stay with their competition. Questions about whether Transmode can hold its own and cross-sell. Worries about how much PAM-4 will eat into CX sales, if any.
Infinera selling $250-260M per quarter. $0.08/quarter in GAAP earnings. Product line has expanded from just the first-generation DTN on to an end-to-end suite of systems.
Seems like the obvious solution is... give up some of that 45-50% margin and win that first landmark contract that gets them over that momentum threshold and into an easier energy state
If they don't feel comfortable having the Company stand behind more than just 1Q of forward guidance because of potential legal liabilities, feel free to consider buying 100K, 50K, 10K of shares on the open market (CEO, CTO, CFO respectively) ... to immediately put a floor on this latest decline and if anything, field a response to the Market that "hey, we don't give more than 1Q forward guidance but that doesn't mean we don't know what we're talking about or doing when it comes to gauging our market sector"
Just sayin' , ya know...
Actually, Mr Fallon definitely has thrown us a bone in the past, along with I think the CTO at another point in time. If you see explosive growth over the next hill, now seems like a good time to signal that they know it's coming and follow them.