Infinera expects 7 percent growth in long-haul 100G optical even as segment slows

Infinera says it continues to see robust demand for optical products from customers focused on building out new 100G long-haul capabilities, despite operating in a market segment where growth is starting to slow.

Echoing industry analyst estimates from IHS and Dell'Oro, Infinera said it expects the long-haul DWDM market segment to grow 6 to 7 percent in 2016.

"Consistent with industry analysts, we anticipate 6% to 7% growth in long haul DWDM, 9% to 10% in Metro DWDM and double digits growth in data center interconnection (DCI)," said Tom Fallon, CEO of Infinera, during the fourth quarter earnings call, according to a Seeking Alpha transcript. "While overall long haul growth is slowing, our aggressive deployment in a 100G long haul footprint over the past few years places Infinera in an excellent position to continue to outgrow the long haul market."

Besides long-haul, the vendor is seeing good growth potential rates of 9 to 10 percent in metro DWDM and double digit growth in the data center interconnect segments.

"Growth estimates for the DCI market vary considerably between industry analysts but all project the market will grow substantially in 2016," Fallon said.

Infinera immediately enhanced its metro DWDM capabilities by purchasing Transmode in 2015.

Fallon said that it is seeing RFPs from a mix of existing and new Infinera and Transmode customers for the metro and long-haul gear. However, he cautioned that when it pitches the Transmode products to existing Infinera customers, the company has to go through the same vetting process of proving out the network equipment's capabilities like it would for any new prospect.

"We are seeing a lot more opportunities for Transmode gear than Transmode did independently," Fallon said. "A lot of that is because it's going in to potential Infinera customers and one of the things I am going to caution everybody about is, it's easy to think, 'oh, Infinera already has these customers, gosh, selling them something new would be really easy.' It might be easy but it's going to take time. You have to quote it, you've got to explain it, they have to test it, they have to have an application."

Fallon added that Infinera will see the positive elements of the Transmode transaction, but it will probably be the second half of this year "before you really see the pull-through of these synergies."

From an overall financial perspective, Infinera's revenue was $260 million, up from $232.5 million in the third quarter of 2015 and $186.3 million in the fourth quarter of 2014.

On a per-share basis, Infinera said it had net income of 8 cents. Earnings, adjusted for stock option expense and amortization costs, came to 21 cents per share.

The company's results met Wall Street expectations. Analysts surveyed by Zacks Investment Research forecast earnings of 21 cents per share.

Shares of Infinera were listed at $13.28, down 68 cents, or 4.87 percent in Friday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release
- see the Seeking Alpha transcript

Special Report: From Adtran to Zayo: Tracking wireline earnings in Q4 2015

Related articles:
Optical transport equipment market dropped to $3.1B in Q3 2015, says research firm
Infinera's Fallon: Cable industry consolidation is an opportunity
Infinera's Fallon: There's a pent up demand for 100G
Ciena, Cisco and Infinera lead optical hardware market, IHS Infonetics says

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