Infinera sees the next frontier for 100G optical networking taking place in the data center interconnection market segment, one that the company's leader says will be driven by the rise in server-to-server traffic to accommodate the growth of cloud and content services.
Speaking to investors during Infinera's third-quarter earnings call, Tom Fallon, CEO of Infinera, said the company is poised to attack the data center-to-data center interconnection opportunity with the recently introduced Cloud Xpress platform.
The Cloud Xpress platform is designed to address the metro cloud, which is the transport network that interconnects multiple data centers within a metro area.
"We believe this is the market that will drive the first volume adoption of 100-gig into the Metro starting this year and accelerating into 2015," Fallon said, according to a Seeking Alpha transcript. "Industry analyst firm ACG expects the Metro cloud market to grow to over $3 billion by 2019, which significantly expands Infinera's addressable market and further enhances our operating leverage by driving more volume to our vertically integrated manufacturing capability. In the distinct but complementary Metro aggregation market, we expect 100 -- to see 100-gig growth starting in late 2015 or early 2016."
At the same time, Infinera continues to see growth of its flagship DTN-X product.
During the quarter, Infinera added three new DTN-X customers, including service provider wins in Europe and Asia-Pacific as well as a large North American enterprise customer. The vendor now has a total of 49 DTN-X customers and a total of 136 customers with deployments in 72 countries.
Although North America is Infinera's strongest region in terms of revenue, international revenues made up 30 percent of total third-quarter 2014 revenues, up from 18 percent in the second quarter of 2014.
Infinera's CFO Brad Feller said the company saw improvements in the EMEA, Latin America and Asia-Pacific regions.
"After a relatively soft first half of fiscal 2014, the EMEA region showed improvement in the quarter, accounting for $34 million or 20 percent of total revenue," Feller said. "In addition, we continued to see growth with partners in Latin America and APAC, as revenue in each region individually accounted for 5 percent of total revenue."
Fallon said he sees a wide pipeline of long-haul opportunities as more customers migrate from the existing DTN to the DTN-X platform.
"We see our opportunities in long haul continuing for a number of years, as the majority of DTN networks deployed today are lightly populated and are just beginning to see fill," Fallon said. "We have a pipeline of DTN customers who we believe will convert to be DTN-X family, and we believe we will continue to win market share with new DTN-X customers."
Overall third-quarter 2014 GAAP revenue was $173.6 million, up year-over-year from $142 million in the third quarter of 2013. GAAP gross margin for the quarter was 43.4 percent compared to 42.5 percent in the second quarter of 2014 and 48.1 percent in the third quarter of 2013.
Looking forward, Infinera has forecast fourth-quarter 2014 revenue to be in the range of $175 million to $185 million.
Shares of Infinera were listed at $12.15, up $1.54 in Thursday morning pre-market trading on the Nasdaq stock exchange.
- see the earnings release
- and the earnings transcript (sub. req.)
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