Infinera's Fallon sees opportunities in cloud, data center interconnection services

The metro cloud and data center interconnection markets may be still relatively nascent, but Infinera said during its first-quarter earnings call that it is seeing momentum in both segments.

To serve the metro cloud opportunity, Infinera has developed its Cloud Xpress (CX) platform. As of the end of the first quarter, the vendor said, seven customers had bought the CX platform, while a number of others are conducting lab and field trials. Through its channel program, the vendor has signed agreements for the CX platform with Blackboard and the Japan Internet Exchange (JPIX).

"We continue to gain momentum for our Cloud Xpress platform in Q1," said Tom Fallon, CEO of Infinera, during the earnings call, according to a Seeking Alpha transcript. "We started shipping our 10 GigE version of the Cloud Xpress during the quarter and generated revenue from both our 10 GigE and 40 GigE versions of the product."

Fallon said that although the data center interconnection market is still young, Infinera sees similar potential there.

"The data center interconnect market where the Cloud is going to go, it is probably the more explosive opportunity over time," Fallon said. "It's a relatively young market today, few hundred million dollars and it's forecasted to grow to a few billion dollars over the next several years. But you are not going to see probably linear growth in that."

Driven by ongoing sales across various customer verticals, Infinera's overall Q1 revenue rose on both a sequential and year-over-year basis, to $186.9 million, from $186.3 million in Q4 2014 and $142.8 million in Q1 2014.

"In what is typically a soft quarter for our industry we excelled benefiting from broad strength across customer verticals," Fallon said. "First quarter revenue was $187 million at the higher end of our guidance range and 31% higher than last year's first quarter revenue."

From a regional point of view, North America continued to be the strongest region for Infinera, accounting for 68 percent of its total revenue. On an international basis, EMEA represented 24 percent of total revenue, with Asia-Pacific and Latin America each representing 4 percent.

The company's GAAP gross margin was 47.2 percent, compared with 45.3 percent in the fourth quarter of 2014 and 40.9 percent in the first quarter of 2014. The company's GAAP operating margin for the quarter was 8.1 percent, compared with 6.9 percent in the fourth quarter of 2014 and an operating loss of 0.7 percent in the first quarter of 2014.

Looking toward the second quarter, Infinera has forecast revenue to be $200 million, plus or minus $5 million. The vendor said that the "midpoint of this range represents year-over-year growth in the second quarter of nearly 21 percent."

Shares of Infinera were trading at $20.29, up 7 cents, or $0.35, in Wednesday-morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release
- and the earnings transcript (reg req.)

Special report: Wireline telecom earnings in the first quarter of 2015

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This article was updated on April 27 to correct the fact that Blackboard is not a cloud service provider.