Infinera at JP Morgan conference 2/29

The investor’s conference held at JP Morgan on Monday (2/29) did not have a public broadcast. However, I found some key notes made available on the Silicon Investor site.

JP Morgan:

"We hosted a call with Infinera’s CFO Brad Feller. Following are our key takeaways from that discussion.

# New Chassis Orders in LH 100G: Brad Feller, CFO, said that the company is continuing to see strong demand in the 100G LH (Long Haul) market. Feller said that most of the growth this year will come from line card additions or through licenses for instant bandwidth, but noted that chassis expansion opportunities remain. As an example Mr. Feller indicated that Infinera recently took an order for 100 new chassis associated with a long haul 100G deployment.

# LH will grow but at a slower rate: Infinera doesn’t expect to see the same growth rate in the LH market in 2016 as in the last few years. However, Mr. Feller believes that slower growth is better than consensus expectations for a decline in the market. We also believe that increased line cards in the mix should be helpful to margins. [Kevin’s comments: these are the razors in the razor blade model that sell at tremendous profit margins; plus, turning on more Instant Bandwidth is 100% profit. The high margins from the LH space will fuel their ability to be aggressive in the metro space – offset one with the other while still protecting overall targets]

# Long Term Metro expectations: The company plans to increase its share in the metro market to levels similar to its LH market share. Based on Dell’Oro data, Infinera (+Transmode) had 2.6% share in Q4’15 in the Metro market vs. 14% in the Long Haul market.

# Ciena in DCI lab trials and Cisco’s solution interesting: When asked about competition in the metro DCI market, Feller commented that they are hearing that Ciena’s solution is in lab trials. He noted Cisco’s new solution as potentially competitive but pointed out that he does not believe it has yet been commercially deployed. Infinera expects to remain competitive in the metro DCI market by leveraging its PIC technology to deliver cost effective higher speed solutions."

When you listen to the Morgan Stanley conference from my other post (which was held on 3/1), you’ll hear Tom let something slip that by itself was innocuous. However, after seeing the JP Morgan notes and reading what Brad said you can easily connect the dots. First, on the Morgan Stanley call Tom said that the competitive solutions in DCI were largely vaporware - all talk and no product. He then went on to say however that there was one competitor who had a their DCI product in trials, but heard it was not going very well. Doh! That would be Ciena’s product based on what Brad told us!

In the meantime, while all these competitors talk about a competing DCI solutions with presumably better specs, Infinera will be grabbing more market share and delivering product - only to release their next generation offering right when the competition begins delivering theirs. So much for the competition! Infinera is way ahead in DCI.

You just have to listen to Tom in these talks. He really does give away all the info on just how well Infinera is positioned.