Infinera - on sale today

Further confirmation that Infinera just went on sale today:

http://www.investopedia.com/stock-analysis/090815/infinera-s…

Also, adding a little more color to the credibility of the GS analyst covering Infinera, he is new and was only on the most recent earnings call less than 2 months ago. Transcript from his contribution on the call and his focus, perhaps teeing up today’s downgrade and manufacturing a reason to do so:

Operator: Our next question will come from Mr. Doug Clark of Goldman Sachs.

Douglas Clark Q
Goldman Sachs & Co.
Hi. Thanks. I want to focus a little bit on gross margins, which continue to be really strong. I think the comments this quarter were a little bit more heavily skewed towards a favorable mix shift, especially when you consider kind of no new DTNX customers. Is that true? And how much was capacity felt like a contributor to margins this quarter?

Brad D. Feller A
CFO, Principal Financial & Accounting Officer
Yeah. So Doug, it continues to be a combination of things. So we continue to get good leverage out of the fab. Obviously, we’re ramping new products, which helps as well. But we are seeing people starting to order more and more capacity adds as well. So it is a combination of different things that continues to drive the margin and will continue to drive the margin going forward.

Douglas Clark Q
Goldman Sachs & Co.
And maybe as a follow-up to that, Instant Bandwidth was also cited, and certainly if you look at deferred revenue, they continue to grow a little bit each quarter. Is that primarily what’s driving that deferred revenue growth, and is that becoming a more meaningful contributor to gross margins?

Brad D. Feller A
CFO, Principal Financial & Accounting Officer
Yeah. So, one clarification, Doug. So the Instant Bandwidth licenses don’t sit in deferred revenue. They’re nowhere on the balance sheet. So it’s really – we’ve deployed a lot of Instant Bandwidth modules, and there’s still a lot of ports to still be filled with licenses in the future. So we continue to see both customers adding new licenses, but also customers buying more and more modules. So we’re able to deliver those first modules, still deliver strong margin profile, and build up an annuity as they license these 100-gig licenses going forward. It’s a nice margin uplift in the future as well.

Douglas Clark Q
Goldman Sachs & Co.
Okay. Great. And then, if I can sneak one more in as well, on the gross margin front from the CX, how are those margins, can you remind us, relative to kind of corporate average?

Brad D. Feller A
CFO, Principal Financial & Accounting Officer
Yeah. So I would say it’s similar to what we’ve said since the launch which is, the – some of the initial bigger customers will have lower-than-corporate-average gross margin. As we get more and more customers, I feel good about the margin profile of it. We are seeing customers adopt Instant Bandwidth for CX as well. So the initial margin on that will be a little bit muted, but over the long term, will be higher-than-corporate-average gross margin. So I still feel good about the margin profile of CX being at or above corporate average gross margin over time.

Douglas Clark Q
Goldman Sachs & Co.
Great. Thanks a lot, and congratulations.

Brad D. Feller A
CFO, Principal Financial & Accounting Officer
Thanks.

Thomas J. Fallon A
Chief Executive Officer & Director
Thank you.

Best,
–Kevin

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GS public communications are contra indicatory. They are buyers of sell notes and sellers of buy notes. SOP for them.
A

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After learning how green the Goldman analyst really was, I re-read the answers given by Brad and his tone became more apparent.

“Yeah, so Doug” and “Yeah, so one clarification Doug”. My read, while not 100% certain (as I was not in the room), is this guy is a rookie. Brad is doing his best to accommodate this newcomer in the room with the deer in the headlights.

Just my 2c.

–Kevin