INFN: Simple thought experiment

Like maps, quarterly earnings reports are conceptualizations of a business. They’re not the territory.

Now imagine that human beings agreed that only 1 check-up per year was sufficient for keeping tabs on a business.

Given the news we just received, do you think Infinera’s stock would have lost over 1/3 of its value as a business, just now, if we weren’t going to hear from them for another year?

The arbitrariness of quarterly results feels more like abstraction for abstraction’s sake, especially when it drains management resources away from fruit harvesting.

Borders are non-existent and yet cause lots of damage in terms of suffering and establishing haves from have-nots. Let’s keep focused on the big picture, please, without slicing up reality for who-knows-what-reason?

(long INFN)


Hi Monkey,

I think your posts are wonderful and this last one is yet another example.

I do however think this exercise shouldn’t be done here - on this board - because what you’re asking for is an assessment of the potential or future value of a stock that currently doesn’t have a compelling present value. In other words, a story stock by this board’s definition.

I still believe in the stock and in its potential, but, for the stock to work here on Saul’s boards it has to have a recent track record. That track record has been broken. That means it no longer qualifies as a “Saul stock” (even if he doesn’t like the term, it is how I think of the stocks talked about here).

So, with that said, I’ve been personally trying to keep my comments and observations on the private boards since yesterday’s quarterly announcement.

I will say this. When you look at just the rearview mirror Infinera actually had a decent quarter. They came in higher than they guided. The recent downturn could have been just a blip and talking more about Infinera here may have been fine. Well, we just ran over a pothole and I think we may be holding up traffic. Should we let the other board readers move along?



I think you are right Monkey. The long haul is starting to slow and the Metro and Data Centers have not picked up enough yet. The growth is coming, I see it every day at work. I work the Metro and so far this year I have put in 5 100 gig circuits. 3 to customers and 2 for our backbone. I have put in a lot of 10 gig and 1 gig circuits. Those circuits were built onto 100 gig circuits running between our offices. We just installed 10 gig circuits last year between all of our ethernet aggregators. Those in one year are no longer large enough. We are now starting to install 100 gig circuits. While some may think this is a story stock, I do not think of it as that because I work with the data every day. While it has slowed down recently, this is not unusual in the Telecommunications sector. It could stay slow the rest of the year but I think in 2 years we will be much higher. But one thing everyone has to understand that when the growth in Metro starts slowing down you will want to be out of this stock. But that time is not yet. The Metro portion should start picking up. I want to see Ciena report though because it is possible that they are stealing market share. We want to watch that closely. In the Long Haul pop that I work in occasionally I noticed that they are installing a Ciena 6500 transport. It seems they are going to use this to hook between their Infinera Dtn-x and the Metro. But maybe Ciena is trying to win market share by selling at a discount.



I have been involved in several deals over the last 6 months where we went up against Ciena 6500. They appear to be discounting the living ^@3$ !!! out of it, beyond stupidity at times.


Thanks Bashar, That could be really bad. Another price war could go on for awhile. ciena is reporting 9/1 and I want to see that before I decide on whether I will buy more Infn.


I have been involved in several deals over the last 6 months where we went up against Ciena 6500. They appear to be discounting the living ^@3$ !!! out of it, beyond stupidity at times.

Hasn’t this been one of the fears concerning INFN, that its’ products would become just another commodity? If I heard correctly on the call, management said margins are going to suffer as we try to hang on to our market share. I think we have all seen this in tech before. Once it starts it doesn’t stop until everyone is broke. Alcatel is already broke, now perhaps Ciena is on their way to broke, etc.
My hope since day one with this company was that their product would be such a game changer that others could not compete with it and it would command a high enough price that the company could rise above the fray, as it were. But it appears that is not the case, the INFN PIC is just another way of doing the same thing and does not offer any clear advantage if you factor price into the equation.
I don’t know, I have depended on those of you in the industry to help me out on this, but my feeling is the thesis is broken. Those using these products have always been in the drivers seat. Consequently, unless you can offer them a product that is so superior to the next guys product that they can justify allowing you to make a great return, you are not going to get that great return. They will force the price down so low that it is all you can do just to stay in business. It looks to me, looking from the outside, that evidence suggest INFN does not have that product. If we go way back to the Verizon deal, cost made the difference. And now you are telling me that Ciena is winning on price. So it seems to me the thesis is broken. We are dealing with a commodity here and INFN will never get past the point where gross margins get much past 50 percent and R&D below 20 percent and total operating expenses below 40 percent. Leaving them, after taxes, maybe 4 or 5 percent. Not much better than a grocery store. And with every build cycle they will loose money, or at the very least the stock price will collapse every time there is a hiccup with one their customers. etc. Sure hope you can tell me I am wrong. I have a GTC in to dump the whole shebang if the price rebounds somewhat. So I am anxious to hear others thoughts.
But these are mine.