OT: Infinera IHS Scorecard Excerpts

I’m cross posting this here for those that may still follow Infinera. I thought this finding was interesting enough to share, but, I’ll likely keep most of these types of findings to the private boards (if and when I have time to do so). When I saw Infinera come out on top of the IHS score card it piqued my interest for a bit of a follow-on.

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I was able to find some excerpts on the IHS scorecard findings as well as an explanation for the methodology employed. I think the explanation below will help make better sense of that graph I shared in the IHS post.

Here’s how IHS did their assessment:

The assessment was limited to the top 10 optical vendors by revenue for 2015 with sales of $290M or more

Evaluation criteria was based on actual data and metrics. Each criterion was measured on 5-point scale with 5 being the highest.

The criteria was categorized into two groups: market presence and market momentum.

The market presence scores were based on each company’s position in the market that includes size, brand cachet, reputation and financials. It includes the specific criteria below:

• Market share: the vendor’s percentage share of optical revenue
• Financials: an analysis of the vendor’s financial health, noting that a strong financial position improves long-term viability and allows a company to stay ahead of the competition by investing in R&D and/or acquiring other companies/technologies; the score was based on the “Altman Z-score non-manufacturing model”
• Buyer feedback: an assessment of a vendor’s performance by optical purchase decision-makers based on interviews conducted with global service providers every year
• Product reliability: buyers’ assessments of a vendor’s product reliability
• Service and support: buyers’ assessments of a vendor’s service and support

The market momentum scores reflect each company’s potential that include growth, reputation for innovation, and development of next generation technologies. The specific criteria are as follows:

• Market share momentum: a vendor’s growth in the optical market (revenue)
• Packet-optical intensity: The portion of the vendor’s portfolio that is the most advanced equipment; a measure of the percentage of a vendor’s product portfolio that is designed to meet the evolving requirements of customers, and whether the vendor is capitalizing on new, high growth market segments
• Buyer feedback on technology innovation: an assessment of a vendor’s performance by optical purchase decision-makers based on interviews conducted with global service providers every year

With that backdrop firmly in your mind, now you can take a look at the comparison chart: http://www.marketwire.com/library/MwGo/2016/5/20/11G099420/I…

Here’s what the chart tells us:

  1. Huawei has the highest score in “presence”. It scored a 4.3 here. This is likely due its sheer size of units sold in sales volume, but I don’t have the individual criterion scores to confirm this assumption.

  2. Staying in the “presence” category, Cisco, Ciena, Nokia and Infinera all came next at 3.5. Some were at the higher end of 3.5 while Infinera trailed a bit at the lower end. What was interesting is they all rolled up to 3.5 meaning the differences can be considered within rounding error range.

  3. Turning toward “momentum”, Infinera had the highest score here at 3.9. They edged out Ciena for the top spot who themselves were at 3.8. Huawei was next at 3.4.

It looked like Infinera and Ciena were pretty close. Ciena had slightly better “presence”, but not enough in “momentum” to take the crown. Below are what the excerpts said on why this was so.

Customer highlight excerpts:

When customers were asked what Infinera does well the PICs are not mentioned (interesting!), rather customers cite ease of operation, ease of provisioning and higher reliability over their competitor’s solutions (nice!)

Presence and Momentum highlight excerpts:

Infinera had excellent scores across the board and were ranked a market leader despite their smaller size.

The acquisition of Transmode gave them a boost in market share and furthered their customer perception of leadership in technology innovation.

The company achieved its strong market presence score not by bulk (they were ranked 5th in worldwide equipment share), but because of their excellent scores from customers.

The company’s financial score also helped. They were healthier than all but one of their competitors.

But what really raised their market presence score was their excellent product reliability scores and their service and support scores from customers.

What else did IHS say?

Infinera is reaping the benefits of its unique approach of being a completely vertically integrated provider of coherent 100G solutions and using them to build systems perfectly suited to the needs of DCI and competitive carriers. The Transmode acquisition was a great strategic fit that plugged the few remaining portfolio gaps in areas such as metro access and packet-optical. Though it is not the largest vendor, it has used its agility to hunt and take down emerging market niches like DCI while winning the trust of customers.

Overall, it looks like Infinera got another good report card this year, largely due to feedback from customers who actually use their products AND their ability to create purpose-built solutions - because they control their own fab process and supply chain. This is not an imaginable advantage. It is a real one.

'Nuff said (IMHO).

Best,
–Kevin

22 Likes

Thanks so much, Kevin.
I know that Saul reduced or closed his position in Infinera, but I am still a believe, as I imagine others on this board are.

7 Likes

I’m hanging too. Thanks for the info.

Joe
Long INFN & NOK
Community Fool - Ticker Guide OKE, PRLB, MTZ, & SRCL
click link for my profile & holdings
http://my.fool.com/profile/CMFJambo/info.aspx

Long INFN & NOK

Joe,

Long NOK? Have you shared your reason(s) somewhere regarding that question/topic? I checked the NOK board but recent activity there is low to absent. Curious though. If not a topic for Saul’s board feel free to email me a reply. I look forward to your response. Thanks in advance.

1 Like

Yep, what az5speedy said.

I’m very much a believer, too. I took advantage of the recent price plunge to add to my position.

Forgive me, but I simply can’t resist going over a bit o’ history. Some may recall that I expressed concern about insider selling right about this time last year (post #8864). I had established a nice position at prices from $14-$15. As I noted in my post, the heavy insider selling troubled me. I sold my entire position over the course of May-June, 2015 at prices ranging from $20-$22/share. Lotsa folks thought I was being dumb. Turns out the insider selling foretold future price declines.

I began buying back shares in January through March at prices ranging from $14.88 to $12.24 (insiders were buying at that time, too). I’m back to a full position.

Infinera has been good to me. I believe the company has a bright future.

The moral of this story? It’s not to brag. Heck, I’ve made lotsa mistakes over the course of my investing career. But I learned a few things, too. If I can impart a smidge of wisdom (particularly to new investors) it would be this: ENTRY/EXIT POINTS MATTER! It’s that old “buy low/sell high” dictum so often repeated, so often ignored.

3 Likes

anothersojourner,

Yup - Long NOK - I noted that because Kevin’s chart had NOK on there as a supplier of optical systems & equipment.

shared your reason(s) somewhere

…on premium MF Services only. Like many, I keep up with this board to get new ideas and see what the more-experienced-than-me investors are thinking about growth stocks - especially INFN. I have a portfolio that’s a work in progress (aren’t they all) towards retirement (< 2 years away) with currently 40% dividend stocks; 50% not; and 10% option investments.

I have a small (1.25%) NOK position that is used for income (options + dividend)and am waiting to see if the Alcatel-Lucent deal bears cost-cutting fruit for earnings. I am betting NOK will keep plodding along. It’s definitely not a high-conviction growth (Saul-type) stock. My INFN position is similar sized. I have too many of these 1-1.5% sized positions so I’m looking to cull and wonder whether to cut-and-run from both.

Joe
Community Fool - Ticker Guide OKE, PRLB, MTZ, & SRCL
click link for my profile & holdings
http://my.fool.com/profile/CMFJambo/info.aspx

1 Like