In the December quarter (when the CEO was much more confident than he is today), he said something that struck me. “Time is a weapon.” I’m paraphrasing from memory, so forgive me if that quote is inexact. I was thinking this morning how true that is. I bought Infinera six hours before the conference call. Was my research complete? (Probably not, since I had no idea that Infinera did not give guidance!) But your research, your knowledge, is never complete. The Needham guy knows way more about the optics business than I do, and he was wrong (short-term wrong) in a very public fashion. He and his team were pounding on the table on Monday. On Wednesday they were embarrassed by Infinera. The CEO and CFO made very public buys. They too are embarrassed. And many of their investors are mad at them.
Time is a weapon!
I was researching Infinera and another fiber optics company simultaneously, trying to figure out where to invest my money. One of these companies is going to be a 100-bagger. In my research I was listening to an interview between an optics guy and a Verizon guy. It was a very nerdy discussion. But in the middle of it the Verizon guy was saying, “you can’t keep relying on software, it’s physics.” Meaning, an optical buildout had to happen. This is the same damn thing George Gilder was saying 16 years ago! Gilder was right! But, alas, time is a weapon. Timing is huge in terms of failure and success. Gilder, as many of us knew, was a visionary, and very bad at timing. And yet, on the fundamental question of the necessity of an optics buildout, I am convinced more than ever that Gilder is right.
Time is a weapon!
Imagine the Infinera CEO, the head of this very small cap company, bragging to the guys at Google that Infinera can deliver optical equipment very quickly. They don’t need lead time (unlike all their competitors!) I have a strong feeling the Infinera CEO was making this brag (hey, it ain’t bragging if it’s true!) And I can imagine the Google guys wanting to create a real-life test to see if Infinera could, in fact, deliver optical equipment very quickly.
I can also see Google saying to themselves, “Maybe we can build this optical stuff in-house. How difficult can it be?” So they want to test themselves, too. Google is going to try to build this stuff in-house. And Google’s back-up plan? Their back-up plan is to have faith in what the Infinera CEO told them six months ago.
“Time is a weapon.”
So, as Google runs into trouble, they call Infinera and see how quickly they can respond. Is Infinera a partner they can trust? I imagine the rich, rich, rich Google guys listening to the poor, poor, poor Infinera guys and wondering if they can get into bed with this company that just wants to steal their money. “Let’s try to build it ourselves and see how hard it is,” says Google. (My assumption? Very hard!) “And if we get into trouble we call up Infinera and they will bail us out.”
So let us wait and watch and see what happens over the next quarter or two. Do not panic, optics investors! George Gilder was right! It’s just timing that is a pain in the ass. And humbling.