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Infinera’s Biggest Concern is Ciena

A commonly heard phrase over the years has been that nobody gets fired for buying from Cisco Systems. When it comes to optical networking products, we have reached the stage in which the same can be said for Ciena, although we believe it has come about despite its top leadership. While both Infinera and its archrival continue to benefit greatly from the US government protection from Chinese competition, which in our opinion is for no legitimate reason, customers are obviously going to think at least twice before buying from the PIC-fixated supplier because once again, its seems that its long-term survival is in doubt.

As usually the case, listening to one of Infinera’s quarterly earnings calls along with seeing the slides associated with the event, always raises more questions than provides answers. After its latest conference, we have the following 14 inquiries for the top executives at the supplier:

1. When you are not a full turnkey submarine vendor, why do you imply that Infinera can take advantage of trans-Atlantic routes (as part of its slides?)

2. Is it possible there is only room for one major player in the undersea upgrade market with Xtera Communications probably on the brink of collapse (as we discussed almost four weeks ago on the fibeReality LinkedIn home page).

3. Given that your new 1RU box still does not solve the Open Line System (OLS) issue, do you really believe that your band-aid approach in partnering with Lumentum Holdings will be taken seriously by customers?

4. Why do you defend the indefensible by continuing to assert that the use of your PICs consistently provides a substantial cost savings, and resultant price competitiveness on equipment, when it is not the case with much of the gear being offered?

5. With all of the development work on your PICs, why are you still producing a 2x50G combination for 100G capability?

6. Concerning Transmode, in stating,” “We didn’t buy the company to hold market share [in Europe],” why did you not leave it as an independent entity to have a much better shot at accomplishing the task of growing share?

7. Is it just a coincidence that you only hit 50 percent gross margins right after buying Transmode, and have not done so since, because of the consolidation efforts with your metro product lines?

8. Before the acquisition, Transmode was doing substantial cost cutting on every one of its products each year – is that still the case?

9. Why do you insist on mutilating the Transmode solutions with PICs?

10. There was a note released by an investment analyst that you are putting Acacia Communications’ DSPs and PICs into Transmode devices – if it is true, would that not solve your OLS problem in the data center interconnect space, and should not this work have begun right after the close of the metro business purchase?

11. With XO Communications probably being Transmode’s biggest customer in the US, what has been the impact on your revenues after the Verizon buyout of the carrier?

12. Given the growing interest in WDM-PON in the industry, are you even aware that Transmode developed this technology?

13. When your performance is underwhelming, is it appropriate to be laughing, and to be cracking unfunny jokes about investment analysts buying your devices?

14. With the abysmal record of private-public partnerships, does it make sense, just out of principle, to spend a million dollars in becoming part of AIM Photonics?

Please find details on our latest report, Clash of Optical Component Vendors & Technologies in Data Center Networks here. For our seven-day-a-week updates, please click here.

[written by Mark Lutkowitz]

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