News Article

Infinera Whacked Despite Deutsche Deal

It's good news and bad news for the photonic integrated circuit manufacturer, as it scores a major deal with Deutsche Telekom, but lowers sales guidance for the back end of 2008.

Shares in InP-based photonic integrated circuit (PIC) manufacturer Infinera tumbled by 30 per cent after the Nasdaq exchange closed on June 16, despite the company securing a key deal with a major telecom carrier.

In perhaps its highest-profile design win to date, Deutsche Telekom has chosen an Infinera system with which to upgrade to its pan-European network. But investors took fright when the company, which runs an InP wafer fab in California, significantly cut financial expectations for fiscal 2008.

Previously, Infinera management had indicated that 2008 revenue would be 25 per cent higher than the 2007 figure, which was just over $309 million.

That would translate to 2008 sales of approximately $385 million. But with subdued sales to North American customers now expected in the third quarter of the year, which ends in September, annual growth will be pegged back to just 10 per cent, equating to 2008 sales of around only $340 million.

CEO Jagdeep Singh said that despite the lowered forecast, he believed Infinera had lost neither existing customers nor market share in the fiber-optic networking sector.

Referring to the Deutsche Telekom deal, Singh said: "Today s win and ongoing engagements with other leading carriers worldwide give us continued confidence in the strength of the long-term strategy and growth outlook for Infinera."

Since it is with one of the world s biggest carriers, the Deutsche Telekom deal represents a breakthrough for Infinera s digital optical network architecture, which relies on large InP semiconductor chips each featuring dozens of tiny optoelectronic components (see related stories).

The particular system chosen by the German carrier for its backbone includes up to 160 dense WDM channels operating in the C-band, boasts on optical reach of 2500 km, and supports future capacity upgrades to 8 Tb/s.

That system is also compatible with future generations of faster PICs, which Infinera outlined in accordance with "Kish s law" earlier this year.

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