Infinera's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Infinera (INFN)

Q4 2011 Earnings Call

February 02, 2012 5:00 pm ET


Bob Blair -

Thomas Fallon - Chief Executive Officer, President and Director

Ita M. Brennan - Chief Financial Officer

David F. Welch - Co-Founder, Chief Marketing & Strategy Officer, Executive Vice President and Director


George C. Notter - Jefferies & Company, Inc., Research Division

Blair King - Avondale Partners, LLC, Research Division

Ehud Gelblum - Morgan Stanley, Research Division

Rod B. Hall - JP Morgan Chase & Co, Research Division

Michael Genovese - MKM Partners LLC, Research Division

Simona Jankowski - Goldman Sachs Group Inc., Research Division

Nathan Johnsen - Pacific Crest Securities, Inc., Research Division

Kevin J. Dennean - Citigroup Inc, Research Division

Sanjiv Wadhwani - Stifel, Nicolaus & Co., Inc., Research Division



Welcome to the Fourth Quarter Year 2011 Investment Community Conference Call with Infinera Corporation. [Operator Instructions] Today's call is being recorded. [Operator Instructions] I would now like the turn the call over to Mr. Bob Blair of Infinera Investor Relations. Sir, you may begin.

Bob Blair

Thank you. Today's call will include projections and estimates that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements address the financial condition, results of operations, business initiatives, views on our market and customers, our products and our competitors' products and prospects of the company in the first quarter of fiscal year 2012 and beyond and are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

Please refer to company's current press releases and SEC filings, including the company's annual report on Form 10-K filed on March 1, 2011, for more information on these risks and uncertainties.

Today's press releases, including fourth quarter and fiscal year 2011 results and associated financial tables and investor information summary will be available today on the Investors section of Infinera's website. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. This afternoon's press release and today's conference call will also include certain non-GAAP financial measures. In our earnings release, we announced operating results for the fourth quarter and fiscal year 2011, which exclude the impact of restructuring and other related costs and noncash stock-based compensation expenses.

These non-GAAP financial measures are provided to facilitate meaningful year-over-year comparisons. Please see the exhibit of the earnings press release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and an explanation of why these non-GAAP financial measures are useful and how they are used by management, which will be available today on the Investors section of our website.

On this call, we will also give guidance for the first quarter of fiscal year 2012. We have excluded noncash stock-based compensation expenses from this guidance because we cannot readily estimate the impact of our future stock price on future stock-based compensation expenses.

I will now turn the call over to Infenera's President and Chief Executive Officer, Tom Fallon.

Thomas Fallon

Good afternoon and thanks for joining us. With me are Chief Strategy Officer, Dave Welch; and CFO, Ita Brennan. I will spend a few minutes today commenting on the market, touch on our Q4 results and then provide an update on the reception to our new products before turning it over to Ita for a full review of our Q4 performance and Q1 outlook.

Internet bandwidth continues to expand with unabated growth, driven by video, mobile and cloud computing applications. Simultaneously, we are observing the transformation of the Internet into the primary and mission-critical telecommunications network of the future. We believe these trends are causing service providers to take a hard look at how they build and manage their next-generation transport infrastructure. This transformed transport infrastructure will need to: scale smoothly to multi-terabits of optical transmission, starting with a 100 Gig and quickly moving to terabit capacities; efficiently accommodate more fluid, cloud-based traffic demands and support mesh networking while maintaining the predictability and reliability of transport networks; and become a simpler and more cost-effective, requiring significantly less human resource, power, cooling and space per bit of traffic carry.

We believe that our recently launched DTN-X is optimized to accelerate this important transformation. Our competitors are starting to ship 100 Gig and present concepts and demos of 200 hundred Gig on a line card. Customers are testing our DTN-X today, with 500 Gig super-channel line cards, and we've already demonstrated technology to go to 1 terabit of super-channel capacity on a single card.

The DTN-X is the step function that service providers and in particular Tier 1 carriers need to properly prepare their networks for the high-capacity future. We believe that our new DTN-X, in conjunction with our enhanced DTN and existing ATN, all with control plane unification software, enable us to better address our traditional customer, as well as a new set of Tier 1 customers across verticals and geographies.

In Q4, we saw an active market in the cable, Tier 1 and bandwidth wholesale segments, while much of the industry conversation and our own go-to-market strategy centers around 100 Gig and greater than 100 Gig super-channel speeds. The 10 Gig market remains strong. It is a consensus view among analysts that 10 Gig will continue to grow in volume throughout the next several years. And we believe it will remain robust for another decade. In fact, we believe the strength of the 10 Gig market was a key factor enabling Infinera to achieve the #1 share position in the North America, terrestrial long-haul WDM transport and ROADM market, and advanced to #3 worldwide, based on Infenera's data for the third quarter of 2011.

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