| | | FROM INFINERA IR,
Hi everyone. We had a packed room in San Diego to hear David Heard and Dave Welch present at OFC yesterday afternoon yesterday. For those of you not able to attend live or watch the webcast, the transcript and slides are attached.
The webcast link:
infinera2015ir.s3.q4web.com.
To recap some key points from the presentation:
David Heard started by outlined market opportunities, our development strategy, and new processes/people:
- We see opportunities to outgrow the market over the next several years. Metro densification (5G, Fiber Deep for cable) is a key opportunity for Infinera to expand its current addressable market.
- Webscale product lifecycle tends to be 2-3 years with service providers being longer. We are matching our optical engine cadence with this lifecycle to deliver products when our customers need them.
- ICE4 will grow for many years given it covers our full customer base
- The smooth delivery of new technologies enable us to deliver on customer price expectations and grow/sustain revenue and gross margins going forward.
- We have put into place key processes and new team members to expand our go to market capabilities and to ensure smooth product/technology delivery, particularly given our faster cadence.
Dave Welch covered technology… ICE4/ICE5/ICE6:
Last year at OFC we committed to a faster technology cadence (2 yrs, down from 4-5 historically). With ICE5 products to be out in 1H-19 and ICE6 technologies already showing strong results in labs, we are on track.ICE5 technology (600G/wave, 66gbaud, 64 QAM) is being demo’ed live on the floor at OFC. ICE5 product delivery will be aligned with webscale demand (i.e. faster than traditional service providers).Vertical Integration is more important than ever (Infinera is the most vertically integrated systems company in optical, with its own indium phosphide fab to build PICs and its own DSPs)Enables gross margin leverage – the higher % of revenue mix that comes from new technologies (which have lower cost structure to INFN), the better our marginsVertical integration is also vital to control our innovation destiny and stay ahead of competitionWithin the next few years it will be critical to co-package optics and DSP in the same module as baud rates advance (i.e. faster speed) to drive higher capacities. We are uniquely capable of doing this with our PIC + DSP to effectively build a DCO we use in our systems. Competitors who are reliant on merchant sources may be challenged to keep up.While much of the technology presentation focused on future technologies (ICE5, 6), ICE4 is selling well and is demonstrating technological differentiation.- Record spectral efficiency – This enables customers to have more fiber capacity… particularly important in the subsea market
- Open ICE – We recently won a deal with a large European wholesaler, selling the XT-3300 over a competitor’s line system
- Lightning Tolerance – Most customers have a lot of aerial fiber in their networks, which is more susceptible to outages caused by lightning at higher QAM rates. Our technology is proving to be more resilient than competitors, which is driving new opportunities to Infinera.
If you have any questions, please let me know.
Thank you,
Jeff Hustis, CFA
Infinera
Director, Investor Relations |
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