Thanks for Making Me Look Stupid, Infinera!

Thanks for making me look stupid, Infinera (Nasdaq: INFN  ) . Your shareholders, on the other hand, look very smart today.

A couple of days ago, I told my readers to back off Infinera shares ahead of Thursday's fourth-quarter report. The company appeared to be lined up for a swing-and-a-miss performance in the short term, and I expected share prices to dive to comfortable buy-in levels.

But there was no miss. Instead, Infinera knocked the cover off the ball. The optical networker delivered a $0.06 non-GAAP loss per share on $112 million in sales, in both cases far better than either Wall Street estimates or management guidance predicted. Shares jumped as much as 14% in after-hours action.

So what sweet spot did Infinera find that helped it beat every expectation while rivals Oclaro (Nasdaq: OCLR  ) , Juniper Networks (Nasdaq: JNPR  ) , and Tellabs (Nasdaq: TLAB  ) all whiffed their recent reports in the eyes of Mr. Market?

According to CEO Tom Fallon, Infinera simply stole market share. Juniper and others say that large telecom customers are holding back on their equipment orders; Fallon sings a very different tune about "continued solid demand from customers for Infinera's unique digital optical networks including cable, Tier One, and bandwidth wholesale service providers." In particular, his company received lots of budget-flush orders as 2011 wound down.

Sure, the company reported a small loss, but that's to be expected in the middle of new product rollouts. It takes a while to perfect brand-new manufacturing processes, and enterprise-class buyers like Infinera's favorite customers need to put that new stuff through its paces before plunking down large purchase orders. At the moment, four customers are kicking the tires of the high-end DTN-X platform that accepts superfast 500-gigabit fiber-channel modules. That product goes into full-volume production in the second quarter of 2012 with revenues dropping down in the quarters after that.

So my point about Infinera's long-term power is only amplified by these results. If you bought the stock at even lower prices, you did the right thing. But there's plenty of growth opportunity left for us laggards to capture. My bullish CAPScall on Infinera jumped from red to green last night, and the stock will continue to boost my all-star CAPS status for years to come. All at the expense of Juniper and Tellabs, of course.

Some elite investors never look stupid. You wouldn't believe what those geniuses are buying today while everyone else is selling.

Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Motley Fool owns shares of Infinera. Motley Fool newsletter services have recommended buying shares of Infinera. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.


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  • Report this Comment On February 03, 2012, at 7:25 PM, lojikfool wrote:

    Anders, my old friend, you weren't trying to time the market and encouraging others to do the same were you, tuttut

  • Report this Comment On February 04, 2012, at 12:45 PM, kickbishopbrenna wrote:

    Yeah thanks! I got nervous, halved my over-loaded position, and now am waiting for the gate to re-open!!

    Still your logic and information are based on good analysis, and we will continue to see enough fluctuation to buy at a good price, and hold till the sales kick off. I for one feel (and thats all it is..a feeling) the "bottom" may have been pushed up from high 6's into 7's, so I'll be re-purchasing anyways below 7.50. The we sit and wait.

  • Report this Comment On February 05, 2012, at 9:31 AM, doinitmyway wrote:

    Thank you for teaching me a valuable lesson Thursday, never buy or sell on the merits of one article, only on the strengths and weakness of the company you are invested in. Glad I kept the stock in my retirement portfolio, sorry I sold my cash position. Live and learn, again :-)

  • Report this Comment On February 06, 2012, at 8:57 AM, aarub wrote:

    Rash day trading timing advice cheapens MF and makes me very unlikely to buy NF advice or believe you have anything worthwhile to say

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