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High-speed networking is a fact of modern life. There will only be more of it in the future, using even faster technologies.
Say hello to one little company that will benefit greatly from this trend: Motley Fool Rule Breakers recommendation Infinera (Nasdaq: INFN ) .
Infinera has been a newsletter recommendation since December 2007, riding the roller-coaster track of economic ebb and flow on a very lumpy sales model. New customers get affordable infrastructure pieces at first, and then come back later for high-margin snap-in modules that do the hard work of ultra-fast optical network switching.
This reminds me of Intuitive Surgical (Nasdaq: ISRG ) , where surgical robots are just the beginning of profitable revenue streams, such as attachments and accessories that are consumed and must frequently be replaced. As long as there is value in the technology, customers will keep coming back for more of the profit-making extras for years and years.
Unfortunately, this also makes Infinera's sales extra lumpy, even for a small-cap company. This quarter, the company reported sales of $66.6 million -- less than half of last year's $138.3 million -- despite a healthy influx of new customers. Two unnamed Tier 1 telecom providers from Europe placed their first orders, getting put into Infinera's Rolodex along with fellow European giant Deutsche Telekom (NYSE: DT ) ; Infinera's largest customer, Level 3 (Nasdaq: LVLT ) ; and smaller well-known clients like Qwest Communications (NYSE: Q ) .
When the global economy recuperates from its current ills, I believe we can expect these customers to ramp up their plug-in orders. Infinera is taking it on the chin right now to the tune of a $0.26 net loss per share, in order to be ready for the upturn in due time.
The growth opportunities here are nearly ridiculous. Level 3 -- which is anything but a top-level carrier -- is far and away Infinera's largest customer. The rest have plenty of room to pick up their installations of Infinera's revolutionary optical components. And European first-class clients are all good, but where's AT&T (NYSE: T ) and Verizon (NYSE: VZ ) ? I see higher-caliber customer signings in the future.
So Infinera is cheap today because the quirky revenue stream and horrendous economy have conspired to constrict sales and earnings. But its balance sheet is crisp and clean, with $233 million of cash equivalents and no debt whatsoever. Watch out for that bounce!
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