Shares of networking equipment maker Infinera Corp. plunged Tuesday morning after the company cut its 2008 revenue forecast and issued a third-quarter outlook that fell short of expectations.
The stock dropped $3.91, or 28.3 percent, to $9.90 in heavy trading after Infinera said it now thinks revenue will grow 10 percent in fiscal 2008, down from a prior projection of 25 percent. The company also forecasts $75 million to $80 million in the third quarter, as demand from North America is expected to decrease.
Infinera posted $309.3 million in revenue in 2007, and Wall Street's outlook calls for $388.5 million in 2008. The company's updated forecast puts 2008 revenue at about $340.2 million, well short of Wall Street's target. According to Thomson Financial, analysts expect $97.7 million in third-quarter revenue, on average.
Goldman Sachs analyst Simona Jankowski, who rates the stock at "Neutral," said part of the problem was Infinera's reliance on a few major customers, including Level 3 Communications Inc., Cox Communications, Interoute Communications and XO Communications.
Level 3 ordered 31 percent of invoiced shipments in the first quarter, and Cox, Interoute and XO each made more than 10 percent of Infinera's orders.
Jankowski now expects the Sunnyvale, Calif., company to lose money in 2008 and 2009, as Infinera won't be able to significantly reduce its costs to make up for the decreased revenue. She slashed her price target to $10 per share from $14.50.
On average, analysts expect a profit of 11 cents per share for Infinera in the year ending Dec. 27, 2008, and 30 cents per share in 2009.
Four analysts currently rate Infinera shares at "Buy," while two give a "Neutral" rating.
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