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Infinera Corp  (NASDAQ:INFN)
Q3 2018 Earnings Conference Call
Nov. 06, 2018, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Third Quarter Year 2018 Investment Community Conference Call of Infinera Corporation. All lines will be in a listen-only mode until the question-and-answer session. (Operator Instructions) Today's call is being recorded. If anyone has any objections, you may disconnect at this time.

I would now like to turn the call over to Mr. Jeff Hustis of Infinera Investor Relations. Jeff, you may begin.

Jeff Hustis -- Investor Relations

Thank you, operator. Welcome to Infinera's third quarter of fiscal 2018 conference call. A copy of today's earnings and CFO commentary are available on the Investor Relations section of our website. Additionally, this call is being recorded and will be available for replay from the website.

Today's call will include projections and estimates that constitute forward-looking statements, including but not limited to statements about our business, plans, products, and strategy, statements about our acquisition of Coriant, integration plans and synergies, as well as statements regarding our fourth quarter outlook. These statements are subject to risks and uncertainties that could cause Infinera's results to differ materially from management's current expectations. Actual results may differ materially as a result of various risk factors as included in our most recently filed 10-Q, as well as the earnings release and CFO commentary furnished with our 8-K filed today. Please be reminded that all statements are made as of today and Infinera 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.

Today's conference call includes certain non-GAAP financial measures pursuant to Regulation G. Infinera has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures in its third quarter earnings release and CFO commentary.

I'll now turn the call over to our Chief Executive Officer, Tom Fallon.

Tom Fallon -- Chief Executive Officer

Good afternoon, and thank you for joining us on our third quarter 2018 conference call. Joining me today are Brad Feller, Dave Welch, and our COO David Heard.

Let me start by updating you on the most impactful event of the third quarter, the announcement of our intent to acquire Coriant. With this acquisition now closed, Infinera is positioned as a significantly stronger Company with every opportunity to deliver an end-to-end portfolio to the largest consumers of transport technology. When we announced the acquisition we did so with the commitment to achieve three things. First, significant cost savings from synergies that should deliver a profitable business in the near term. Second, from expanded customer traction with Tier 1s and ICPs scale that allows investments needed to win in the market. Third, vertical integration of our optical engine over a broad end-to-end solutions portfolio as a cornerstone of a differentiated business model.

I'd like to talk about each of these areas, so you will understand why I'm so excited about the future. First on synergies, as a reminder, we committed to deliver $100 million in synergies in 2019 and expected additional $150 million in synergies combined over 2020 and 2021. In order to achieve these goals, we have detailed quarter-by-quarter plans in place and are executing on our first phase now. We have already achieved millions of dollars in run rate cost reductions to supplier negotiations and taken specific actions to lower spend across the combined Company.

We will continue to relentlessly execute on this plan through 2018 and plan to enter 2019 with a fundamentally lower expense base. A little over a month after closing the deal, we now see delivering more synergies than expected in 2019. This should deliver significant improvements to our bottom line and drives the expectation of achieving non-GAAP profitability by the end of 2019.

In addition to driving synergies on the integration front, we've established our senior leadership team with a mix of Infinera and Coriant personnel. This team recently met in Chicago, when I came away inspired by the team's passion and determination to make the hard decisions deliver results and take the new Infinera to the next level. Beyond senior leadership, I'm energized by the capabilities, enthusiasm the Coriant employees bring to the Company. This talent and infusion strengthens our ability to address the work that is required today in order to realize the opportunities in 2019 and beyond.

Now to customers, we have a clear vision to help our customers win in their markets by delivering the unique value of the new Infinera. I am pleased that our combined solutions road map is already in place and that we are actively engaging new and existing customers on opportunities. Customer feedback regarding the acquisition has been exceptionally positive. We have a strengthened position with service providers to expect end-to-end solutions that utilize efficient hardware and software-enabled automation capabilities to lower operating expenses.

Coriant software and disaggregated IP edge solutions most of the value of our offering to the largest Tier 1s in the world. In combination with Infinera's leading optical technology, these customers now see a differentiated solution to their traditional approach. To date, customer interaction has been positive with several new opportunities opened for us to pursue. For example, with a carrier that is in the late stages of testing our DTN-X for long-haul applications. After reviewing our new portfolio, they were insistent we deliver units of our new vibe and poured Metro access solution to their lab. That equipment is planned to be installed in December for opportunities in 2019.

In DCI, we have added three of the top six ICPs in the world. These customers have deployed to Groove, which now boasts more than 70 customers and it's on track to nearly double revenue in FY 2018. In metro, we have an improved position for fiber deep opportunities with cable operators and the emergence of 5G services. We've recently announced our high-density ethernet aggregation product, which in combination with the layer three vibe offering from Coriant and ICE4 transport delivers a unique solution for metro access.

Finally, on vertical integration and technology. We don't have detailed plans in place to deliver Infinera's optical engines broadly across our new portfolio. Doing so we'll drive better margins by substantially lowering the combined Company's cost structure, as we take advantage of both the power of integration and the leverage of scale. As we announced ICE5 recently carried live customer traffic on a segment of (inaudible) carrier's network and industry's first for 600 gig. ICE6, which builds upon the architecture of ICE5 and is designed to deliver 800 gig per wave will be leveraged across our full set of high capacity platforms, including mTera and Groove and remains on schedule for delivery to the market beginning in 2020.

And this in summary, this acquisition brings us all the ingredients needed to build an end-to-end optical network based on industry-leading optical engines. We now believe we have the customers, technology, and scale necessary to win and to create a differentiated business model.

Now to Q3, which is a quarter of strong accomplishments and overall progress. Revenue for stand-alone Infinera in Q3 was $200 million, representing 4% year-over-year growth, and driven by continued strength in our APAC region.

As we outlined on our last earnings call, with a wider than typical revenue guidance range, we had a few key deployments with hiring that fell on the cusp of Q3 and Q4. Revenue came at the lower end of our $200 million to $220 million range, due to this timing. With gross margin and expenses being better than our midpoint guide, earnings were slightly better than the midpoint.

Q3 was a significant quarter for establishing footprint and ramping our refresh product portfolio, led by a AOFX-1200 deployments and complemented by the XT-3600 beginning to generate revenue. In Q3, we added 16 new ICE4 and eight new XTM customers to our roster while completing a combined 39 ICE4 trials and XTM trials.

In subsea, our ICE4 products continue to bring us new opportunities by delivering clear optical performance leadership, leadership that is earning us business and new customers. In Q3, we set another record for transatlantic optical performance with ICE enabling transmission of 24 terabits of capacity, data single transatlantic subsea fiber. For the subsea market, spectral efficiency is the most important buying criteria and we see ICE4's industry-leading performance, building a pipeline of opportunities for us over the upcoming quarters. Including recently being awarded three key subsea deals that we anticipate will generate revenue in the first half of next year.

Optical leadership also enhances the value proposition of our Open ICE initiative. The disaggregated portion of our industry is the fastest growing segment, forecast to grow about 25% a year and is expected to be a $2 billion market by 2021. With our proven optical leadership and commitment to open, we create the opportunity for customers to rethink how they build networks and who they want to buy from.

In 2018, we have 30 open trials completed, we're currently in progress and matching our Open ICE win in Q3. Open ICE wins and trials are exceptionally important, as they create opportunity with customers and markets that we have not yet penetrated. Open ICE customers have access to leading optical performance and enjoy the value of our instant bandwidth approach without having to rebuild (Technical Difficulty) infrastructure.

ICE4 success is also accelerating adoption at our unique instant bandwidth approach. At instant bandwidth customers have the ability to create connectivity with utility like availability. Our customers only need to pay for capacity when their customers actually need it. And like other utilities, we all use, creating the capacity is not much more complicated than flipping a switch.

To date, our XT-3600, which has 2.4 terabits of embedded capacity is being adopted a 100% with Instant Bandwidth. This platform, which began shipment in Q3, will have an installed base of almost 500 terabits of installed capacity by the end of this year, it was only about 100 terabits settlement paid for. Our customers understand the value of being able to deploy the capacity they need today with the scale they will need without ever having to touch the box, while this put short-term pressure on our margins, we create a value proposition that delivers expanded software margin to us in the future, as our customers move to usage based network design.

Combining the attributes of optical leadership, our ease of deployment and open and disaggregated networks and our unique approach to instant network with carrier customers. We expect shipments of ICE4 capacity to grow around 80% from Q2 of this year to Q4. While we are on track with the strategy and plans we made when we announced the acquisition and continue to successfully ramp ICE4 into the market. We are seeing some customers delays that purchasing decisions until they better understand the combined Company's future product direction. We anticipated this, but the impact is turning out to be larger than expected. Our top priority is spending time with these customers and clearly, explaining our specific plans. While the meeting to-dates have been positive, we do expect near-term challenge in the top line, as we work reverses pause.

In conclusion, one month into the integration the deal thesis remains strong and I am confident in Infinera's long-term opportunity. We are on track to exceed our 2019 committed synergies. We have greatly expanded our Tier 1 scale customer base and are winning new deals. These ICE4 based opportunities are increasingly based on our unique instant network model, which compresses margin upfront, while creating significant margin accretion over time. We continue to demonstrate optical leadership with ICE and have specific plans to drive vertical integration across our broader portfolio. And we have a passionate team of people and leaders, who believe in the opportunity that we have before us.

As we prepare to finish 2018 and launch in the 2019, we do so as a materially different Company with a materially better opportunity. At Infinera, we have never been more excited about our future. With that I'd like to thank our customers, partners and shareholders for their ongoing commitment with Infinera. And I think our employees for their dedication.

I'll now turn the call over to Brad to discuss the financials.

Brad Feller -- Chief Financial Officer

Thanks, Tom and good afternoon everyone. Today I will discuss Q3 highlights for the Infinera core business, provide our outlook for the combined Company for Q4 and share some color on our outlook for 2019. The detailed recap of our Q3 results is available in the CFO commentary on our Investor Relations website.

In Q3 revenue was $200.4 million representing a 4% increase year-over-year and a 4% decrease sequentially. Q3 was another strong quarter of ICE4 sales, as we added 16 new ICE4 customers in the quarter many on the new AOFX-1200 and XT-3600 platforms. Our new technology continues to win in the market and I'm excited about some deals which we have won with ICE4, which have not yet begun to ship. Despite the overall strength in the quarter, we did experience a delay on one large order from an ICP customer, which caused our revenue to come in at the low end of guidance. This order has since been received and shipped.

Relative strength in the quarter continued to be driven by the APAC region, as we had both higher volumes with our largest customer and also recognized our first meaningful piece of revenue from a large new Tier 1 in Southeast Asia. This strength was more than offset by lower sequential revenue from our cable vertical. This decrease was anticipated as spend from cable customers tends to be lower during the second half of the year.

Now turning to margins. Non-GAAP gross margin in Q3 was 38.4% near the higher end of our guidance range of 36% to 40% largely attributable to another strong quarter of high margin Instant bandwidth license sales. As we mentioned on the last earnings call in August, we anticipated starting to deploy several large new footprint opportunities, which would put pressure on gross margin in the short-term, but represent exceptional opportunities for both revenue growth and margin expansion over time. We deployed several of these networks in the third quarter with more of them to come in Q4.

In addition, as Tom mentioned, the newer ICE4 products targeting the service provider portion of the market are being deployed by a large percentage of customers utilizing our unique Instant Bandwidth model, instead of buying full line cards like they had historically. Initially Instant Bandwidth sales are lower, because we incur all the cost upfront and only recognize revenue for the portion of the capacity the customer starts with. Over time, however, our margins should benefit substantially from this model as customers will buy a 100% margin licenses to add capacity to the deployed networks. This model allows us to maximize our overall gross margin on deals.

Turning to OpEx, non-GAAP operating expenses were $82.2 million in Q3, down from $92.8 million in Q2 and below our $84 million to $88 million guidance range. This result stems from our close scrutiny over every dollar we spent in anticipation of the closure of the acquisition, as well as a one-time benefit from adjusting down our incentive compensation accruals for the year based on the revised forecast.

In Q3, on a non-GAAP basis, we had a operating loss of 2.6% and a net loss of $0.04 per share. With both metrics, better than expected. On a GAAP basis, we incurred a net loss of $0.21 per share with stock-based compensation expense, amortization of intangibles, and other acquisition-related costs being the largest drivers of the difference between our GAAP and non-GAAP results.

With the addition of the Coriant portfolio of solutions and their broad customer base, I'm excited about our opportunity to significantly outgrow the market over time. I believe the Groove nicely complements our Cloud Xpress solutions and opens opportunities with several ICPs that are not current DCI customers. Shipments of Groove chassis were at a record level in Q3 and we look forward to the opportunity to fill these chassis with transponders over future quarters. In addition, the mTera provides a tool for us to attack the fast-growing metro core an outstanding addition to our existing Metro solutions.

Finally, with service providers increasingly looking for software to automate their networks, driving efficiencies and ultimately saving them operating costs, the SDN automation suite that Coriant brings to the Company provides another strong tool in our portfolio. Looking forward, my expectation is, as a combined Company, we will endure a couple of quarters of challenge revenue as customers have pause spend, taking time to assess our new roadmap and support planned for existing products as well as aligning contractual arrangements. I believe this is a temporary phenomenon that was most pronounced on the Coriant side in Q3.

We are working through this pause by actively engaging with customers and demonstrating the combined capabilities of the new Infinera. Well, the feedback from customers we have met so far is that they believe in the opportunity of the combination, we are still in certain win they will turn back

on spend. While we continue to win new opportunities given the size and complexity of these deals, several of these are looking as though they will likely not operationalize until 2019. The combination of these two items is putting pressure on the short-term revenue outlook and thus our current expectations for Q4 revenue are $325 million plus or minus $10 million.

Also for the fourth quarter, the inclusion of the cost structure of the acquired Coriant business will have a significant impact on our margin levels. We are confident in our ability to improve the gross margin of the acquired business over time through synergies and vertical integration. In addition, the continued impact of lower margins from new footprint wins and the further shift to instant bandwidth enabled ICE4 hardware will put pressure on near-term gross margin levels.

The first half of 2018 represented customers primarily utilizing full systems versus instant bandwidth but with the release of the ICE4 based products for the service provider market, we are seeing substantially all customers utilizing instant bandwidth. As many of these systems are being turned up with minimal and initial bandwidth, our ability to sell large amount of follow-on licenses is exceptional. We experienced the instant bandwidth margin benefit with our Gen 3 offerings in the past and are excited about an even better opportunity with our ICE4 base solutions. The combination of these impacts on the short-term lead us to a Q4 non-GAAP gross margin estimate of 30% plus or minus 200 basis points.

In Q4, as we begin to drive the initial phase of the synergies, we are focused on optimizing the forward-looking product solutions portfolio and rightsizing our combined organization while continuing to fund key initiatives. As a result, we currently anticipate total non-GAAP operating expenses to be approximately $140 million plus or minus $5 million. Putting it all together, primarily due to lower initial gross margins of the combined business, we project a non-GAAP operating loss of approximately 13% for the fourth quarter. Below the line is a result of the $400 million of convertible debt we raised in the quarter, we expect both interest expense and interest income to increase in the fourth quarter.

With respect to tax, the combined company has significant NOLs and thus our ongoing tax expense will continue to be driven largely based on local tax for cost plus entities throughout the world. We expect tax expense for the near term to be approximately $2 million to $3 million per quarter. In Q4, we currently project a non-GAAP loss of $0.28 per share, plus or minus a couple of pennies with the GAAP results significantly lower due primarily to stock-base compensation, amortization of intangibles and other acquisition-related expenses.

Looking ahead, based on the positive conversations with customers since the acquisition closed, we expect the spending -- that spending will begin to pick up during the first half of 2019 with some initial revenue growth in Q1, but a more substantial rebound starting in Q2. Giving me additional confidence of revenue growth in 2019, is the fact that we have recently won and are well positioned on several additional large multi-year opportunities across multiple end markets and geographies. My expectation for 2019, is that we can achieve revenue in excess of $1.4 billion, which provides the initial scale to create a differentiated profitable business over time.

For gross margin, we have plans in place, which will drive significant cost reductions through supply chain rationalization and leverage as well as activities to significantly lower our fixed cost infrastructure, yielding gross margin improvements in 2019. With our new end-to-end portfolio, we plan to continue to be aggressive to win new footprint with both existing and new customers. In addition, we will continue to utilize instant bandwidth as pre-deploying bandwidth enables our customers to be very responsive to their customers' needs, allowing them to win in their market. We believe that this is a key differentiator for Infinera, as the market moves to usage based network deployments. Despite margins currently being under pressure, we believe this is the right long-term strategy to win market share and drive differentiated bottom line results.

In relation to operating expenses, as the year goes on, we expect to continue to drive execution on the integration, including delivering on our committed synergies. This will allow us to drive expenses down over the course of the year. We anticipate that over the course of 2019 as we drive the synergies and gain traction in the market, the result should steadily improve allowing us to achieve non-GAAP profitability by the end of the year.

Only one month after the close of the Coriant acquisition, I believe we are well on track to realize the significant benefits on the key aspects of the deal. First, there have already been significant work done to validate the significant synergy opportunity and I'm pleased to say that the synergies for 2019 are proving to be larger than we anticipated.

Second, we have active engagements with both our existing customer base and also the new Tier ones and ICPs, we gained as a result of the deal. The customer feedback has been very positive. And I believe, that as we continue to work with these customers, we have the ability to significantly grow revenue. This will not only allow us to grow the top line, but will also allow us to make the investments needed to continue to win in the market.

Third, we continue to make strong progress with the development of ASICs, which will be the vehicle to insert our vertical integration capabilities into the Coriant portfolio. This expanded use of our unique technology will magnify the leverage of our manufacturing infrastructure and significantly lower the cost structure, allowing us to once again be the leader in financial performance in the industry.

In conclusion, with the Coriant deal now closed, I believe, we are in a better position to sustainably win in the market and generate differentiated margins over time. I have confident, we will work through our near-term challenges and ultimately realize the substantial opportunities of the acquisition.

With that, I'd like to turn it over to the operator to begin the Q&A portion of the call.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And our first question will come from Rod Hall with Goldman Sachs. Please go ahead.

Rod Hall -- Goldman Sachs -- Analyst

Yes, hey guys. Thanks for the question. So I guess, Brad, I wanted to ask you, what you think the free cash flow looks like in December and kind of anything you can tell us about what you're thinking on trajectory there given things are weaker. I guess, then you guys maybe anticipated. And then I've got a follow-up.

Brad Feller -- Chief Financial Officer

Yes. So we'll clearly burn cash, Rod, in the fourth quarter. We're actively working with the synergy, the opportunity, but I can tell, we can put in a lot of those synergies with the results that are there. We will clearly burn a reasonable amount of cash. We did enter the quarter even after paying off the Coriant close with over $300 million of cash. So it's kind of an expected piece as part of the plan.

Rod Hall -- Goldman Sachs -- Analyst

And what do you, Brad, can you just say like when you think that kind of if you get -- get through back to positive free cash flow, you think, it's middle like next year or give us any idea on the trajectory there?

Brad Feller -- Chief Financial Officer

Yes, so, we've said that we expect to get back to non-GAAP profitability by the end of the year. It'll be touch and go whether it's the fourth quarter we start generating cash again or it's early in 2020.

Rod Hall -- Goldman Sachs -- Analyst

Okay. And then the other thing, this is more for Tom, I guess. But the other thing that we've been wondering is strategically what customers do you guys feel, now that it's a much larger combined entity. Do you -- do you really feel like you've got a, I guess, how important are the Tier ones to the business now? Do you think that strategically, you really need to go after them and win them in order to have positive trajectory on this business if you look out two to three years Tom. Or I'm just curious, how you're thinking strategically about the customer set now that the company is a lot bigger?

Tom Fallon -- Chief Executive Officer

Yes, I think the Tier ones are strategically important to us. And one of the things that Coriant brings to us is deep and long-term relationships with some significant Tier ones not only in North America but around the world. But they also bring some significant Tier one scale types of relationships outside the traditional classification of Tier one. At our size, I think, it's imperative that we have very large scale relationships, and we're going to continue to win new customers in all markets but the -- in the Tier ones, still spend about two-thirds of the overall CapEx in our industry.

And I think, that we're going to continue to drive this aggregated, we're going to continue to drive opened and we're going to continue to drive our relationships with the Tier one, now with a complete portfolio that should satisfy all of them end-to-end.

Rod Hall -- Goldman Sachs -- Analyst

Let me just say the reason, and I know you know this, but the reason, I ask that question is because those Tier ones tend to suck up a lot of development resource and we are a little worried. I think, some investors may be a little bit worried about what happens to the Tier two and three customers out there, if you guys are over rotating to those people because you need that scale.

Tom Fallon -- Chief Executive Officer

We're not going to over rotate, certainly, we will not. We have a portfolio today that is being bought by Tier ones around the world as does the Coriant side. The combination of the two, we have exceptionally good portfolio end-to-end with a orchestration and SDN layer on top of it.

I think the significant challenge that Infinera had on its own was, we didn't have a complete end-to-end. I think the challenge that Coriant had was, they were a private equity owned company and that's been abundantly clear as we've talked to customers. We've eliminated in my mind, both of those detriments. Do I think that these relationships are going to start creating huge money for us in the short-term, I don't we have to go earn it, but we now have a seat at the table with the largest carriers in the world. We have -- in my mind a receptive audience that wants to continue to leverage what we've done both as Coriant and Infinera separately. And I think we start from a good position in a much stronger place than we've ever been.

From a Tier 2 and Tier 3 perspective that's been our bread and butter, we continue to win new business and I think that there is going to be a huge amount of opportunity. And I actually see that is aggregated and open, creating a lot of traction in that space, and I think we're going to win market share based upon that.

Rod Hall -- Goldman Sachs -- Analyst

Okay. Appreciate it, Tom. Thank you.

Operator

And our next question comes from Vijay Bhagavath with Deutsche Bank. Please go ahead.

Vijay Bhagavath -- Deutsche Bank -- Analyst

Yeah. Hey, good afternoon Tom and to your team.

Tom Fallon -- Chief Executive Officer

Hello, Vijay.

Vijay Bhagavath -- Deutsche Bank -- Analyst

Yeah, hi. Yeah, I think my question is on, you know, like with any deal having well defined synergy targets topline and bottom line, very important for us on the sell side and also for investors. So just walk us through, Tom, on some of the near-term synergy objectives topline and bottom line just brainstorming here would the near-term objective in the topline be, for example; like adding new logos or new insertion points for Coriant and like upselling Infinera into the Coriant Tier 1 customer base and on bottom line would it be like, surgically attritioning in term of Coriant's portfolio perhaps inserting your chipsets and photonics into the Coriant platforms. Just walk us through the near-term topline, bottom line synergy targets. Thanks.

Tom Fallon -- Chief Executive Officer

On the topline, I'm going to answer the question and I'm going ask David to talk about the bottom line, because he's the guy that's driving the integration and the synergies. On the top line, I think there is huge amount of opportunity, the first thing we have to do is turn around, what I would consider this pause or dyssynergy, as we've talk to customers, it's clear that there was a bit of anxiousness and I think it was actually started prior to us announcing that we were buying Coriant, and I think when the prior PE guys took over from Marlin in February. I think it started creating amount of concern in the customer base and we saw a significant dyssynergy in bookings from Coriant in Q3.

In Q4, that's starting to recover as we've gone and talk to customers, we are seeing a recovery in Q4, though not to the levels that they were at before or historically we would expect. I think the huge opportunity for us to work with the Coriant opportunities there is one -- long-haul, I mentioned where we are in the final stages of testing and approval and we are over there talking to them about the new portfolio and by the end of the meeting they were insistent that we had the Coriant vibe in pod into their lab. There are a lot of opportunities for leveraging our mixed portfolio in some of our larger carrier customers, we are working with the Coriant team on a lot of their migration services and also getting ready for 5G. I think there's a great opportunity for cross-sell and a great opportunity for leveraging the combined portfolios both from software and hardware. It just takes a little bit of time. David, if you would talk about the cost synergies.

David Heard -- Chief Operating Officer

Yes. So I think as Brad and Tom mentioned in the commentary, we are -- good news is we're ahead of the synergy targets that we had kind of set for 2019. We have 14 functional teams, a dedicated team that's being audited by two outside consulting firms to ensure, we're getting absolutely not only the operational efficiency from a process perspective and customer experience, but that's yielding bottom line results. Everybody has clear targets that we monitor on a weekly basis. Examples of those, in OpEx it's obviously relieving duplicate functions and we're 30 days in and again feeling confident that we put the right numbers up prior to the deal, and actually they were conservative. So we are over achieving those in areas like G&A marketing and sales that you can imagine.

As we take a look at the cost elements, we've done a very nice job with both our contract manufacturing partners, as well as some of our key supply chain partners, at already sitting down in the first 30 days and negotiating as we anticipated more favorable terms for the combined entity going forward. I would tell you that those synergies, as you know, when you have the inventory take a while to then blow through the system and get achieved. So as we get into second quarter, third quarter, fourth quarter, we have those mapped out on a quarterly basis. And again, feel like we are ahead of schedule. I think Brad mentioned in Q3, you already saw a bit of that moderated OpEx. Again you'll see that continue in Q4 and beyond, so --

Tom Fallon -- Chief Executive Officer

In regards Vijay, you asked about incorporating our vertical integration into the Coriant platforms. I am explicit, yeah it is part of the long-term value proposition, and why we did this deal, putting the ICE6 into Groove, putting the ICE6 into mTera is imperative, we now have very specific plans and engineering teams are working on that ICE6 continues to remain on track. So nothing is done until it's done, but we've got a lot of internal proof points, including the demonstrable carrying of live traffic with ICE5, I believe that, that will allow the Coriant cost structure to move from quite frankly inferior to ours by quite a bit to be more in line with what Infinera's has historically been, I consider it a mandatory part of what we're doing and we are committed to that plan in 2020.

Vijay Bhagavath -- Deutsche Bank -- Analyst

Okay. Thank you very helpful.

Tom Fallon -- Chief Executive Officer

Thanks, Vijay.

Operator

And our next question comes from Simon Leopold with Raymond James. Please go ahead.

Simon Leopold -- Raymond James -- Analyst

Thank you for taking my question. I wanted to see where you were in terms of the timeline or milestone of communicating with your customers regarding product pruning strategy. I would imagine that part of the process is hearing from the customers to understand and set priorities, but just wondering how long that process should take and when you'd communicate to customers, which product would be eliminated and which would be maintained?

David Heard -- Chief Operating Officer

Yes, it's really good question. This is David Heard. So again we closed officially the transaction, obviously on 1st October, so we actually had together a preliminary view of that. I think in this deal versus prior deals that have been done both micro in this space and macro in the telecom space is typically quite a bit of product overlap. And I think the uniqueness both in terms of end-to-end solutions and our vertical integration is in this case, it really is less than 20% overlap. And so some of the nervousness that we saw from our customers is a bit unfounded when we get out to them with that actual road map and have that dialog. So already in the first 30 days, we've been out to, you know, a couple of dozen of those customers, we had 85 of them lined up to be able to get out -- to be able to have that discussion.

I would imagine that we would see that continue through the remainder of this quarter and in the first quarter, hot and heavy as they commit their capital budgets going forward. I think when we look at history and look at again similar deals in our particular micro, as well as the macro, we see that similar effect they call it temporal pause in orders, albeit in those cases there were overlaps of 50% or greater in the product portfolio. So we've got a big focus on that because obviously that's the real upside in revenue synergy, as we integrate the business, create the end-to-end portfolio and then drive the economies of scale, as well as growth going forward.

Tom Fallon -- Chief Executive Officer

Yeah, Simon all of those are spending as much time with customers we can. And I think you're right, we're positioning this not as a -- here's what we're doing to you, but laying out where we're at, listening to their concerns. And as David said, there's only about a 20% product overlap and from a customer base, we only have three customers that have overlapping product applications. Those customers have to worry a little bit about what's my second source strategy now. So far, I haven't seen anybody do anything that I would consider over reactionary.

We are in that process of talking through the customers, we've already made some decisions about what isn't going forward. Nothing that hurts customers in the short-term, we have a sales meeting for the global sales force in the middle of January and will be 95% locked and loaded by that time, because our sales guys are obviously anxious to go out and hunt.

Simon Leopold -- Raymond James -- Analyst

Great. That's very helpful. So to follow-up at the call when you announced the deal in July. Brad had indicated an expectation of exiting 2018 with $1.6 billion run rate. And now we're looking at 2019 at about $1.4 billion. And so that there is a gap and you cited the pause. So the pause make sense to me that we'd see this pause effecting the current quarter. Could you help us understand what you see is the delta for 2019?

Tom Fallon -- Chief Executive Officer

Yeah, I think it's, let me explain it from my perspective. We expected a pause , if you look over the history there is always some amount of pause. The pause is actually at a bigger magnitude, particularly on the Coriant side and we had anticipated. It's recovering in Q4, but we don't want to overly optimistic and set a benchmark of rising too much, not creating appropriate levels of synergies and negatively surprising.

As we said on the call, carefully said, we see Q1 actually rising in revenue over Q4. We are trying to take a thoughtful, relatively moderated view to next year, and I'll have numbers that will drive the necessary synergies at the credit profitable company sooner rather than later. Do I think that there is opportunity are to exceed. Of course I do. If we go back to historic levels, we will exceed those numbers. But, we don't serve anybody well by over-committing on that. So we're going to take a conservative approach. I do see Q1 starting to increase after the Q4 in an industry that's typically 15% down in Q1 and nothing is done until it's done, but I can touch that.

Simon Leopold -- Raymond James -- Analyst

That's very helpful. Thank you, very much.

Operator

Our next question comes from Alex Henderson with Needham & Company. Please, go ahead.

Alex Henderson -- Needham & Company -- Analyst

Well, I thought, I go lowball and just to start off with some real basic stuff. Can you tell us, what the basic share count and the fully diluted share count is? What the tax line is in your assumption for the fourth quarter? And what is your interest expense income line would be for the fourth quarter in the guide?

Brad Feller -- Chief Financial Officer

Yeah. So, the share count, Alex, is 1.75. The taxes, similar to the past, not necessarily a rate but about 3 million and then interest expense and net of interest income is a couple of million dollars.

Alex Henderson -- Needham & Company -- Analyst

And, what would the share count be, if you were profitable?

Brad Feller -- Chief Financial Officer

It would add another probably 20 million shares.

Alex Henderson -- Needham & Company -- Analyst

Okay. And then, as we're looking out into CY'19 and for that matter, even for the first, for the fourth quarter, can you talk a little bit about the trajectory of your margins. How much when we look at the 30% number is the margin on product versus service and how do you see that trajecting across the year, as most of the improvement coming in the product side or a similar amount in service and how much improvement, do you think you can get as we go through 2019? Thank you.

Brad Feller -- Chief Financial Officer

So, Alex will be improvements in both product and services margins. Obviously, when you look at two service organizations, there's a fair amount of overlap, both in infrastructure, from a people perspective, but also from the depots, all those different things that are out there. From a product side of things, we talked about getting the supply chain aligned going and driving synergies on that side of things. So, I think, you'll see significant opportunities on both. Obviously, starting the services margins are much higher than the product margins, as they have been historically. But, I think, you'll see improvements in both and you'll see us make changes going into next year, but then continue to chip away things as the year goes on.

As David mentioned, some of the things from an inventory perspective will take some time to work through the system. But the negotiation, so far have been very good, very strong. We have some great partners from a supply perspective that are excited to do business with the new Infinera.

Tom Fallon -- Chief Executive Officer

Yeah, I would comment on margin and I tried to lace (ph) this through my script, pretty explicitly, but this is so important that I think, people need to understand. When I talk about 100% of our 3,600 product going out with instant bandwidth, instead of anybody buying it full. That is a huge opportunity. First of all, we see the market moving to usage based design. If I'm a network operator, why wouldn't I, if it's available go to usage base design. I only pay for what I need at the point of time when I'm getting paid for it. I think, this is a trend that's going to grow and we're the only people in the industry that can do that with our infrastructure.

Second of all, our 3,600 and AOFX got with 2.4 terabytes. It's a lot of capacity (inaudible) remains me back when we introduced the DTN, the line card was 100 gig. The number of people told us like, holy cow, a 100 gig is just way too much for a line card who could use that much, while an bandwidth is growing 40% to 60% a year, it doesn't take too long for that base -- that too much to become not enough. I think, the opportunity we're creating with our instant bandwidth with 500 Terabits of capacity going out in six months on a new platform, 100% instant bandwidth with only about 20% paid for.

It's a staggering opportunity. Does it cost us margin upfront, absolutely. Is it painful, absolutely. Are we buying a franchise and a continuity, a very, very high margin in the future, we are. When they need their next 100 gig or terabit, it's coming to us. So, I think, that it's a really important thing for you understand that while we anticipated high bandwidth to go up, the fact that it's gone to a 100% is remarkable.

Alex Henderson -- Needham & Company -- Analyst

So just to be clear, are we starting off around 26% to 28% on product gross and around 45-ish in service gross, is that the band there, the ballpark?

Tom Fallon -- Chief Executive Officer

Yeah, I mean, it's a little higher on the services side and a little lower in the product side.

Alex Henderson -- Needham & Company -- Analyst

Perfect. Thank you.

Operator

And our next question comes from George Notter with Jefferies. Please, go ahead.

George Notter -- Jefferies & Company -- Analyst

Hi, thanks a lot. I guess, I just wanted to -- I guess get a little more clarity on the guidance for 2019, the $1.6 billion number or $1.4 billion vis-a-vis what we thought was more like a $1.6 billion kind of run rate. I just want to make sure that, that is purely a byproduct of the integration with Coriant and issues on that side. I assume this has nothing to do with the Level 3, CenturyLink deal. I know, that there was a comment you guys made a number of weeks ago about having that decision not being made yet. But I just to want make sure that the guidance isn't related to the Level 3, CenturyLink situation at all. Just clarifying that.

Tom Fallon -- Chief Executive Officer

That has nothing to do with the CenturyLink situation. We've got no official update from them and we're not going to comment on their process. I will say that CenturyLink's, had a great partner for a long time. There will be a great partner for a long time. They continue to certify some of our new products for deployment. And I think, that we will continue to do a lot of business with them.

Brad Feller -- Chief Financial Officer

And so, George, just the rest of the your -- the rest of your question right, it comes down to timing and that the temporary positive, we talked about. We -- we anticipate that recovering and we expect to, over the course of next year, to grow the revenues to where we're exiting 2019 at a very different run rate than we are 2018.

George Notter -- Jefferies & Company -- Analyst

Got it.

David Heard -- Chief Operating Officer

Hey, George, the additional color that maybe helpful as well as, where we have seen the pause, it's interesting we have seen an overall process is traditional in these M&A deals, but the nice pieces we're carefully monitoring the growth in the mTera as it grew the vibe, all of the new products that whereas key in creating a whole portfolio, those continue to grow, correct quite nicely. And, they are being inserted in the network situations that as Tom said, tend to compound as you get through the year.

So, I kind of see this is a quarter or too pause or a bit of a muted impact as a result of the M&A, that then just begins to ramp as we go through 2019 and then, exiting at a nice rate that shows industry growth rate, quarter over quarter, fourth quarter to fourth quarter, that is double-digit healthy and strong.

George Notter -- Jefferies & Company -- Analyst

Got it, OK. And then, just one quick follow-up for Brad. Can you give us a sense for what the restructuring costs look like here, cash restructuring costs? Thanks.

Brad Feller -- Chief Financial Officer

Yeah. So, George, we announced a deal, we talked about kind of the combination of restructuring cost, in terms of severance retention other onetime costs being in the $75 million to $80 million range.

George Notter -- Jefferies & Company -- Analyst

Okay, thank you.

Operator

And our next question comes from Jeff Kvaal with Nomura Instinet. Please, go ahead.

Jeff Kvaal -- Nomura Instinet -- Analyst

Yes, thanks. Brad, I was hoping to ask the margin question in a slightly different way. Obviously, you have a decent handle on where you would like us to at least start thinking about revenues and you've also told us that we should be thinking about operating profit by the end of the year. I guess, could you help us understand what kind of gross margin structure or OpEx is embedded in that loose fourth quarter 2019 outlook?

Brad Feller -- Chief Financial Officer

Yes. So, Jeff, you should expect, we're starting with 30% going into the year, as we go drive those synergies on the cost side, go drive at the fixed cost, I think, you start to approach something, it looks like mid '30s. Mid '30s, maybe a little bit higher exiting the year. From an OpEx perspective, we're starting with the 140 kind of run rate, you should expect that to take a pretty significant step down in the first quarter and then continue to decline over the course of the year, as we get the integration done, exiting the year with something quite a bit lower than the 140, we are today.

Jeff Kvaal -- Nomura Instinet -- Analyst

Okay. We should be able to sort it out from there. Another sort of lingering issue that is not related to the Coriant deal, is where you are with XO and obviously has been a big customer for you in the past. And then it wasn't as part of the Verizon integration. Do you have a better handle on what the go forward outlook at those properties looks like at this stage?

Tom Fallon -- Chief Executive Officer

Yeah. The Verizon relationship was actually on both sides of the house. Coriant has a substantive installed base with Verizon, as thus Infinera through the XO acquisition that wasn't Infinera relationship. As we stated before, that relationship has progressed nicely over the few -- last few years, so slower than I would have hoped. We went from -- they're going to throw us out to, they're not going to out to, they're going to allow us to expand within our current footprint to -- growing our footprint. We're still within the XO footprint and I think we are continued to be -- I have opportunities to continue to grow that relationship.

On the Coriant side, they have a very good relationship and are continuing to have a number of opportunities with them. The core product revenue is going down. But there's opportunities for new products and a significant opportunity around service migration that Verizon is looking at Coriant, now Infinera to perform. So I would say overall, our relationship with Verizon -- with the acquisition, we are in a better place both tactically and strategically.

Jeff Kvaal -- Nomura Instinet -- Analyst

Okay, that's helpful, Tom. Thank you, Brad as well.

Operator

And our next question comes from Michael Genovese with MKM Partners. Please go ahead.

Michael Genovese -- MKM Partners -- Analyst

Great, thanks very much. It seems like this revenue delay is caused by customers trying to figure out your roadmap. And I'm also trying to figure it out, sort of what you're seeing in terms of a internally homegrown technology versus virtual technology, going forward. If you could talk about the timing of ICE5. What you're seeing with ICE5 and just generally how you're seeking, how you're talking to customers about ICE, a new generations of ICE versus products that use virtual technology?

Tom Fallon -- Chief Executive Officer

Yeah, Mike, and I understand the question. I think I'm going to answer them ask Dave to answer on top of it. First I want to talk strategically. Strategically, we are committed to continue to perform -- provide a leading edge vertically integrated DSP technology, particularly for long-haul and subsea. ICE4 continues to win this opportunities, because we have a differential value proposition, around spectral performance. And we are winning deals today, because we actually are more efficient than any other DSP in the market for the subsea opportunities.

I think from a commercial side, we are always going to explore opportunities to complement our strategy with appropriate commercial technologies. We have used external DSPs for ICE5, we are using external DSPs for part of our XTM strategy, clearly Coriant uses external DSPs for a Groove. I don't think that having a strategy of having both internal capability, complemented with external capability is orthogonal. So I think we are going to continue to see us, use both wherever we can create the most advantageous solution of our customers and our shareholders. Dave?

David Heard -- Chief Operating Officer

Yeah. Just could add a couple of comments. ICE4 is demonstrated that is clear leadership in the long-haul and subsea applications for spectral efficiency. We've seen a number of significant subsea wins, as of late as at ICE4 technology gets into the XT30-600 et cetera. We've demonstrated that the higher baud rate technologies for ICE5 for a 66-gigabyte generation or 88 to 100-gigabyte generation requires the integral connectivity between the DSP and the pick.

What you'll find is a lot of these technologies that the (inaudible) Technologies performed better at higher baud rates. And so it's not just as a DSP engine drives to the $1 per gigabit benefits a higher bond rates, it's not just a DSP, it's a DSP in the optics coming together. That gives us a strong position on why our technologies favored. What technology we choose and what platform, whether it'd be a short reach DCI metro or whether it's a subsea, i.e. is all dependent what the opportunity, what the platform is capable of and we're opened to whatever technologies serves that purpose best. However, in the long run, we do believe that our core technologies, continued to expand their application base differentially.

Michael Genovese -- MKM Partners -- Analyst

Great. And then just as a follow-up, (Technical Difficulty) when do we expect, the same including in the revenue (Technical Difficulty)

David Heard -- Chief Operating Officer

You know, I hate to say it, but your phone is breaking up kind of on that. If you're asking and when do we expect to see your technologies out. We'll expose that as you get in the future quarters, we've talked about today about demonstration of live 66-gigabyte traffic over networks, both using internal technology, as well as Coriant then using external technology.

Michael Genovese -- MKM Partners -- Analyst

Thanks for taking the questions. Thanks.

Operator

Next question comes from Samik Chatterjee with JPMorgan. Please go ahead.

Samik Chatterjee -- JPMorgan -- Analyst

Hey guys, thanks for taking my question. Just one from me, I wanted to go back to the gross margin. And when you announced the acquisition you had guided to kind of a ladder in terms of the improvement in gross margin every year, roughly 200 to 400 basis points for the next couple of years and then kind of accelerated improvement thereafter. How should I think about the ability to deliver to those targets on a lower revenue base, then you had contemplated earlier. Do you need to kind of exit certain initiatives. Do you need to exit your vertical integration to deliver to those targets. How should I think about that on a lower revenue, than you had contemplated previously?

David Heard -- Chief Operating Officer

Yes. So if you think about it overall, the overall business is actually a bigger revenue opportunity, which provides us scale which being vertically integrated is a great thing for the margin profile. Just will take time to adjust the cost structure of the Coriant business, get our vertical integration technology into those products and really get the benefits of both the integration, which drives a lower cost structure. But also leveraging the fab asset we have.

As I mentioned in the earlier response, we expect over the course of 2019 to be able to get north of mid '30s and then the opportunity to longer term, continue to expand the margins and longer term. Get back to a position of being best-in-class from a margin perspective in the space.

Tom Fallon -- Chief Executive Officer

Yeah. If overall you're also referring to again with this moderated pause kind of with the push out of two quarters and Brad's comments so, kind of having a very rational view of next year at kind of that $1.4 billion to exceed mark versus the $1.6, if you know, a 10% to 12% decline in volume. The good news is, we've had again great supply chain partners that we've early on, been able to get commitments for the flow-through of synergies to keep up with that pace.

So in the short-term, it's by over driving the synergies and taken out the fixed cost basis to accommodate that 10% to 12% kind of volume basis. In the long-term per Dave Welch's comment, it's about integrating more and more vertical integration versus commercial technology into the platform to really get that -- call it very, very large gross margin benefit in industry leadership in the future.

Samik Chatterjee -- JPMorgan -- Analyst

Got it. Thank you.

Operator

(Operator Instruction) And our next question comes from Tim Savageaux with Northland. Please go ahead.

Tim Savageaux -- Northland Capital -- Analyst

Sorry. Hi, good afternoon. My question is kind of reflect back, I'm trying to get a better sense of what surprised you here. The deal was announced on, I guess July 24th and closed on October 1st. I mean it sounds like, during that period, prior to ownership basically things sort of locked up. Your comments on the new product growth at Coriant would indicate that maybe that's focused on the legacy area, I'm not sure, but, you know, in the context of what seems to be a pretty limited amount of product and customer overlap.

And Tom, I don't know if those three customers are awfully big ones or if you could characterize what that is as a percentage of your total revenue or the direct kind of dyssynergy potential was? But it seems pretty small, so from that standpoint, do you think it was sort of -- kind of a lack of an ability to communicate, post announcement and pre-close or I wondered, if you could characterize kind of what you think happened there in that fairly short time frame.

Tom Fallon -- Chief Executive Officer

Yeah, and I think that, it is interesting, because we are seeing continued traction and growth with the Groove. We are seeing continued traction and growth with the mTera. And I think, it is some of the legacy equipment that people put on pause. The queue through fall off of bookings in the Coriant side was significant. And it was significant, both from a perspective of historic Q3, it was a -- it was significant in perspective to the outlook and it was significant to perspective of what was running in Q1 and Q2.

So I think, that there was a true delay of people saying, there's acquisition been announced, we didn't take a long time to close, but it was probably six weeks and during that period of time, there was a significant amount of -- we can't do anything. And I think that, that impacted things materially. I also think, Tim, my guess is a speculation on my part, (inaudible) announced in about February and put Coriant up for sale, not secretively in about the March timeframe. I actually think the pause started in that timeframe from a perspective of getting things lined up.

I think, that started creating concern, when you have a PE guy, wiping another PE guy, that doesn't make anybody feel comfortable. So we were -- we expected some of the synergy around that, some pause, but the magnitude surprises. We've also seen in full disclosure, a little bit of pause on the Infinera side. And I think, that there is -- some of that's the same uncertainty, some of it is, I think, caused by other issues, mostly timing in regard to deals that we thought we would close in Q4. But now look like they will close in Q1. Is that because of the pause or because of the acquisition? I don't know. I'm still comfortable that we're going to win those deals.

So I think the biggest you asked the surprise. The surprise was the magnitude of the pause in Q3. I will tell you that the scrutiny now building into the forecast, is at a different order of magnitude then I promise, they've ever seen. We are absolutely getting by week, specific account-by-account-by-account detail. What's -- who's going to buy what and when by product? And I think that the overlap of those three customers and the overall scope of things, it's pretty small. And none of them have made a decision yet. I don't think, that's it.

Tim Savageaux -- Northland Capital -- Analyst

Right. And just to follow up real quickly then. Wonder if you could get, take a shot at revised estimate of that kind of combined run rate, we are looking at $1.6 billion especially relative to your 2019 forecast. Where do you think, we end up on a combined run rate for 2018?

Brad Feller -- Chief Financial Officer

For 2018?

Tim Savageaux -- Northland Capital -- Analyst

Yeah.

Brad Feller -- Chief Financial Officer

For 2018 or 2019?

Tim Savageaux -- Northland Capital -- Analyst

2018.

Tom Fallon -- Chief Executive Officer

For 2018, exactly -- what's, the actual for 2018 going to be a ballpark.

Brad Feller -- Chief Financial Officer

Yeah, I mean, it's -- if you look at the run rate based on Q4. I mean, Q4 is smaller for both of us, right. So the run rate in Q4 would imply a $1.3 billion, it's higher than that given both our higher revenues in the first part of the year, as well as Coriant side revenues in the early part of the year.

Tom Fallon -- Chief Executive Officer

I think, the current run rate is about one-fourth, north of, if you look at year-to-year --

Brad Feller -- Chief Financial Officer

Full year.

Tom Fallon -- Chief Executive Officer

Full year. And that's one of the reasons we're surprised, if you look at the history of the Coriant side, first half versus second half. It is completely atypical from anything they've ever experienced. And my guess is, these are losses, these are push outs while people figure out what the risks are and will have an opportunity to recover some of those opportunities and as we engage with these customers.

Like I said, we are seeing some new opportunities. And I think that, I know, there a couple of people that we've talked to, who had specifically put Coriant on hold, are now -- they are off hold again. In the large carrier, put somebody on hold, it's on hold and we've been officially taken off of hold. So I think, that we will have the opportunity to hopefully reearn some of that growth opportunity.

Brad Feller -- Chief Financial Officer

A little bit of that, as I think you nailed it right on the legacy portion, both products and services and as people look to sign single year and multi-year service renewals, they pause and wait to see what's the new deal putting it together and on whose paper, they're going to put it together as well.

Tom Fallon -- Chief Executive Officer

That's another thing that's causing, I think some delay. Even though we don't have a lot of overlap with specific customers, with same application, we do have a lot of overlap with customers with adjacent applications and we have to go to one set of paper, one legal terms, one NPA. All of that just slows things down and administratively takes a while to clean through. We're cleaning through it, but it takes a while.

Tim Savageaux -- Northland Capital -- Analyst

Got it, thanks.

Operator

And our next question comes from Jim Suva with Citi. Please go ahead.

Jim Suva -- Citigroup -- Analyst

Thanks very much. This is probably a very simple question, but very important. And that is, how can we have comfort or surety that you think these orders and sales are being delayed and not lost. And the reason why I ask is, literally three months ago, you gave revenue guidance and you came in on the low end of it. So it seems like that there's already a lack of visibility on the quarter we just closed. So how do we know that you're talking about pauses and delays, that they're not lost customers or lost orders.

Brad Feller -- Chief Financial Officer

That's a fair concern. I think, you're referencing the Q3 being at the low end of our revenue, it was one order, we very specifically said in this press script, it was one customer and we gave a broad range, saying there were a couple of things on the edge. So we try to be very transparent with our guidance and what's based upon. So I think that -- I appreciate your skepticism, but I think that we were very, very candid in Q3 and what the range would be and what the risks will be about puts and takes and why we had a broader range.

There's always a risk on an acquisition, clearly, that what we see as we will recover. We have to recover it and until we do quite frankly, you have every right and should be cautious. But I think, as we said, we've taken a guidance toward Q4 that I would view as a conservative. We've taken all of it in my mind, things that are on the edge and taken it out, we have nothing to gain by at this point over the saying what we will go do.

We very carefully said that Q1 would be up and we can touch those deals and we gave our view that next year would be probably in the one-four range. We have to earn it, we have to go come back to you and show you, what is going to be as candid as we can possibly be and tell you what we see from our customers.

Jim Suva -- Citigroup -- Analyst

Great. And then my follow-up question on the product delay or customer delays, due to the integration this quarter and the outlook. Was it more on the Infinera side or Coriant side or kind of equally or how should we think about the positives of which side those were?

David Heard -- Chief Operating Officer

The pause came from both sides, but it was distinctly more on the Coriant side, distinctly more. We were -- as I said, we expected some, the magnitude was a significant surprise for the Q3 bookings, which bleeds directly into Q4 revenue. Q4 bookings are actually on an uptick. As I said in the call, not quite early, not quite to historic levels that what we expected. But it is beginning to recover and we see a Q1 that will be probably and bookings of kind of equal magnitude to Q4, which that our industry is unusual. So that's all about I can tell you some detail.

Tom Fallon -- Chief Executive Officer

Yeah, I mean from the Infinera side of things, right. I think it's important to understand, we continue to win more-and-more opportunities every day and across multiple markets, multiple large opportunities we won in subsea, multiple opportunities we're winning in Metro, winning in long-haul. We continue to win new deals and some of those deals are very large, very complex deployments. And so having a little bit of delay in those -- into the first half of next year, it's not a uncommon situation. If you look at the impact those are going to have over time, those are big important customers for a combined company.

David Heard -- Chief Operating Officer

That is fair, I mean, right now in the last month, I would say, we've been verbally awarded more new deals than I've seen for quite a while and we have a few more that are up, until that's written in paper, we don't condone, but I do see a pipeline of opportunities, subsea, long haul in particular that I'm excited about.

Jim Suva -- Citigroup -- Analyst

Thank you.

Tom Fallon -- Chief Executive Officer

Yeah, the other thing, the color I -- the last piece of color I'll give on Q4, is that starting with Q4 oftentimes is -- is there budget flushes there, what's the year end money look like. We have factored in, none of that into -- what we're looking at for the quarter. Hard to say, whether it will come or not. But if you look traditionally and what happens in the fourth quarter, there is oftentimes some customers who come forward with incremental money. Given the conservatism that we are going forward with, we've factored none of that into the Q4 outlook.

Jim Suva -- Citigroup -- Analyst

Thank you so much for the details. That's greatly appreciated.

Tom Fallon -- Chief Executive Officer

I'd like to thank all of you for your time and I look forward to keeping you up to date on this exciting operating Infinera's history. Have a great day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 67 minutes

Call participants:

Jeff Hustis -- Investor Relations

Tom Fallon -- Chief Executive Officer

Brad Feller -- Chief Financial Officer

Rod Hall -- Goldman Sachs -- Analyst

Vijay Bhagavath -- Deutsche Bank -- Analyst

David Heard -- Chief Operating Officer

Simon Leopold -- Raymond James -- Analyst

Alex Henderson -- Needham & Company -- Analyst

George Notter -- Jefferies & Company -- Analyst

Jeff Kvaal -- Nomura Instinet -- Analyst

Michael Genovese -- MKM Partners -- Analyst

Samik Chatterjee -- JPMorgan -- Analyst

Tim Savageaux -- Northland Capital -- Analyst

Jim Suva -- Citigroup -- Analyst

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