There was a glimmer of dot-com magic yesterday. Telecom optics operator Infinera (NASDAQ:INFN) launched its IPO and raised a tidy $182 million. Priced $1 above its $10-$12 range, the company's shares went on to post a 51.58% surge on their first day of trading.

Infinera develops breakthrough technologies to power optical communications networks. The company's IPO prospectus boldly states that it is leading a market that will "change optical communications networks in a fashion similar to the integrated circuit's impact on electronics beginning in the 1950s."

Hype? Not that I can see. Infinera continues to win against fierce competitors like Cisco (NASDAQ:CSCO), Nortel (NYSE:NT), and Ciena (NASDAQ:CIEN). There are 28 customers, including biggies such as Level 3 Communications (NASDAQ:LVLT), XO, and Qwest Communications (NYSE:Q).

The revenue ramp-up has been stunning. From 2005 to 2006, sales surged from $4.1 million to $58.2 million. As for Q1 this year, revenues came to $49.1 million. While the Q1 net loss was a hefty $19.8 million, this is expected as the company is aggressively building its customer footprint.

Keep in mind that revenues can be volatile because customer deployments are usually large. Another risk factor is that about 75% of revenues come from Level 3.

Yet the market opportunity is significant as communications networks need to effectively manage the growth in video and other multimedia data streams. Infinera believes that its addressable market will go from $3.7 billion in 2007 to $13 billion 2010.

With revenues moving at hyperspeed, it's tough to get a sense of Infinera's growth rate for 2007. Just assuming the current $200 million run rate, shares are trading at 8.5 times revenues. That seems high, but it's actually in line with other fast-growing companies like Aruba Networks (NASDAQ:ARUN) and Starent Networks (NASDAQ:STAR). Such growth usually comes at a high price and fair amount of volatility in the stock price.


Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. The Fool has a disclosure policy. Tom is currently ranked 1,161 out of more than 29,000 rated investors in Motley Fool CAPS.