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Infinera: Actions Speak Louder Than Words

November, 2017

As Infinera continues the messaging of ambitious product development plans, its comparatively quiet, top-level management changes indicate a supplier that is in a state of crisis, and that it will now be open to radical changes in an attempt to survive in the marketplace. While at the last quarterly earnings conference this month, it was announced that the company had taken on a new Senior VP and GM of Product and Solutions, it was evidently decided to minimize the impact of the move initially by not putting out a press release of him coming aboard this past June. In the meantime, the President of the company (also a co-founder), who was most identified with PICs remaining the domineering course forward, had his title changed to Chief Technology and Strategy Officer, which appears to be a demotion.

In our opinion, it also seems that he has been expelled from day-to-day corporate decision-making, as he will “increase his external presence.” We also interpret this move as more than a subtle means of communicating to the executive that if he believes in this ICE roadmap so much that it is time that he go out and convince customers.

The new GM, who will apparently be ensconced at the home base, will be responsible for “product realization,” which certainly suggests to us that he has by default taken over the role of being in charge of the overall direction of future solutions. He also has a reputation for turning around distressed businesses and putting them on a path toward a healthy exit.

Infinera may be his biggest challenge, yet. If he is to be successful, there will likely be major changes in the company’s culture and strategy along with a needed rehabilitation of its credibility. One way or another, we would not be shocked if ICE5 never becomes real in terms of commercial offerings. We would also not be surprised to see the firm become much smaller as it is potentially reinvented into a leaner and more practical gear vendor.

There was definitely some foreshadowing of this executive shakeup on the part of Infinera’s CEO on the preceding quarterly conference when he evidently finally saw the light and stated, “Make no mistake, I have under-executed on our metro strategy based on the TM." It has been our view that the former President’s actions and mindset were to make Transmode a secondary consideration.

From the beginning, fibeReality advocated that the Swedish acquisition be given the independence and authority necessary for Infinera to make a more successful transition to the metro space. Now the challenge is even greater as vitally important ex-Transmode execs, including on the technology side, are no longer part of Infinera.

Included in this list will be Transmode’s former CEO, who we believe was treated quite horribly by Infinera, as we discussed right after the buyout. We think it is quite clear that the promise of having him in charge of the metro business was primarily used as a means of helping to close the deal, and in apparently breaking the pledge, probably resulted in a loss of a great deal of high-margin opportunities. Certainly, we made the case that Infinera was not going to achieve consistently better gross margins than Ciena without fully taking advantage of Transmode.

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[written by Mark Lutkowitz]

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