In early 2012, Forbes published an article called “Why Narcissistic CEOs Kill Their Companies.” While we believe that some of the characteristics described in the article do not necessarily apply to the two principal corporate executives at Infinera, there are at least several that seem to fit one or both to a tee. It also more than appears that some of the prominent analysts on the Street following the firm have to some extent been influenced by the personalities of the top leadership (if they are not possibly suffering from at least a partial narcissistic disorder themselves) in determining the valuation for the supplier right after the last earnings conference call.
As we have mentioned in the past, undoubtedly, there has been “arrogance” expressed over the years on the “superiority” of their technology, and that they are “better than others” in the marketplace, which we think has never clearly been demonstrated. Also, Infinera is currently spending “more on R&D as a percentage of their sales,” despite admitting that the bulk of their business is growing in the single-digit range. So, they have not become “more conservative in the face of bad recent results.”
In fact, they can hardly constrain themselves in promising to speed up future development, as well as currently introducing several new products, including coming up with an entirely novel solution category, “meshponder.” In addition, a strong case can be made that they “feel threatened by having people around them that are smarter than them” at least related to the metro expertise by the ex-Transmode management.
In elaborating on this last point, there was the unusual behavior of bending over backwards right after Transmode came on board in letting everybody know that its traditional products were the way to move forward. While in the next-to-last quarterly earnings call, they were desperate enough to mention wireless fronthaul/backhaul as a possible avenue of growth, when they met the high end of their guidance for revenue, it was only after being forced to address the matter based on a question, they were not as enthusiastic about it on the last conference call. As they got called out on it, they evidently felt compelled to issue a press release on the use of the “XTM” Series for this application, but conveniently failed to mention the ex-Transmode CEO, who at least has the title of SVP, Head of Metro Business Group.
One of the most disrespectful comments toward the “Transmode” contingent was made after it had become very noticeable that the TM Series helped to bail out Infinera in the last quarterly results. Evidently, the CEO could not control himself in characterizing the solutions as currently “longer in the tooth.”
Concerning analysts on the Street, it was hard to understand why they were inclined to reward Infinera immediately for merely performing within the range of the expected guidance. Given that Infinera was originally punished for such an outlook, it just did not make any sense. At least in general, they acknowledged the challenges ahead for the supplier, and one even questioned its ability to survive in the longer term.
Please consider our reports, including Clash of Metro 100G Optical Vendors with Shifting Network Paradigm and Clash of Optical Component Vendors & Technologies in Data Center Networks.
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[written by Mark Lutkowitz]