Infinera and the Age of Narcissism

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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 find details on our reports, including Clash of Metro 100G Optical Vendors with Shifting Network Paradigm and Clash of Optical Component Vendors & Technologies in Data Center Networks here. For our seven-day-a-week updates, please follow us here.

[written by Mark Lutkowitz]

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4 comments

  1. Hi mark I have been reading your opinion and inherent negative bias on Infinera for several years. Even when they were doing well you were very critical.
    Your arguments are looking more and more personal rather than professional. I beg to differ on their superiority. I believe they are the only company that can innovate in three areas coherent, baud rate and photonic integration. All others only innovate in DSP . You will see their superiority once the 5G starts to take off ATT VZ will have no choice but to buy Infinera products.

    Did Infinera management upset you? your criticism is unreasonable and over the top.

    I think your comments are more narcissitic than Tom Fallon.

  2. Thank you for the reply, I respectfully disagree with your notion that suomehow Infinera will not be there in 2 years, ( reason for my feeling that you are subjective and wishful thinking due to some personal reasons) that is far from reality. They have solid strong balance sheet and have strong technology years ahead in photonics integration with vertical integration, will be one of the 2 winners in the space over the next 5 years. Their 2016 problems are due to their customer consolidation once that is behind the growth will resume. Lets us wait and watch.
    Thank you for insights.

  3. Well, I am certainly not going to leave it there. I categorically deny that my views on Infinera have anything to do with any personal “feelings.” In the case of any vendor, they are irrelevant in my analysis. Frankly, it could easily be argued that I have stronger negative “feelings” against the Ciena leadership, but it has not stopped me from looking at reality in that one will not get fired for going with the vendor. Actually, the problem in society in general is that “feelings,” which never keep me up at nights should be a replacement for objective truth. I would be more than glad to change my stance on Infinera with any kind of real evidence to the contrary.

    I have been called a lot of things in my 35 years in this business, but nobody has ever referred to me as “subjective.” I have a reputation for brutal honesty, and as I have stated in the past, I will put my track record in predicting the future of this industry against anybody. A better use of your time would be in going after the information prostitutes in the industry, who believe it is their role to be extensions of the public relations departments of the manufacturers.

    So, let us look at your viewpoint. Apparently, you are refusing to address my previous articles, which have shown that Infinera’s PICs have not resulted in any meaningful advantage. If PICs were the way to go, why is Infinera the only system vendor to deploy them? (Please do not tell me that Infinera knows how to do them because that would contradict the first portion of this paragraph.)

    You seem to be obsessed with 5G, in which Infinera has been hot and cold on publicly in the recent past, and you have a great deal of confidence that it will happen in a big way within two years. You also fail to notice that the largest amount of the fiber business involving 5G will be addressed by the access players (companies like Calix and Adtran).

    So, which companies will be the losers amongst the other supposed winner, Huawei, Ciena, Nokia, ZTE, etc? Why do assume that after customer consolidation, it will result in a very favorable outcome for Infinera? For example, Verizon/XO is a goner.

    I have tried to be polite, but you have demonstrated that you have no intimacy with this space.

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