Infinera (NASDAQ:INFN) is reported to have lost 40Gigb/S packet optical transporter system (P-OTS) bids to Huawei with Level 3 Communications (NASDAQ:LVLT). INFN had been LVLT's sole provider of 40G; LVLT had provided 24 percent of INFN's revenues. INFN shares are down and at least one analyst has downgraded them to $6.50.
Verizon (NYSE:VZ) is planning to replace routers with P-OTS; that is bad news for Cisco (NASDAQ:CSCO) and Juniper (NYSE:JNPR), who are now likely to either try to build their own P-OTS, or buy an experienced vendor like Tellabs (NASDAQ:TLAB) [my own baseless speculation].
TLAB has a large chunk of VZ's P-OTS and backhaul business. GGOX.OB is a new P-OTS vendor with a new technology that I am watching carefully.
Huawei also scored large deals with Comcast (NASDAQ:CMCSA) and Cox (CXR). Huawei is a Chinese company, new to N America. Huawei has stepped up by becoming a single RAN (radio access network) provider, but it is winning bids on price. This is bad news for profits in the wireless broadband infrastructure market, already hit hard by delayed purchases by telcoms. When Huawei goes public (after they have bankrupted several of their competitors) it will be huge, keep an eye on it.
Another company to watch is Starent (STAR-OLD). Revenues and profits are up when everyone esle's are down. Cramer has been all over it lately, so check his site if you are interested in his views. STAR is the backhaul top dog at the moment. LTE requires an extremely sophisticated network, with new equipment and software, but supposedly moves more bits per dollar. Starent should grow tremendously over the next several years as AT&T (NYSE:T) and VZ build out advanced 3G and 4G networks.
Dragonwave (DRGNF) is reportedly the WiMax backhaul leader; I know very little about them, but sales in WiMax equipment and devices is projected to be $16.1B by 2013. Alvarion (NASDAQ:ALVR) is the worldwide specialist in WiMax infrastructure, and has signed several large contracts lately; and, their results are deceptive because they lost money on Nortel's (OTC:NRTLQ) bankruptcy.
All of the packet optical companies have been hurting; some consolidation at the first of the year should have helped (MLNX, OPXT, FNSR, CIEN, JDSU) but Huawei is making optical devices as well. The infrastructure companies have been hammered by the telcom spending freeze which was beginning to thaw, but now Huawei muddies that water.
In my opinion, be wary ALU, MOT and ERIC because of Huawei; Nokia Siemens Network has been losing bids to Huawei (and most everyone else, ahem), probably a good idea to avoid NOK. ERIC recently won a $17B deal in China with CHL and CHU.
ZTE (OTCPK:ZTCOF) is a Chinese company making cell phones and wireless infrastructure; I have no interest owning cell phone makers, and info on ZTE is thin, but I bought a little anyway because of gaudy growth numbers and ZTE's enormous market share in China's broadband wireless infrastructure build-out; spending was frozen 1H09, but it is rolling again.
Tremendous dislocation is the only way I can describe the global wireless broadband infrastructure build out, which looks like easy money at first glance. Towers may be the safest bet: AMT, SBAC and CCI will definitely grow and make a lot of money.
Testing should also be consistent: EXFO and XXIA are P-OTS testing specialists; they should give the old warhorse JDSU some solid competition. I am far from an expert, but the news and the numbers suggest companies in these sectors will consolidate and liquidate this year.
I would short a couple of P-OTS companies if I did not think there was a good chance they will be bought.
Please note, this article is a simply list of companies in which I am interested, and is far from complete.