Infinera may split from Level 3

July 24, 2017

Infinera, an optical vendor, and Level 3 wholesale carrier, may soon part ways with a damaging report issued by analyst George Notter of the Jefferies Group, who said that Hauwei beat out Infinera for use of Level 3’s 40GPS long haul WDM network.

As Level 3 comprised 24% of Infinera’s company revenue, this move may hurt the company, causing Jefferies to downgrade Infinera’s shares to a low target of just $6.75.

While the news of Huawei’s receipt of the Level 3 optical contact is not yet confirmed, if it pans out to be true Infinera may lose all of Level 3’s business that currently accounts for a hefty $75 million in sales each year.

Additionally, the loss of the contract may make it harder for Infinera to convince other companies to strike deals with it, causing even more long term damage.

Even if the rumour turns out to be false, Infinera is already suffering some of the fallout with a stock drop of over 15.5%, as their stock is down to $7.60 a share from $9.00 per share on Nasdaq.

Notter noted in his report that Huawei is able to provide a 40Gbit/s solution, while Infinera does not offer 40G wavelength support solution.

Level 3 has not yet commented on the matter.

timyeo

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