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Semiconductors - Thursday, October 21, 2004

Infinera - Profile

HQ: Sunnyvale, CA

Founded: 2000, previously called Zepton.

Management: Jagdeep Singh is President, CEO and founder of Infinera. He was President and GM of CIENA's core switching division and he was a VC with Interwest.

Investors: Raised $52M in October 2004, moving the needle to red zone total of $205M! Astoundingly, this money will not get them to profitability (they have over 250 employees to feed at Silicon Valley prices) so they might need another 8 or 9 figures. VCs are Agilent Ventures, Applied Materials Ventures, Kleiner Perkins Caufield Byers, Benchmark Capital, Accel Partners, Sutter Hill Ventures, Venrock Associates, Mobius Venture Capital
Sprout Group, Worldview Technology, Juniper Networks, JAFCO Ventures, and Cypress Semiconductor.

Business Model: Digital optical networking chips and networking boxes sold to telcos for their Internet & voice networks. Company makes the case that current standards, which require conversions from optical to electrical and back to optical transmission, require costly converters. Infinera claims to greatly simplify conversion and can save telcos at least half of what they are currently spending on products from Lucent, Nortel, etc.

Competitors: Ultimately, Lucent, Nortel, & JDS Uniphase.

Dirt: Company expresses a goal not often heard by chip startups these days - to grow as an independent company, rather than position itself as an acquisition candidate. VCs are hoping this will be the next Broadcom, but thus far the company is long on funding and pedigree and extremely short on traction. Analysts expect telcos will dabble with buys, but don't expect major orders anytime soon. Infinera says it will keep the latest $52M in the bank as a signal to buyers that they won't get stuck holding a bag of chips from a bankrupt company. We feel for their CFO. They are burning through $4.5M p/month and have no revenue or customer wins.