Infinera Corporation Reports Fourth Quarter and Fiscal Year 2010 Financial Results

Revenue of $117.1 Million on Year-Over-Year Growth of 30%; Non-GAAP Profit of $0.07 per Diluted Share; Non-GAAP Gross Margin at 51%

Sunnyvale, CA on 31 January 2011

Infinera Corporation (Nasdaq: INFN), a leading provider of digital optical communications systems, today released financial results for the fourth quarter and fiscal year ended December 25, 2010.

Results for Q4 2010:

• GAAP revenues for the quarter were $117.1 million compared to $130.1 million in the third quarter of 2010 and $90.2 million in the fourth quarter of 2009.
•  GAAP gross margins for the quarter were 49% compared to 50% in the third quarter of 2010 and 38% in the fourth quarter of 2009. GAAP net loss for the quarter was $2.7 million, or $(0.03) per share, compared to net income of $4.4 million, or $0.04 per basic and diluted share, in the third quarter of 2010 and a net loss of $18.7 million, or $(0.19) per share, in the fourth quarter of 2009.
• Non-GAAP gross margins for the quarter were 51%, the same as in the third quarter of 2010 and 40% in the fourth quarter of 2009. Non-GAAP net income for the quarter was $7.6 million, or $0.07 per diluted share, compared to net income of $18.7 million, or $0.18 per diluted share in the third quarter of 2010 and a net loss of $6.5 million, or $(0.07) per share, in the fourth quarter of 2009.

These Non-GAAP measures exclude restructuring and other related costs and non-cash stock-based compensation.

Results for Fiscal 2010:

•  GAAP revenues for the year ended December 25, 2010 were $454.4 million compared to $309.1 million in 2009.
• GAAP gross margins for the year were 45% compared to 33% in 2009. GAAP net loss for the year was $27.9 million, or $(0.28) per share compared to $86.6 million, or $(0.91) per share in 2009.
• Non-GAAP gross margins for the year were 47% compared to 36% in 2009. Non-GAAP net income for the year was $22.4 million or $0.21 per diluted share in 2010, compared to net loss of $45.4 million or $(0.48) per share in 2009. These Non-GAAP measures exclude restructuring and other related costs and non-cash stock-based compensation.

Management Commentary

“2010 was a year of strong growth in bandwidth demand worldwide, and our customers saw growth in their networks, driven by a number of applications, notably video, mobility, and cloud computing,” said Tom Fallon, president and chief executive officer. “We are pleased that we have been able to participate in this growth, showing strong year-over-year performance in revenues and market share, improved profitability and progress toward achieving our long-term business model. Service providers continue to look for ways to improve the economic performance of their networks through both efficiency and rapid response to their revenue-creating opportunities. With our digital optical architecture, we enable them to do so with the unique combination of world class optics and digital network intelligence.”

“In fiscal 2011, we will continue to focus on meeting the needs of our customers and on addressing market expansion opportunities. In addition, we will focus on expense management, while at the same time ensuring that we invest appropriately to enable the successful launch of our PIC-based 100G product in 2012. We remain on track to ship our differentiated 40G solution with FlexCoherent technology for our current DTN networks later this year. In the meantime, we will meet customer needs today with what we believe is the industry’s most cost effective and flexible portfolio of network solutions — our differentiated PIC-based DTN network and our ATN metro solution.”

About Infinera

Infinera provides Digital Optical Networking systems to telecommunications carriers worldwide. Infinera’s systems are unique in their use of a breakthrough semiconductor technology: the photonic integrated circuit (PIC). Infinera’s systems and PIC technology are designed to provide customers with simpler and more flexible engineering and operations, faster time-to-service, and the ability to rapidly deliver differentiated services without reengineering their optical infrastructure. For more information, please visit www.infinera.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements about our belief in the drivers for our customers’ bandwidth growth and the need for improvements in the economic performance of their networks, our belief in our ability to satisfy our customers’ requirements with our systems and the benefits of our systems, the timing of shipments for our differentiated 40G solution and the timing of the launch of our 100G product in 2012, and our areas of focus and investment for 2011. These forward-looking statements involve risks and uncertainties, as well as assumptions that if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs and develop new or enhanced products to meet those needs; the adoption rate of our products; our ability to establish and maintain successful relationships with our customers; our ability to reduce customer concentration; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; general political, economic and market conditions and events; and other risks and uncertainties described more fully in our documents filed with or furnished to the U.S. Securities and Exchange Commission (SEC). More information about these and other risks that may impact Infinera’s business are set forth in our annual report on Form 10-K, which was filed with the SEC on March 1, 2010, as well as subsequent reports filed with the SEC. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

Use of Non-GAAP financial information

In addition to disclosing financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP measures that exclude non-cash stock-based compensation expenses and non-recurring restructuring and other related costs. We believe these adjustments are appropriate to enhance an overall understanding of our underlying financial performance and also our prospects for the future and are considered by management for the purpose of making operational decisions. In addition, these results are the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss), basic and diluted net income (loss) per share, or gross margin prepared in accordance with GAAP. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations. For a description of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures, please see the section titled, “GAAP to Non-GAAP Reconciliations.” We anticipate disclosing forward-looking non-GAAP information in our conference call to discuss our fourth quarter and fiscal year 2010 results, including an estimate of non-GAAP earnings for the first quarter of 2011 that excludes non-cash stock-based compensation expenses. A copy of this press release can be found on the investor relations page of Infinera’s website at www.infinera.com.

Infinera Corporation and the Infinera logo are trademarks or registered trademarks of Infinera Corporation. All other trademarks used or mentioned herein belong to their respective owners.