Infinera shares fall as 4Q outlook disappoints

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SAN FRANCISCO (AP) — Infinera Corp. shares fell 8 percent Wednesday after the communications equipment maker issued fourth-quarter guidance that disappointed investors.

THE SPARK: Late Tuesday, Infinera reported third-quarter results ahead of analyst expectations. The Sunnyvale, Calif., company posted an adjusted loss of 9 cents per share — 2 cents per share narrower than what analysts polled by FactSet expected. Revenue fell to $104 million from $130 million, which was a bit better than the $100 million analysts hoped for.

In a conference call with analysts, Infinera predicted a fourth-quarter adjusted loss of 8 to 12 cents per share on $100 million to $110 million in revenue.

At the time, analysts were expecting a loss, excluding one-time items, of 7 cents per share on $109.4 million in revenue.

THE ANALYSIS: In a client note, Citi Investment Research analyst Kevin Dennean called the company’s outlook “good enough” and said the company’s comments about 2012 makes it sound like it will be a “transitional year” with gross margins around 40 percent — lower than the 44.5 percent he says analysts expect. He’s also predicting operating expenses will rise as a result of increased marketing expenses and performance compensation.

Dennean rates the stock “Neutral” with a $9 price target.

SHARE ACTION: Infinera shares fell 79 cents, or 9.9 percent, to $7.20 in afternoon trading. During the past year, the stock has traded between $5.91 and $12.48.