Infinera goes un-public

Another whopping round of venture capital funding for an optical switch maker that many predicted would go public could be a reflection of just how challenging the public market is for telecom equipment vendors these days.

Infinera has raised at least another $100 million in its seventh round of funding, raising its total funding to over $300 million, according to Venture Wire. The five-year-old vendor hasn’t publicly announced the news and won’t talk about it yet. At least one analyst interprets the move as a lost opportunity.

“They may have missed the market,” said Joe Chiasson, Susquehanna Financial Group analyst. “They missed a golden opportunity to take the company public in the first part of the year.” Wireline equipment stocks were riding high, in a relative sense, for the first three months of this year, he said, but in the past three months, they’ve “imploded.”

That’s partly because, earlier in the year, many investors anticipated an inflection point in which investment and spending would shift from wireless to wireline equipment. At the National Optical Fiber Communications/National Fiber Optics Engineers Conference in March, Credit Suisse financial analyst Paul Silverstein reported a wave of new investment into optical networking stocks in recent months, with nearly all optical stocks up from a year earlier. But he predicted investors would grow more discriminating in the months that followed. And they did. The American Express index of telecom network vendor stocks (^NWX) has fallen precipitously in the past three months or so, from a peak around 275 in April to about 201 today.

While Infinera’s latest round will allow it the scale to serve more and bigger customers, it raises the bar the company must reach in order to bring a return to its investors. It also raises the price for any company that might want to acquire Infinera. But according to more than one analyst in the space, that was probably a short list to begin with, since established equipment vendors with enough cash to make such a purchase probably have their own optical switches already and are unlikely to mothball those investments in favor of spending still more money for someone else’s product.