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Infinera IPO Filing: The Juniper Net Works?

March 2, 2007 on 9:31 am | In Company Analysis, Investor Analysis, Board Member Analysis, IPO |

Infinera, a fiber-optic network chipmaker, recently filed for its IPO.  Infinera has been the subject of much scrutiny based on its accumulation of start-up capital ($300M total, including $110M in its last round in 7/06), recent losses ($89.1M last year), and a pending 2006 lawsuit (Cheetah Omni, LLC, over two patents).  So things are bad?  Well, maybe not - especially when looking at its capital relations.  I use this post to investigate their public company ties.  The Infinera Investment Relational Map w/ Public Company ties is below [Specs: Private + Acquired companies filtered out]:

First note that Infinera has 17 investors (a high number).  This may be partly explained by its 7 rounds of funding (again, a high number).  But examination of the above map indicates that there are multiple public company co-investments among their investors.  Kleiner Perkins is the leading investor in Infinera and has multiple IPO experiences with Sprout Group, Venrock, and Benchmark.  It is also interesting to note that Juniper Networks is on the map as both an investor and company (both Kleiner and Benchmark were its investors).  Thus we see Juniper as a key figure in Infinera.  I next mapped the People Relational Map for Infinera and the results [Specs: People Filter: Remove Former Management Team; Drop Pendants].  The resultant Person-Investor Map is below:

Here we see that the Infinera ties three board members to Juniper as the only people relations in the map: (1) Kenneth Goldman (Seibel CFO); (2) Pradeep Sindhu (Juniper Founder/CTO); and (3) Vinod Khosla (KPCB).  It should be noted that while Khosla no longer sits on the board of Juniper, fellow KPCB Affiliated Partner Will Hearst now does (thus maintaining a Kleiner tie).  The people relations between of Juniper increase its interest in the Infinera IPO.  For this reason, one should not be surprised if Infinera has a corporate ally in their IPO.  The people connections between Juniper and Infinera become even more striking when mapping both of their Board networks together.

 

The above map details indirect connections of current Infinera board member Alex Balkanski with former board member Peter Wagner (Mu Security & Entrisphere) and current Juniper board member Richard Kramlich (Decru).  It also shows a previous tie from Infinera board members Vinod Khosla and Don Maydan (eASIC).  All told, there are 7 people paths between Infinera and Juniper, 3 of these are direct paths. 

The purpose of this post was to uncover a strong relationship between Infinera and Juniper Networks that may not be played up (or even noticed) by analysts - a so-called relational gem.  By comparison Juniper networks had a successful IPO in mid-1999 and steady large increase in value for its 1.5 years.  After that, it maintained a pace slightly ahead of the Nasdaq.  Following Juniper’s path, the overall prospects for Infinera seem prime over the first 1.5 years after its IPO. 

A couple of other factors to consider at the IPO: (1) Given the recent (02/28/07) downturn on the market, ensuing IPOs have an advantage of not having to share in this burden; (2) Given all of the negative press about Infinera, their initial IPO price may be affected, thus making it a potential bargain; (3) IPOs in general have been viewed as favorable in recent months, perhaps even overvalued, finding a worthy sleeper such as Infinera may be the best strategy for short-term gains.  Of course, external market factors, its looming patent suit, and its overall profitability will necessarily be important to keep an eye on.  In any case, I am bullish on Infinera because its network works.