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Summary

On April 9th, Infinera announced plans to acquire metro packet/optical vendor Transmode AB, for $350m. The deal, expected to close in 3Q15, will greatly expand Infinera's metro capabilities and strengthen the company's business in Europe. Infinera has been developing its PIC (Photonic Integrated Circuits) technology for use in the metro aggregation market, and the combination with Transmode will provide a strong end-to-end value proposition and significantly widen Infinera's addressable market.

Deal expands addressable market for Infinera

Infinera is currently the fourth-ranked vendor of backbone DWDM equipment globally. The company recently introduced, in September 2014, a new product (Cloud Express) aimed at the quickly growing metro data center interconnect market. At OFC, in March of this year, Infinera unveiled its next-generation PIC technology, which is aimed at the metro aggregation market, and has hinted that it would announce a new product addressing the metro aggregation market later in the year. Not having a metro product has limited Infinera's ability to grow its business.

Transmode is the eleventh-ranked metro WDM vendor globally but is the fourth-ranked metro vendor in EMEA, with a very strong presence in Europe. The company has a strong, feature-rich, low-power, high-density metro packet-optical product line and has been successful in the mobile backhaul and data center interconnect markets. As a small niche vendor, Transmode has struggled when competing head-to-head with some of the bigger vendors; that should now change.

The combination of Infinera and Transmode will provide the company with the products and capabilities to compete across all segments of the optical/Ethernet market, putting it on even footing with its chief rival Ciena in terms of having all the parts to address network operator requirements in an end-to-end manner. Additionally, Infinera will gain some key customers, such as Virgin Media in the UK and Akamai in the US. The deal is a really good fit and a win-win for both companies.

Appendix

Further reading

Market Share Report: 4Q14 and Full-Year 2014 Global ON, TE0006-001030 (March 2015)

"OFC 2015 Highlights: Day Three," TE0017-000033 (March 2015)

Author

Ron Kline, Principal Analyst, Intelligent Networks

ron.kline@ovum.com

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