PAM4 doesn't scare Infinera

Executives at Infinera (NASDAQ:INFN) used their April 27 first quarter analyst call to underscore their belief that pluggable, direct-detect transceivers for short-reach data center interconnect (DCI) applications do not pose a material threat to demand for the company's Cloud Xpress platform.

Executives at Infinera (NASDAQ:INFN) used their April 27 first quarter analyst call to underscore their belief that pluggable, direct-detect transceivers for short-reach data center interconnect (DCI) applications do not pose a material threat to demand for the company's Cloud Xpress platform. In fact, CEO Thomas Fallon asserted transceivers based on PAM4 technology, such as those that are the subject of a recently announced collaboration between Microsoft and Inphi, would have "zero viable market share this year."

He also called them "a flash in the PAM."

Microsoft and Inphi used OFC 2016 to announce a reference design for PAM4-based pluggable transceivers that Microsoft sources said they would use for some of the company's data center interconnect requirements (see "Inphi offers 100G PAM4 QSFP28 for 80-km data center interconnect"). The share prices of publicly traded companies in the optical transport space with data center interconnect platforms, particularly Infinera, dropped at the news.

Infinera sources subsequently downplayed the competitive threat PAM4-based approaches present as well as their impact on the overall data center interconnect market. In the prepared opening to the analyst call and also in response to questions, Fallon doubled down on such assertions.

"We agree with industry analyst ACG's recent assessment that a pluggable-based approach like PAM4 is more complementary to coherent-based solutions like Cloud Xpress than competitive. Pluggables in general are likely to be attractive in shorter-reach, fiber-rich environments for customers who can manage the higher operational complexity required versus a plug-and-play coherent solution like CX," Fallon said in his prepared remarks.

"There are a broad set of different applications across the DCI market segment, and we are unwavering in our belief that Infinera's long-term opportunity to be the DCI market leader remains firmly intact," he added.

In response to a question from an analyst later in the call, Fallon cited Andrew Schmitt of Cignal AI as stating that PAM4 approaches likely would prove a strategic niche option that would only account for a limited total of the data center interconnect market.

"He says PAM4 is a short-termed tactical opportunity that will be marginalized as the cost and power density of coherent improves. And I would agree with that," Fallon said. "If you look at the history of capabilities that are semiconductor-driven, power and size improve over time. And I believe coherent will continue to be demonstrated the right solution. PAM4 is not a solution today. It's a potential solution for later and the short-term opportunities may be a couple of years."

For this reason, Infinera has no plans to offer a PAM4-based option on its platforms, Fallon added.

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