Adtran's Q2 Profits Fall; Top Execs to Retire
The company also announced replacements for its top two executives -- its CEO and chairman Mark Smith and its president and COO Howard Thrailkill -- who will retire in September.
Investors weren't shocked at Adtran's moves and still see upside in its equipment business. Shares of Adtran were up $3.08 (12.15%) to $28.44 in late afternoon trading.
The company reported a profit of $20.7 million, or 27 cents a share, on sales of $118.9 million for its second quarter, compared to a year-ago profit of $21.4 million, or 26 cents a share, on sales of $120.6 million.
To replace its retiring executives, Adtran announced that its board has elected Tom Stanton as CEO and Danny Windham as president, COO, and secretary. Both appointments are effective September 10.
Stanton is currently the company's senior VP and general manager of Adtran's carrier networks group, and Windham is senior VP and general manager of Adtran's enterprise networks unit.
Though Adtran's sales and profits were down year over year, the company still beat analysts' expectations for its second-quarter results; analysts surveyed by Reuters were expecting Adtran to report earnings of 25 cents a share on sales of $115.7 million.
Adtran says its net cash from operations was $22 million for the second quarter. Its unrestricted cash and marketable securities totaled $308 million as of June 30.
While Adtran is benefiting from increased DSL equipment spending by carriers of all sizes, the company's strategy is coming under fire by analysts.
"We believe, however, that Adtran is being hurt by the current shift in access technologies from pure DSLAMs to a triple-play FTTx architecture," wrote Eric Buck, an analyst at Janco Partners Inc., in his earnings preview early on Monday. "Adtran's strategy of being a fast follower, rather than technology leader, takes the company out of the market sweet spot during such technological changes."
During its conference call, Adtran management said to look for the company to earn between 29 cents and 31 cents a share on revenues of between $128 million and $130 million. For all of 2005, the company guided analysts to expect revenues to be in the $480 million to $485 million range.
And, though Adtran doesn't have as many of the pieces to build carrier IPTV networks as do competitors such as Alcatel (NYSE: ALA; Paris: CGEP:PA), cable competition is still helping the company maintain its momentum. "We believe the RBOCs are losing ground to the cable TV companies and may force Adtran’s customers to invest more aggressively to stay afloat," writes Needham & Co. analyst Anton Wahlman in a note to clients on Tuesday.
— Phil Harvey, News Editor, Light Reading