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ADC Reports Mixed Bag in Q2

ADC Telecommunications Inc. (Nasdaq: ADCT) posted revenues of $298 million for the quarter ended April 30, 2002, up a bit from $294 million last quarter (see ADC Closes Q1).

Executives said they think the company is "bouncing along the bottom" of the telecom recession, but it's not counting on carriers loosening their purse strings anytime soon. ADC is taking measures to reduce its costs even further, in order to hit a breakeven point of $300 million to $350 million per quarter (with roughly 38 percent gross margin) by the end of the year.

Despite a slight move up in revenues, gross margins are down to 30 percent (including operating reserves) from 32.3 percent last quarter. And despite strong sales in broadband access products, the company reported a pro forma net loss of $0.06 per share, two cents lower than analyst consensus as reported on First Call. Execs say next quarter will see a similar loss per share of $0.05 to $0.06, with $0.02 to $0.04 the quarter after.

Execs blamed a witches' brew of charges, including some related to inventory and accounts receivable, for the EPS loss. As predicted in the April edition of the Optical Oracle, Light Reading's paid subscription research service, charges for non-cash stock compensation, restructuring charges, and goodwill amortization weren't recorded in ADC's first quarter and were likely to emerge to the company's detriment this quarter. It looks like those chickens indeed came home to roost.

Among the cost-cutting measures will be plant closings and work reductions through attrition and layoffs.

On the upside, broadband infrastructure and access (BIA) sales were $205 million, compared to $197 million last quarter, with ADC's CUDA CMTS system up 43 percent sequentially and 221 percent year-over-year. CEO Richard R. Roscitt repeatedly referred to increasing access, particularly in the cable modem termination system (CMTS) area, as the key to the company's future.

"We're the only company that's kicked Cisco's butt in CMTS over the last quarter," asserted Roscitt. But he was reserved about growth in the short term. ADC won't turn around, he says, until 2003. "I believe the worst is over. The road ahead will be mixed, or I might say bittersweet. The companies that survive are those that will master the dynamics of short-term realities while positioning themselves for long-term growth."

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com

Editor's Note: Light Reading is not affiliated with Oracle Corporation.
I Wish I Was Tiger 12/4/2012 | 10:20:42 PM
re: ADC Reports Mixed Bag in Q2 How is ADC is positioned for "long term growth"?

Granted they have a strong CMTS play, but Cisco still rules this market. They are losing share in HDSL to ADTRAN and have NO other growth engines.

"Roscitt repeatedly referred to increasing access", but from where I sit the Avidia DSLAM is being crushed, they're DLC position is dismal, and they have no next gen access platform (e.g., PON).

So much for the "Broadband Company".
Iipoed 12/4/2012 | 10:20:42 PM
re: ADC Reports Mixed Bag in Q2 They sold their access products division, Kentrox, a while ago. This made no sense. It almost appears that if products require software to function ADC seems to shy away. Everything they make is always top shelf but constant senior management infighting and the battle over Carrier versus Enterprise customers wages on.
I also worked there for 5 years.
Einstein2 12/4/2012 | 10:20:34 PM
re: ADC Reports Mixed Bag in Q2 ADC is in stronger than Cisco in CMTS, and gaining share (rossitt said on the call)

wireless they are doing well with digivance, which was proven at the olympics

their next gen DLC, called iAN, will be at supercomm.

their connectivity business is gaining share and is not threatened by any nextgen products. Avaya, their only competitor is selling out.
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