Adtran Zooms on Growth Hopes
The equipment vendor's shares climbed $9.95 (15.67%) to $73.44 in late afternoon trading on Friday.
The company expects that its revenues for the quarter ended September 30 will be in the range of $104 million to $107 million. It expects earnings to be between 40 and 42 cents a share. In early September, Adtran said it expected its third-quarter revenues to be in the range of $98 million to $100 million, with fully diluted earnings in a range of 34 to 36 cents a share (see Adtran Raises Q3 Estimates). Adtran says its revenue surprise came from greater than expected DSLAM shipments; more revenues from its enterprise networks group; and market share gains in gear that provides HDSL (high data rate DSL), which is seen as an economical replacement for T1 or E1 services.
The varied factors that make up Adtran's earnings improvement provide some idea as to what's kept Adtran going for so long (see DLC Shakeout Looms). The company isn't usually first in any of the technology markets it serves, but it builds solid gear and hammers out costs in a way that has pleased enterprises and carriers alike (see Adtran's Access Routers Handle VPNs). Still, analysts are keen on Adtran's emergence in the DSLAM arena. "This large increase is due to what we believe are strong remote DSLAM sales to SBC Communications Inc.... and strong prospects that the company may land an RBOC contract for the new high density central office-based DSLAM product," writes analyst Joel Noel of Pacific Growth Equities Inc.. Indeed, Adtran has been one of the only vendors to give Alcatel SA (NYSE: ALA; Paris: CGEP:PA) a run for its money in established accounts, such as SBC, which has 1,463 DSLAM-equipped central offices in 13 states, each office with anywhere from one to 20 DSLAMs (see LR Insider Handicaps DSLAM Market). "Adtran sold to many carriers with sales to SBC as the primary fuel for growth," writes Merrill Lynch & Co. Inc. analyst Simon Leopold. "Adtran’s larger DSLAMs have the potential to win meaningful share as well. In the most recent quarter, we believe Adtran sold about 30,000 DSL ports compared to nearly 50,000 by Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI) and over 300,000 by Alcatel." One specific area where Adtran is gaining ground is in mini-DSLAMs, and there's a new product coming up soon. At the upcoming United States Telecom Association (USTA) conference, the company will announce its newest remote-access DSLAM, a small device designed to be installed at varied locations in between the central office and the customer premises. Adtran had nothing more to say about its quarter or its upcoming product when contacted by phone on Friday. The company will talk about its third quarter at length on Tuesday, October 14.
— Phil Harvey, Senior Editor, Light Reading