Cable Tech

Adtran's Early Warning

“The Godfather prefers to hear bad news immediately.” -- Tom Hagen (Robert Duvall), The Godfather

Analyst darling Adtran Inc. (Nasdaq: ADTN) afforded Wall Street the same courtesy as The Godfather when it previewed some ugly fourth quarter results Monday evening (see Adtran Revises Q4 Down).

But did the Huntsville, Alabama-based telecom equipment provider give enough detail in its bad news? Some think not. "The lack of information contained within Adtran’s pre-announcement press release is unnerving – we suspect that this temporary vacuum on information will motivate investors to draw very negative conclusions," wrote Jefferies & Co. analyst George Notter, in a note to clients on Tuesday.

What did Adtran say? A company statement from CEO Mark Smith says the earnings hiccup will be brief. "Bookings have been weak during the quarter in the midst of a pause in our market,” Smith said. “We believe this pause will be short lived as consumer demand for broadband services continues to grow and as business spending begins to improve.”

DSL equipment firm Adtran was expecting to hit $119.5 million in sales for the quarter ending December 31, 2004, a number it has now ratcheted down to a range of $100 million to $104 million.

Earnings per share will be in the 16 to 18 cent range, rather than the 25 cents the company had earlier projected.

Adtran stock fell $3.58 (16.41%) to $18.23 in trading on Tuesday.

With such light commentary surrounding Adtran's news, analysts were left to connect the dots. UBS Investment Research analyst Nikos Theodosopoulos atttibutes the poor results to “a shift in carrier spending from DSL to new FTTx architectures,” combined with “a lack of improvement in enterprise space.”

UBS believes Adtran derives 72 percent of its sales from carriers and 28 percent from enterprise customers.

Another theory has Adtran getting squeezed by Alcatel SA (NYSE: ALA; Paris: CGEP:PA) in big carrier accounts. "We believe the recent SBC Communications Inc. (NYSE: SBC) - Alcatel deal is an ominous sign regarding Adtran’s near-term ability to win the next leg of RBOC access business," wr0te Needham & Co. analyst Anton Wahlman in a note to clients on Tuesday (see Mais Alors! Alcatel Bags $1.7B SBC Deal ). "Not detrimental, probably, but enough to give us concern." The company will formally release fourth quarter financial results on Tuesday, January 25, 2005.

— Mark Sullivan, Reporter, Light Reading

materialgirl 12/5/2012 | 12:59:13 AM
re: Adtran's Early Warning How real can DSL be if FTTx results in better regulatory pricing treatment, and wireless offerings (EV-DO in particular) will offer higher bandwidth within two years?
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