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October 15, 2021
Broadband network Adtran reported record demand for its products, but warned that it will post a loss in its most recent quarter due to supply-chain constraints.
Broadly, the situation does not come as a surprise. After all, a number of other fiber operators and network suppliers have hinted at similar supply-chain problems. Further, demand for fiber networks has been growing all year, and could shift into overdrive if Congress approves $65 billion in funding for broadband buildouts.
Adtran, which referenced some of the issues the company was facing due to supply chain constraints during its second quarter call, said this week it expects to report $138 million in revenue in the third quarter paired along with an operating loss of $10.1 million, below its previous forecasts.
"This lower gross margin and decreased profitability, as compared to prior guidance, was attributed to approximately $9 million in quantifiable supply chain constraint-related expenses incurred during the quarter," the company reported.
Demand remains strong
However, Adtran CEO Tom Stanton's message was: Don't worry. "We are experiencing record demand," he said in a statement. "During the third quarter we secured two additional Tier 1 fiber customers, and previously announced Tier 1 fiber customers significantly increased their bookings for our fiber access platforms. Although our revenue growth and profitability in the near-term are impacted by the supply chain issues, our long-term outlook continues to strengthen given the record demand and the supply outlook."
The company said it expects supply-chain challenges to peak during the second half of 2021, and that they will begin to ease by the middle of next year.
Some financial analysts concurred with Stanton's posture. "We believe demand for fiber access and home networking platforms will continue to accelerate over the next several years driven by favorable underlying mega trends and unprecedented levels of public sector funding," wrote the financial analysts with WestPark Capital. However, they warned that other fiber network vendors like Calix could report similar short-term dips.
Concerns about the supply chain for fiber and fiber network products are not new. For example, AT&T recently lowered its fiber buildout target for 2021 to 2.5 million locations from 3 million locations due to supply chain issues.
"Shortages in semiconductors and other vital components, including capacitors and flash memory, have been well-documented, impacting not only networking equipment, but also consumer electronics, automobiles and other industrial equipment," wrote analyst Jeff Heynen of research and consulting firm Dell'Oro Group earlier this year.
Nonetheless, those in the broadband industry remain optimistic as operators invest into their networks following historic, pandemic-driven increases in Internet traffic. And those investments could catch fire in the months and years to come if government investments into broadband play out as expected.
Editorial Director, 5G & Mobile Strategies, Light Reading
Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.
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