Monday, December 13, 2004

Adtran still looking for footing in Broadband

ADTN pre-announced after the market close today and lowered revenue guidance to $100M-$104M from previous guidance of $115M-$120. This is the second quarter in row that ADTN has lowered guidance. This does not bode well for traditional equipment providers especially given that there are still 17 days left in the quarter- unless they are closing shop. Last quarter ADTN blamed "Broadband" (DSLAMs & IADs) weakness and some missteps (moving from ADSL to ADSL2+) for the lower revenue and they are blaming broadband again this quarter. To me last quarter miss seemed that it was more than just broadband and most probably that will be the case this time as well. Broadband or what is non-traditional ADTN revenue account for less than 20% of revenues and its tough to picture a 15% miss that is based entirely due to this segment of revenues.

ADTN has been hoping that non-traditional products contribute growth to its top line but it remains hard to come by. ADTN has had no success winning recent FTTx initiatives by the RBOCs. SBC picked ALA as its primary supplier for project LightSpeed and ADTN got no business for its DSLAMs (expected source of growth). With its traditional HDSL business running out of room to grow (20% y/y for last three quarters whereas T1 line growth has been single digit y/y) and broadband opportunities missing, ADTN stock has a lot more down side then upside as company not only losses revenue but also credibility.


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5:38 AM  

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