Adtran Cites Lumps and Bumps in Q3

Telecom equipment vendor Adtran Inc. (Nasdaq: ADTN) this morning was out with disappointing Q3 results and had little to say that would clarify things going forward other than that things "should" get better.

To hear Adtran Chairman and CEO Mark Smith tell it, the quarter was characterized by unpredictable, lumpy sales.

"When you take the lumpiness we don't associate it with anything other than the fact that it's lumpy," said Smith inscrutably on this morning's conference call.

Adtran, which lowered its Q3 estimate last week, reported income of $18.8 million, up from $17.2 million in the same period last year. But revenues and earnings fell short of estimates. It blamed the revenue shortfall on bookings that failed to occur during the second half of September, particularly for integrated access devices and DSLAMs. Specifically, customers for remote terminal and outside plant DSLAMs were awaiting the availability of new, higher-density ADSL2+ products, according to execs (see Adtran Falls Short in Q3).

Speaking on this morning's conference call, Smith described the problem as a "timing situation" and said that some of the bookings may be pushed into the fourth quarter. However, with the current quarter only a few days old, he added that it was too early to make that call. He also stressed that the DSL market continues to be "lumpy."So will growth return? Smith said that revenue growth should return in the fourth quarter, but he dropped plenty of hints that this was no certainty. "We're not sure" what the real growth rate would be, said Smith.

One product area in which Adtran says it's making steady progress is its NetVanta family of access routers, Ethernet switches, and firewall/VPN products, according to Smith. The NetVanta range is essentially a portfolio of all-in-one network products designed to slash the cost of using separate switches and routers (see Adtran Offers a Combo).

The Huntsville, Alabama-based firm has been continually adding to the NetVanta range over the last few months, aiming to undercut archrival Cisco Systems Inc. (Nasdaq: CSCO) on price (see Adtran Attacks on Price).

According to Smith, the NetVanta message is getting through to users, and sales are rising steadily. "It continues to grow on a quarter-after-quarter basis," he said. "We are pleased with the progress that we're making and look on that as a significant win for the company."

However, Smith admitted that NetVanta is yet to reach five percent of Adtran's total sales, although he said that the company is "definitely on its way" to that milestone.The company's overall Q3 sales were $115.3 million, up from $106.2 million in the same period last year.

Adtran's Q3 earnings per share came in at 23 cents, which was at the low end of the estimate released by the company last week. Analysts had expected earnings of 24 cents a share.

In early trading today, Adtran shares rose 63 cents to $21.10.

— James Rogers, Site Editor, Next-gen Data Center Forum