ADTRAN posted mixed financial results for the first quarter of
2014. Meanwhile, the company continues to perform well owing to
strong contributions from the U.S., Europe, the Middle East, Africa
and Latin America. ADTRAN has stabilized its businesses with the
Tier 1 carriers and has also won contracts from Tier 2 and Tier 3
carriers. We expect the company to benefit from market share gain,
strong growth of core products, solid international sales and
growing service revenues. However, global macroeconomic
fluctuations, foreign currency risk and stiff competition may act
as headwinds for ADTRAN moving ahead. Moreover, the stock price is
currently trading at the high-end of its 52-week price range and is
fairly valued at current levels. Therefore, we maintain our long
term Neutral recommendation on ADTRAN.
Based in Huntsville, AL, ADTRAN Inc. designs, manufactures,
markets and services network access solutions for communication
networks. The company develops, markets and supports high-speed
network access solutions for use across Internet protocol (IP),
asynchronous transfer mode (ATM) and time division multiplexed
(TDM) architectures in both wireline and wireless network
applications. Its solutions are used to deploy new broadband
networks and upgrade slower, established networks using copper,
fiber, and wireless technologies both in the United States and
ADTRAN maintains two operating divisions based on its product
and service offerings: the Carrier Networks Division and the
Enterprise Networks Division. The Carrier Networks Division
provides products used by service providers to deliver voice, data
and video services from their equipment, to a customer's premise,
irrespective of its location either at a central office or at a
remote terminal. This division accounted for 79.3% of the total
revenue in 2012. ADTRAN's Enterprise Networks Division provides
products used by enterprise customers to construct voice, data and
video networks within the customer's site or among distributed
sites. This division accounted for the remaining 20.7% of the total
revenue in 2012.
The company's three major product categories are Carrier
Systems, Business Networking and Loop Access.
Carrier Systems includes broadband access products comprising
Total Access (TA) 5000 multi-service access and aggregation
platform products, Total Access 1100/1200 Series of
Fiber-To-The-Node (FTTN) products, Digital Subscriber Line Access
Multiplexer (DSLAM) products, and Optical Access products.
Business Networking includes Internetworking products, Optical
Network Terminals (ONTs), and Integrated Access Devices (IADs).
Internetworking products consist of Total Access IP Business
Gateways and NetVanta product lines that include multi-service
routers, managed Ethernet switches, IP Private Branch Exchange
(PBX) products, IP phone products, Unified Communications
solutions, and Carrier Ethernet Network Terminating Equipment.
Loop Access includes products such as Digital Data Service (DDS)
and Integrated Services Digital Network (Total Reach) products High
bit-rate Digital Subscriber Line (HDSL) products including Total
Access 3000 HDSL and Time Division Multiplexed-Symmetrical HDSL
(TDM-SHDSL) products, T1/E1/T3, Channel Service Units/Data Service
Units, and TRACER fixed wireless products.
In addition, ADTRAN identifies sub-categories of product
revenues, which are divided into growth products, representing its
primary growth areas and traditional products. The company's growth
products consist of Broadband Access, Optical Access products (both
included in Carrier Systems) and Internetworking products (included
in Business Networking) and traditional products include HDSL
products (included in Loop Access) and other products.
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