Free Newsletter
Adtran sees possible Tier 2 spending decline
Network equipment vendor Adtran reported second quarter earnings that included a profit of $22.4 million, about 34 cents per share, on revenues of $131 million, but the bigger news coming out of Adtran's earning call was the observation that spending by Tier 2 carriers in general may slow down in the near future, and may already have slowed down--at least for Adtran--where Tier 2 telco Embarq is concerned.
The largest Tier 1 carriers have not appeared to have changed spending patterns yet during a rocky year economically in the telecom industry and other industries. A revenue scare among carriers late last year and early this year turned out not to be as bad as first thought. As second-quarter earnings reports unfold in the next few weeks, watch closely for other signs that Tier 2 telcos may be touching the brakes.
For more:
- check out this coverage at Light Reading
Related articles:
Adtran entered the GPON market earlier this year. Adtran report
Adtran reported a strong first quarter of 2008. Adtran report
More stories about Tier 2 Tier 1 Telcos Second Quarter Earnings Network Equipment Vendor Embarq Adtran
Comments
Posted by Dan O'Shea | July 16, 2008 - 12:36pm
Thanks for the comment. Yes, I did read the transcript, and I agree my word choice in the headline is not the most accurate to the specificity of the statements made on the call.
Here is what Adtran CEO Tom Stanton said at the end of the call (after another Adtran official earlier confirmed that spending by Embarq had dropped off): "I think the note with the mid-tier carriers and as to rationale I would really like to leave it to them to explain but I do think that most of the mid tier carriers have been really cautious in their capEx spending, at this point in time really for a year. In fact we even saw periods of that prior to a year ago. I would say that environment hasn’t gotten worse. I would say it is just the same in how they are being cautious in spending money and even to the approval cycles about how they spend on things. I don’t know if I would attribute it specifically to the economic environment more so than just the methodology in which they run their company today."
That excerpt was taken from the transcript as posted at Seeking Alpha...
The mission of the newsletter is to point readers toward the top news of the day at a variety of publications, and where we think it helps, to add some further perspective on matters. In doing so, we sometime adopt the tone of the reports we link to and sometimes not, and sometimes we add an observation they didn't mention. In this case, I agreed with the perspective that Light Reading took in its story (and a similar take Telephony had, but that I didn't link to).
In the text, I used the word "observation" because I believe this is one possible observation to draw from Stanton's statement, from the tone of the questions he was responding to, from general economic and industry conditions and from further media analysis of all of the above.
Perhaps the lower recent spending by mid-tier carriers (Tier 2 ) and the Embarq drop-off that Adtran officials alluded to is not an indication of a future trend. I believe it very well could be... In any case, I think we'll find out in upcoming earnings call whether or not this observation is on the mark.
-Dan
Posted by Anonymous | July 16, 2008 - 11:22am
Where exactly did they state this? I actually read the transcript of the earnings call, did you?
SHARE
WITH:
Comments (2) | Post a comment