By Senad Karaahmetovic
Adtran (NASDAQ:ADTN) shares are down as much as 20% in premarket Tuesday after the company reported preliminary Q1 results.
The company sees first-quarter preliminary revenue between $322 million and $326M, below its guidance of $355M-$375M. The Street consensus was $364.11M. The company sees a GAAP operating margin between -14% and -2.5%.
“Growing customer concerns over inventory stocking levels affected our first quarter Subscriber Solutions category. We believe that this over-supply condition in CPE products will continue into the second quarter. Revenue for our Access and Optical Networking products grew sequentially. Supply constraints, however, limited our flexibility to clear past-due backlog across all product categories,” said Chief Executive Officer, Tom Stanton.
“We believe that the inventory impact is transitory, and we expect to see some improvement during the second quarter. We plan to adjust expenses in the near term to reflect current conditions, however, we do not see any material changes to our near-term opportunities and our long-term growth catalysts as carriers around the world race to upgrade their networks to fiber.”
Vital Knowledge analysts commented:
“This is the 3rd profit warning in the space after Lumentum (NASDAQ:LITE) and A10 Networks (NYSE:ATEN), but these companies are so small it's hard to extrapolate them to tech overall (keep in mind that earnings from Ciena (NYSE:CIEN) on 3/6 and Cisco (NASDAQ:CSCO) on 2/15 were both quite strong).”
Shares of peer Calix (NYSE:CALX) also slipped in premarket trading although Loop Capital analysts said ADTN’s negative preannouncement “offers no read through” for Calix.
“We suspect the weakness was primarily from ADTN’s two or three largest customers, BT (LON:BT) and Dynatrace (NYSE:DT), and to a lesser extent Lumen (NYSE:LUMN), neither of which are CALX customers,” they said.
“CALX enjoys a far more diverse customer base than ADTN; over 80% of CALX’s revenue comes from Tier 3 - 4 service providers, where we do not believe there is a risk of inventory buildup as these service providers do not have the balance or financial wherewithal to accumulate significant inventory. Moreover, almost all of CALX’s customer base is in the U.S.”
The analysts reiterated a Buy rating on CALX stock.