Adtran Seeing "Unanticipated Softness" In Orders

Telecommunications equipment maker Adtran (ADTN) Thursday night warned that it was seeing “unanticipated softness in order flow, beyond normal seasonality, from some of our large customers.” The company said that “market share and strategic positioning within these customers has never been stronger,” and that it expects the softness to be “temporary.”

The company said it now sees revenue for the fourth quarter of $108 million to $112 million, GAAP EPS of 22-24 cents and non-GAAP EPS of 24-26 cents; the Street had been expecting $126.5 million in revenue and GAAP EPS of 30 cents.

Vivek Arya, an analyst at Merrill Lynch, today dropped his rating on the stock to Sell from Neutral, citing “a challenging 2007 outlook.” He sees Adtran as a company with significant challenges: “a legacy portfolio in secular decline coupled with a negligible visibility in new product sales.” He cut his 2007 EPS estimate to $1.07 from $1.27, and 2008 to $1.09 from $1.38. He says the company is struggling with a “lack of next gen fiber contracts which were won by larger competitors like Tellabs (TLAB) and Alcatel (ALU),” as well as “cap ex uncertainty from consolidating U.S. carriers.”

George Notter, a Jefferies analyst who downgraded Adtran last month, says he still sees “little upside to the shares over the near-to-intermediate term.” He rates the stock a Hold, and today cut his price target to $25 from $26.50, after trimming his EPS estimates to $1.03 from$1.09 for this year and to $1.25 from $1.30 for 2007.

Likewise, Nikos Theodosopoulos of UBS kept a Neutral rating on the stock but cut his target to $24 from $26.

Earlier this week, Morgan Stanley cut its rating on the stock. Nicely done.