Alabama-based networking solution provider, ADTRAN Inc. (ADTN) recently announced the completion of its acquisition of Nokia Siemens Networks’ (“NSN”) fixed-line Broadband Access business.
Last December, the company announced its plan to acquire Nokia Siemens’ Broadband Unit. As projected, the deal has reached its settlement in the first half of this year.
The transaction involves the acquisition of the intellectual properties, technologies and the established customer base of NSN’s Broadband Access unit. Further, it would entail the transfer of manpower to ADTRAN.
The deal will remain accretive to ADTRAN’s professional services in domestic and overseas markets and enhance business opportunities with Tier 1 and Tier 2 carries. The company remains focused on its strategy to build positions in new markets with additional business from Tiered carriers like Verizon Communications (VZ) and Frontier (FTR) and generates incremental sales from its new customer Telmex. Further, ADTRAN is moving into a new arena with the buyout of Bluesocket, a privately held U.S. company that specializes in wireless network solutions with virtual control system.
We believe this global expansion will contribute to ADTRAN’s growth trajectory over the next several years and be favorable for its 2012 strategy of expanding the international customer base.
However, over the near term, we expect the acquisition expenses to continue to weigh on the company’s financials. This remains evident by the company’ first quarter 2012 earnings results that were significantly below its year-ago performance. As expected by the company, expansion plans, acquisition expenses and increased overseas activities affected the earnings results. ADTRAN’s earnings were hurt by expenses related to the acquisitions of Bluesocket Inc. and NSN’s fixed-line Broadband Access business.
We are maintaining our long-term Underperform recommendation on the stock supported by a Zacks #5 Rank (Strong Sell).
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