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Adtran and CommScope Q1 2024 revenues were down 30% compared to last year
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Both companies predict things will improve, but they're noncommittal on exact timing
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Both companies are reducing expenses this year to the tune of at least $90 million each
Adtran and CommScope seem to be floating on life rafts, trying to survive rough financial seas and hoping for landfall on a paradise island soon. But for now – it’s still rough.
In Q1 2024 Adtran reported revenues of $226.2 million, down 30% year-over-year. Similarly, CommScope reported net sales for the quarter of $1.16 billion, down 29.8% compared to the same quarter last year.
Adtran reported that its Access and Aggregation business was down 16% compared to the year ago quarter. Its Optical Networking category was down 49% year-over-year, and Subscriber Solutions was down 12.1%.
Meanwhile, CommScope reported that its Connectivity & Cable Solutions (CCS) business was down 26.4%; Networking, Intelligent Cellular and Security Solutions (NICS) was down 36.6%; Outdoor Wireless Networks (OWN) was down 24.1%; and Access Network Solutions (ANS) was down 37.6%.
Down, down, down. Where’s the bottom of this whirlpool?
Adtran, CommScope, Corning and Nokia have been saying their sales are down because service providers stocked up on fiber products during Covid, and those customers have been drawing down those stockpiles.
Adtran’s CEO Tom Stanton said this week there’s not that much inventory left in its fiber-to-the-premise OLT product line, which is part of its Access and Aggregation business. But in Optical, there’s still an “inventory situation,” and he added “it's got the longest path ahead of it.”
CommScope’s CEO Chuck Treadway said, “We have begun to see early signs of recovery in our Connectivity and Cable Solutions and Outdoor Wireless Networks businesses.” Unfortunately, these favorable trends are offset by significantly lower demand for Networking, Intelligent Cellular and Security Solutions and Access Network Systems.
Both Stanton and Treadway said they think things will gradually get better, but they were noncommittal on exact timing.
Adtran is aiming to reduce its 2024 expenses by $90 million compared to 2023. And CommScope said it’s on track to take out $100 million of annual cost.
BEAD to the rescue
Adtran held its Broadband Business Solutions Summit at its corporate headquarters in Huntsville, Alabama, last week which 180 small and midsize U.S. broadband service providers attended.
“These are the customers that are leading the charge in building out fiber across the U.S., and the energy there was high,” said Stanton. “It's as high as it's ever been.”
He said the excitement comes from anticipation of government stimulus programs such as the Broadband Equity, Access & Deployment (BEAD) fund, which will target the nearly half of all U.S. households that still lack a fiber connection.
“During our event last week, a quick poll of the audience showed that more than 80% of customers in attendance were participating in broadband stimulus programs,” said Stanton.
He touted Adtran’s local manufacturing, saying, “We have now shipped over 1 million OLT ports that comply with the latest Build America Buy America rules that is part of BEAD, highlighting our long history of U.S.-based manufacturing.”
In terms of the progress of BEAD and when money will really start flowing, Stanton said, “It's real clear that some states are better at implementing than others. We're kind of just waiting to see how the state rules roll out.”
For CommScope's part, Treadway said that CommScope expects to ultimately reap about $4 billion over a four-to-five year period from BEAD projects.
CommScope’s cable inventories
It’s not only fiber inventories that are stockpiled. Treadway also talked about the same problem on the cable hybrid fiber coax (HFC) side.
“In general, our customers just have too much inventory right now, and they're trying to figure out where they want to go with HFC or do they want to go to DAA,” said Treadway. “And I mean we have a pretty large installed base. So we have some customers that just want to do more with their existing network and look at DOCSIS 3.1 for example.”