Govt. Stimulus Helps Small Telecom Firms

Small telecom equipment manufacturers, like Alvarion Ltd. (ALVR - Analyst Report), Arris Group (ARRS - Analyst Report), ADC Telecommunications (ADCT - Analyst Report), and Anaren Inc. (ANEN - Analyst Report), are expected to benefit from the $7.2 billion Broadband stimulus fund granted by the U.S. government under the Rural Utilities Service program.

The American Reinvestment & Recovery Act contains provisions that encourage telecom operators to apply for grants, loans and guarantees to assist them in deploying un-served and under-served communities for broadband access. Telecom-gear makers and infrastructure-solution providers will help the regional/rural telecom operators to plan, design, and implement broadband networks.

Recently, Alvarion received a five-year contract from Open Range Communications Inc, a U.S. wireless operator. The total contract size is more than $100 million. Alvarion will provide radio-access equipment, customer premises devices and systems integration for Open Range's broadband wireless network deployment spanning 17 states, 546 rural communities that may reach out to a population of 6 million.

Arris Group has decided to assist cable operators in preparing their applications for the Broadband Stimulus fund. Arris has a strong presence in the rapidly growing cable modem, cable modem termination systems (CMTS), and embedded multimedia terminal adapter (E-MTA) markets.

ADC Telecommunications, a leading connectivity solutions provider for copper, fiber, and wireless network, is also likely to be benefited. We expect increased spending by telecom carriers for next-generation fiber-based networks and wireless networks to boost demand for connectivity solutions, especially in the local loop areas.

Demand is also likely to grow for the products sold by Anaren, a provider of microwave components and subassemblies for the wireless industry. As a pioneer in high-frequency electronics, Anaren's base-station antenna and lightweight components/subsystems can be used by rural telecom operators cost effectively.

We remain bullish on Alvarion, and ADC Telecom, and maintain our Hold rating for Arris Group, and Anaren.