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A leading provider of network solutions, ADTRAN Inc. (ADTN - Analyst Report), achieved another milestone in cloud based technologies by unveiling the first ever cloud-based Mobile Data Offload solution for cellular companies. The technology is based on Hotspot 2.0 specification of Wi-Fi Alliance that provides users with easy access to public Wi-Fi networks.

Given an upsurge in mobile data traffic, data offloading solutions can be defined as the need of the hour. ADTRAN’s cloud-based Mobile Data Offload technology offers a unique solution that not only helps in reducing data traffic but also minimizes the cost of maintaining complex network infrastructure.

The company’s latest solution is capable of targeting various spheres of network congestion including cellular backhaul, Radio Access Network and enterprise access.  It combines advanced virtual wireless LAN (vWLAN) with mobile backhaul solution for integration into any network architecture and provides seamless data offloading.

The deployment of such a solution by carriers would imply long-term benefits by minimizing investment over LTE network infrastructure. Further, it provides an option to identify network capacity requirements and determine which data traffic to offload so as to maximize mobile data profitability.

We believe that the rise in global broadband deployment, intensive upgrade of mobile infrastructure and channel expansion in the Enterprise segment are the key factors driving ADTRAN’s innovative and diverse product portfolio. The company has already benefited from its three main growth products, namely Broadband Access, Optical Access and Internetworking that represent approximately 78% of its total revenue.

Further, we expect broadband stimulus, Total Access 5000, fiber-to-the-node platforms, incremental international sales, growing professional-services activities in domestic and overseas markets, as well as mobile broadband infrastructure upgrades to offset gradual declines in the company’s traditional products like HDSL.

ADTRAN continues to grow on Ethernet access networks and other bandwidth enhancement technologies for fiber-based networks. As a result, the company is enjoying an industry leading profile with approximately 15.0% market share in Ethernet over bonded copper network solutions. ADTRAN is also moving into virtual wireless LAN solutions with the incorporation of the Bluesocket technology in 2011.

Additionally, the company also registered significant growth in its professional service activities that provide deployment of the Total Access System components in telecommunication companies. ADTRAN projects that professional service capabilities will remain accretive as both domestic and international carriers seek cost-effective methods to accelerate network deployments.

However, we believe that the acquisition of Nokia Siemens Networks’ fixed-line Broadband Access business would continue to weigh on ADTRAN’s earnings performance this year given its weaker market shares. Further, muted performance by the company’s traditional product line – HDSL, lower spending by Tier 1 carriers and ADTRAN’s heavy reliance on key customers – AT&T Inc. (T - Analyst Report) and Verizon Communications Inc. (VZ - Analyst Report) – along with regulatory issues in the telecommunication industry contribute to our cautious stance.

We are maintaining our long-term Neutral recommendation on the stock. For the short term as well, the stock retains a Zacks #3 Rank (Hold).

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