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A leading provider of network solutions, ADTRAN Inc. (ADTN - Analyst Report) introduced a technology solution associated with its Bluesocket virtual Wireless LAN (vWLAN). ADTRAN’s latest offering for its enterprise customer involves multiple customer-premise equipment (CPE) deployment options including cloud-hosted services.

Unlike other service providers that offer a managed WLAN service through premise-based hardware controller, ADTRAN’s CPE deployment using Bluesocket vWLAN would not require placing of any hardware controller. Therefore, this new solution leverages the versatile control capabilities of ADTRAN’s vWLAN solution.  With the new Multiple CPE deployment option customers can create new cloud-based Wi-Fi services and support hundreds of WLAN users at a lower cost.

ADTRAN’s vWLAN solution bodes well for wireless service providers because it provides centrally located virtual control and management.  ADTRAN made its foray into vWLAN solutions with the incorporation of the Bluesocket technology in 2011.

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 84% of its total revenue.

Further, we expect broadband stimulus, Total Access 5000, fiber-to-the-node platforms, incremental international sales, growing professional-services 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 enjoys an industry leading profile with approximately 15.0% market share in Ethernet over bonded copper network solutions.

Additionally, the company also registered significant growth in its professional service activities that provide deployment of 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 deployment.

However, we believe that the acquisition of Nokia Siemens Networks’ fixed-line Broadband Access business will 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 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 keep us on the side lines.

Currently, we have a long-term Underperform recommendation on ADTRAN. For the short term, the stock has a Zacks Rank #5 (Strong Sell).

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