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Networking solution provider, ADTRAN, Inc. (ADTN - Analyst Report) has announced its revised revenue and earnings estimates for the third quarter 2012. Revenues are estimated at approximately $162 million, down from $192.2 million generated in the third quarter of 2011.

In addition, GAAP earnings per share for the quarter are expected in the range of 14 cents to 15 cents, while adjusted or non-GAAP earnings per share are expected to range between 18 cents and 19 cents. Whereas during the year-ago quarter, the company’s earnings per share were 56 cents.

Previously, the company expected revenue growth in the third quarter to remain flat year over year or marginally up on a sequential basis. However, given the current market condition with a poor demand trend, the company remains skeptical on its near-term growth trajectory.

During the release of second quarter results, ADTRAN hinted that the market volatilities along side acquisition expenses may hinder its margin performance and thereby impact the earnings results. However, no specific figures were provided on earnings estimates back then.

Challenging economic environment continues to weigh over carrier spending resulting in lower business for ADTRAN. Lower carrier infrastructure spending by Tier-1 carriers like Verizon Communications Inc. (VZ - Analyst Report) and AT&T, Inc. (T - Analyst Report) resulted in a restrained revenue growth and we expect this trend to continue over the near term. Additionally, the company’s traditional products, mainly HDSL, will continue to decline with increased market traction in Ethernet and fiber-based platforms.

However, we believe that the company’s organic growth will be largely based on the recovery in spending pattern of tiered carriers. The company expects positive results from the bidding activities within Tier 1 and Tier 2 carriers in the domestic and international markets. Further, increased penetration of TA 5000, professional services at domestic and international levels, mobile broadband infrastructure upgrade and funds generated through Broadband Stimulus projects are also expected to drive growth.

Additionally, the acquisition of Nokia Siemens Network (NSN) fixed-line Broadband Access business in May this year remains encouraging for the company’s long-term growth prospects. The company is working on manufacturing NSN’s selected products using its supply chainand believes that the new business will add to its global presence given NSN’s established business in the international market.

Currently, we have a long-term Neutral recommendation on ADTRAN supported by a Zacks #3 (Hold) Rank.

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