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ADTRAN (ADTN) Acquires ADVA to Achieve Global Scale of Operations
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In a concerted effort to create an end-to-end fiber networking solutions provider with a global scale of operations, ADTRAN Inc. (ADTN - Free Report) recently inked a definitive agreement to acquire ADVA Optical Networking SE in an all-stock deal. The buyout of the leading Germany-based telecommunications vendor that provides network equipment for data, storage, voice and video services is likely to disrupt the fiber networking market with a huge pool of complementary assets. The transaction is expected to be completed in mid-2022, subject to the fulfillment of mandatory closing conditions and other regulatory approvals.
The combined company is likely to be renamed ADTRAN Holdings Inc. with its global headquarters in Huntsville, AL, and European headquarters in Munich, Germany, pursuant to an exchange offer of all the outstanding shares of ADVA. Per the deal, each ADVA share will be exchanged for 0.8244 shares in the combined entity, while each ADTRAN share will be swapped on a one-for-one basis. Post the completion of the deal, ADTRAN shareholders will own approximately 54% of the combined company with the remainder being owned by ADVA shareholders.
The transaction aims to leverage ADTRAN’s expertise in fiber access, fiber extension and subscriber connectivity solutions with ADVA’s global leadership in metro wavelength division multiplexing, data center interconnect, business ethernet and network synchronization solutions to create a comprehensive portfolio of fiber networking products. The combined entity is expected to generate $52 million in pre-tax annual cost synergies within the first two years of operation, driven by supply chain efficiencies and optimization of resources. The entity is likely to better serve customers with scalable, secure and assured fiber connectivity along with cloud-managed Wi-Fi solutions and SaaS applications that optimize network performance. The complementary product lines will further enhance the scope of cross-selling opportunities to strengthen its regional presence and achieve a global scale of operations to create significant long-term value for the stakeholders.
ADTRAN expects solid traction in its domestic markets for ultra-broadband and fiber-to-the-home solutions along with Software-Defined access and Ethernet passive optical network solutions. The company also anticipates a pickup in capital spending in Tier-1, Tier-2 and regional service provider market segments. ADTRAN’s global leadership in software-defined access is likely to ensure a steady stream of revenues as it helps clients reduce costs and accelerate service delivery and deployment. The company is well positioned to optimize its customer, regional and product diversity momentum. ADTRAN expects to gain from increased customer engagements across its comprehensive portfolio of software-defined access, 10G solutions and G.fast products. Its global strategy of diversification across regions and markets is laudable. The acquisition is probably a significant step in this regard and will better position the company to capitalize on global opportunities.
The stock has gained 83% over the past year compared with the industry’s rise of 6.6%.
Image Source: Zacks Investment Research
We remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the broader industry are Clearfield, Inc. (CLFD - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and InterDigital, Inc. (IDCC - Free Report) and Qualcomm Incorporated (QCOM - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Clearfield delivered a trailing four-quarter earnings surprise of 49%, on average.
InterDigital has a long-term earnings growth expectation of 15%. It delivered an earnings surprise of 536%, on average, in the trailing four quarters.
Qualcomm has a long-term earnings growth expectation of 21%. It delivered an earnings surprise of 13.5%, on average, in the trailing four quarters.
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ADTRAN (ADTN) Acquires ADVA to Achieve Global Scale of Operations
In a concerted effort to create an end-to-end fiber networking solutions provider with a global scale of operations, ADTRAN Inc. (ADTN - Free Report) recently inked a definitive agreement to acquire ADVA Optical Networking SE in an all-stock deal. The buyout of the leading Germany-based telecommunications vendor that provides network equipment for data, storage, voice and video services is likely to disrupt the fiber networking market with a huge pool of complementary assets. The transaction is expected to be completed in mid-2022, subject to the fulfillment of mandatory closing conditions and other regulatory approvals.
The combined company is likely to be renamed ADTRAN Holdings Inc. with its global headquarters in Huntsville, AL, and European headquarters in Munich, Germany, pursuant to an exchange offer of all the outstanding shares of ADVA. Per the deal, each ADVA share will be exchanged for 0.8244 shares in the combined entity, while each ADTRAN share will be swapped on a one-for-one basis. Post the completion of the deal, ADTRAN shareholders will own approximately 54% of the combined company with the remainder being owned by ADVA shareholders.
The transaction aims to leverage ADTRAN’s expertise in fiber access, fiber extension and subscriber connectivity solutions with ADVA’s global leadership in metro wavelength division multiplexing, data center interconnect, business ethernet and network synchronization solutions to create a comprehensive portfolio of fiber networking products. The combined entity is expected to generate $52 million in pre-tax annual cost synergies within the first two years of operation, driven by supply chain efficiencies and optimization of resources. The entity is likely to better serve customers with scalable, secure and assured fiber connectivity along with cloud-managed Wi-Fi solutions and SaaS applications that optimize network performance. The complementary product lines will further enhance the scope of cross-selling opportunities to strengthen its regional presence and achieve a global scale of operations to create significant long-term value for the stakeholders.
ADTRAN expects solid traction in its domestic markets for ultra-broadband and fiber-to-the-home solutions along with Software-Defined access and Ethernet passive optical network solutions. The company also anticipates a pickup in capital spending in Tier-1, Tier-2 and regional service provider market segments. ADTRAN’s global leadership in software-defined access is likely to ensure a steady stream of revenues as it helps clients reduce costs and accelerate service delivery and deployment. The company is well positioned to optimize its customer, regional and product diversity momentum. ADTRAN expects to gain from increased customer engagements across its comprehensive portfolio of software-defined access, 10G solutions and G.fast products. Its global strategy of diversification across regions and markets is laudable. The acquisition is probably a significant step in this regard and will better position the company to capitalize on global opportunities.
The stock has gained 83% over the past year compared with the industry’s rise of 6.6%.
Image Source: Zacks Investment Research
We remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the broader industry are Clearfield, Inc. (CLFD - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and InterDigital, Inc. (IDCC - Free Report) and Qualcomm Incorporated (QCOM - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Clearfield delivered a trailing four-quarter earnings surprise of 49%, on average.
InterDigital has a long-term earnings growth expectation of 15%. It delivered an earnings surprise of 536%, on average, in the trailing four quarters.
Qualcomm has a long-term earnings growth expectation of 21%. It delivered an earnings surprise of 13.5%, on average, in the trailing four quarters.