Adtran warns of carrier spending slowdown

Adtran warned of sequentially flat third-quarter revenue late last week, citing a general decline in carrier spending that offset gains in its optical business.

"The normal seasonal increase in business that is typical in the third quarter has not materialized," said Tom Stanton, chairman and CEO of Adtran, in a statement issued Friday. "Although we have seen the anticipated revenue increase in our optical access product line, carrier spending in general remained constrained. Our major Total Access 5000 platform awards continue to be on track for shipments in 2008."

The equipment vendor hadn't previously specified its revenue expectations for the third quarter other than to say it expected sequential growth. Second-quarter revenue was up 1% from a year earlier and up 12% sequentially to nearly $124 million. A similar top line in the third quarter would represent a nearly 7% decline from a year earlier.

Adtran's warning follows a similar one from Alcatel-Lucent. Though the megavendor attributed most of its revision to slower spending from North American wireless carriers in particular, Alcatel-Lucent CEO also reported recent signs of "softness" in third-quarter U.S. wireline spending as well.

"Carriers are holding purse-strings tightly with few exceptions," wrote Simon Leopold, an analyst for Morgan Keegan, in a research note today. "Competitive forces continue to encourage carriers to spend on network upgrades, but … telcos seek to fund initiatives with budget reallocations. Checks have suggested that independent telcos (e.g. Embarq) have taken a measured wait-and-see approach to network upgrades and have generally controlled spending. This group may face less direct cable TV competition (so far) and have observed progress by Verizon and AT&T to assess tactical choices."