ADTRAN, Inc. (ADTN)’s Looking Like a Bargain

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"How much worse can things get?" is never a glowing endorsement. But in the case of ADTRAN, Inc. (NASDAQ:ADTN), it's hard to not like the company's prospects after it lost 34% of its value in 2012. But Adtran was not alone. It was one of several names (including Alcatel Lucent SA (ADR) (NYSE:ALU)) that suffered in the poor carrier-spending environment. But these shares look interesting. And with continued improvement in its business and consumer demand, Adtran could be one of the best bargains in the sector.

In-line quarter was as good as a beat When Oracle Corporation (NASDAQ:ORCL) picked-off Acme Packet, Inc. (NASDAQ:APKT), I started canvassing the sector to figure out who was next. I thought it signaled consolidation. And considering Acme Packet's tough time -- posting soft revenue due to its heavy reliance on carriers -- ADTRAN, Inc. (NASDAQ:ADTN) was as good a candidate as any. Adtran's fourth-quarter results weren't great, either, but were in line with expectations. Revenue dropped 20% year over year and 13.7% sequentially.

As has been the case with larger players like Cisco Systems, Inc. (NASDAQ:CSCO), Adtran's enterprise hardware was heavily affected, down 6% year over year. But the company was able to offset the slowdown with growth from dealer channels. And I think this area will be key this year -- and as ADTRAN, Inc. (NASDAQ:ADTN) is assessed in the future. Likewise, the company is making strides with value-added resale channels, which increased 12%, helped by growing demand of the Bluesocket wireless LAN product.

Adtran continues to be underestimated for its technology. While this company is not flashy and doesn't generate headlines, it does not mean it lacks in innovation or demand. Both broadband access and Internetworking haven't performed as well lately. But these are good businesses that should see a revival going forward. However, the weak spending environment really took a toll on a sequential basis. Even so, broadband surged 100% year over year. Surprisingly, though, amid tough fiscal concerns overseas, Adtran posted 9% growth in international revenue.

This quarter was far from robust. But it was consistent with what the Street has been seeing from the likes of F5 Networks, Inc. (NASDAQ:FFIV) and the aforementioned Acme Packet. In-line results in this environment are wins, as far as I'm concerned. And it seems investors seem to agree. The stock has been up as much as 14% since the announcement.

Where's this company going? I've always liked Adtran. But its lack of aggressiveness and conservative approach gets lost in sector that is dominated by big egos. The company's acquisition of the Broadband Access Business -- or BBA-- from Nokia Siemens, which completed last year, was a welcome signal that perhaps things are beginning to change. I think this company has a chance to become a leader within a recovering industry.

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