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June 04, 2009

ADC Sales Decline 30 Percent in Q2



By Michael Dinan
TMCnet Editor



In a sign of how this lingering recession is affecting even telecom industry stalwarts that do businesses in broad, international markets, ADC (News - Alert) Telecommunications this week posted net sales of $275.1 million for the three-month period that ended May 1 – a 30 percent year-over-year decline for the quarter.
 
Officials at Eden Prairie, Minn.-based ADC – a company that supplies network equipment, software and integration services for communications service providers in more than 130 nations – say they’re preparing to lay off workers in their Europe, Middle East and Africa, or “EMEA” business to reduce costs. Details were not released.
 
According to Robert E. Switz, chairman, president and chief executive officer for ADC, the company is more “efficient” than it has been in past years and is bracing itself for a turnaround in this down economy.
 
 “While the economy has impacted sales in certain geographies more sharply than others, there were some highlights in the quarter across the business,” he said. “We saw significant growth in our fiber business as our customers began to spend more on their network builds. Internationally, China delivered another great quarter where our Century Man business has enabled ADC to take advantage of the country’s investment in next-generation wireless networks. As we move through the second half of 2009, we will continue to pursue opportunities to expand our participation in next-generation fiber-based and wireless networks worldwide, while navigating the global recession and further streamlining our operations.”
 
The company posted a net loss of $9.6 million for the quarter, compared to a $16 million gain one year ago, and a loss of 10 cents per share for the quarter.
 
Not all the news was bad.
 
In China, for example, revenue growth was strong, mostly because ADC supports the wireless upgrades and capacity improvements that the government there is pursuing with its 3G network buildings, helping carriers deploy more fiber in their networks.
 
Specifically, ADC generated $24.7 million in China sales for the second quarter, a 101 percent increase from the year-ago quarter.
 
In the United States, sales showed some signs of recovery in the second quarter with increased spending by carriers and distribution partners, and in-building wireless sales in the U.S. remained relatively the same as in last year’s second quarter.
 
“Globally, fiber revenue increased 17 percent sequentially as our customers continue the migration to fiber intensive networks through investments in fiber connectivity technologies,” ADC said. The company says it’s focused on bringing innovations to market that enable more efficient use of capital and drive down operational costs of new and existing fiber-based networks.
 
Going forward, the company says it expects sales for the current quarter to essentially remain level, at $265 million to 290 million, and for earnings per share to fall within a 4 cent gain to 4 cent loss.
 
During the quarter, ADC says it saved about $13 million as a result of restructuring late last year and earlier this year.
 
According to James G. Mathews, ADC’s chief financial officer, said the cost reduction and restructuring actions taken over the prior two quarters had a substantive positive impact on our financial results and contributed to our free cash flow generation during the current quarter.
 
“We continue to have the necessary liquidity to meet our operational and strategic needs, even through a prolonged downturn,” Mathews said. “Furthermore, we are well positioned to capitalize on our more efficient operating model and market-leading fiber and wireless positions as economic conditions improve worldwide.”
 

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Michael Dinan is a contributing editor for TMCnet, covering news in the IP communications, call center and customer relationship management industries. To read more of Michael's articles, please visit his columnist page.

Edited by Michael Dinan
 
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