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Interview with Gary Bolton, Vice President of Global Marketing.Company overviewADTRAN, was founded in 1985 in Huntsville, Alabama. With sales offices across the U.S. and around the globe, ADTRAN is a supplier of networking and communications equipment to service providers and enterprises of all sizes, with significant market share in North America. The company has two divisions: Carrier Networks and Enterprise Networks. ADTRAN's solutions support voice, data, video and Internet communications across a variety of network infrastructures and are deployed in locations ranging from carrier COs to enterprise demarcation points to the desktop. IntroductionADTRAN had a good 2009 despite the downturn and according to Gary Bolton gained market share across its growth markets. The company has maintained a position at the head of emerging growth sectors, with new wave products now accounting for more than 50% of total sales. One of ADTRAN's prime aims is to address the real-world challenges faced by its customers. The strong performance in 2009 was aided by the company's financial stability and continued investment in the business. The R&D budget for example was increased to $82 million in 2009, while many rivals have been cutting their operations. Mr. Bolton also puts the performance down to ADTRAN's broad product range, strong customer references and reputation for customer service. Product offeringsADTRAN offers an extensive solution portfolio spanning over 1,700 products and competes with heavyweights such as Cisco in the enterprise market and Alcatel-Lucent on the carrier access side. The company believes though it is in a strong position against its larger rivals as it can supply an end-to-end solution. With regard to Cisco, ADTRAN recently commissioned testing of its routers against the latest generation of competing products from that company and says it consistently, significantly outperformed them. See The Truth About Router Performance. ADTRAN's growth products include broadband, internetworking and optical systems, with the Total Access 5000 Series multi-service access and aggregation platform said to be proving particularly successful and gaining traction across all geographies among Tier 1 to 3 service providers. This platform has been adopted for a range of applications, including broadband and FTTH deployments, Carrier Ethernet, business service migration and mobile backhaul. The bulk of T1s installed in the U.S. are supported by ADTRAN products but as sales of legacy products, such as HDSL solutions, slowly declined, ADTRAN has seen growth in demand for its Ethernet, optical (notably the OPTI-6100 access/aggregation solution), Ethernet over TDM, copper and fibre products. In the enterprise market, Gary Bolton said ADTRAN's converged access systems dominate in the carrier space in bundled service offerings, while its unified business solutions are proving successful with enterprise end-user customers, "In December, ADTRAN launched its NetVanta Unified Communications Solution Suite which, combined with its extensive enterprise portfolio of Ethernet switches, routers and IP telephony solutions, enables the company to offer a comprehensive end-to-end solution. Through this offering, ADTRAN has built strong momentum with Tier 1 and 2 carriers and with its large number of reseller and distribution partners". Market focus and international expansionHaving achieving significant success in North America, ADTRAN is now fully engaged in expanding its international operations in an effort that is seen as strategic to the company's future growth. The company is focusing resources and investing to address key markets within the EMEA, Pacific Rim and Asia regions and has assigned key product management, recruited top in-region sales and business development executives and assigned staff on the product side to tailor products and solutions for specific markets and key opportunities. Building a strong presence in overseas markets will be a gradual process, Gary Bolton acknowledged, although the company is confident it can succeed given time. Confirming that ADTRAN's international sales represented 5% of the total in 2009, and were down slightly compared with 2008, he said the company's strong performance in North America, combined with the global downturn, had contributed to a momentary decline and that the company expects international growth going forward. ADTRAN's IP business gateway is an example of a product that is successful in overseas markets, having been launched by Verizon Business for customers in Europe. Mobile backhaul, Carrier Ethernet and FTTH, via ADTRAN's GPON solutions, are seen as further key markets for the company in Europe and Asia. A win with Korea Telecom, announced in April 2010, was cited as evidence of this push overseas, although Gary Bolton noted that while clearly an important customer, the business is primarily of significance in the local Korean market and the operator is one of a number of Tier 1 ADTRAN customers internationally. Major customersThree customers, AT&T, Qwest and Verizon, are long-term customers of ADTRAN. Together controlling the bulk of the capex in the market, these three accounted for 51% of ADTRAN's total reported revenue in the first quarter of 2010, though Gary Bolton said the company is also making excellent progress with Tier 2 and 3 carriers. Deployments with these major customers of products such as the Total Access 5000 Series and OPTI-6100 platform are being expanded to multiple applications following initial installations, which can also save the customer money. Tapping what the company sees as its core strengths - a passion for engineering and customer responsiveness - ADTRAN will also customise products, though a key factor is ensuring that a customer's requirements are applicable in the wider market. ADTRAN in fact maintains separate engineering teams for carrier solutions and enterprise products, although there is significant interaction and cross pollination between the two units where systems for the access network connect with terminating units for enterprise applications. Stimulus fundingADTRAN has been cautious, Gary Bolton emphasised, with regards to the timing of potential benefits it may see from the broadband stimulus funding package announced in 2009 as part of the American Recovery and Reinvestment Act, "ADTRAN has been cautious about the whole process and unwilling to make announcements prior to customers actually receiving funding, which is now beginning to happen after a number of delays". He feels the delays in awarding the $7.2 billion of broadband stimulus funding are primarily due to the scale and complexity of the task, plus the fact there are two agencies involved in administering the process - the USDA and NTIA. The USDA had programs in place prior to the announcement of stimulus funding under the RUS initiative but then had to develop new ones, while the NTIA had to start from scratch. In addition, both agencies had new leadership following the election of the Obama administration. Originally there were to be three rounds of funding, but due to delays this was later reduced to two, with first-round funding awarded in December 2009. Mr. Bolton noted that the money is specifically for projects that were not otherwise funded, while the recipients must provide at least a 20% match of the stimulus funding awarded. Once funding has been awarded, the recipient must review and accept the terms and conditions attached before the money is finally forthcoming, which is now happening. Tier 1 and nearly all Tier 2 service providers did not apply in the first round of funding as a result of definition issues, notably that of a 'remote area'. However, ADTRAN worked with Washington to resolve this issue and as a result, a number of large carriers participated in second round funding applications, the awards from which are due in the summer of 2010. Mr. Bolton added that funded projects must be substantially completed within two years, meaning that the money will be flowing through the system over the next two to three years. He pointed out that despite the delays relating to the stimulus process over the past year, ADTRAN's broadband products have been very successful, with the company achieving record sales in its most recent quarter and gaining meaningful market share in the broadband access market. Future directionBy most measures, Gary Bolton feels, ADTRAN has been very successful, being well run, delivering a good return to shareholders and generating strong product margins. In terms of growth, he stated that the company always takes a measured approach and the focus going forward will be on product capabilities and enabling customers to address future opportunities. ADTRAN concentrates on innovating in areas where the results allow customers to be more competitive and more profitable in an evolving market, Mr. Bolton said, "In the enterprise space, ADTRAN is delivering solutions, providing gateway, switch and router functionality via its unified business solutions. Such solutions are designed to enable customers and their employees to work more efficiently". ADTRAN intends to pursue development of products in the optical space following the success of the OPTI-6100 platform for applications such as backhaul and access, and GPON products for FTTH deployments. The latter will hopefully help the U.S. to achieve its goal of improving broadband speeds to residential customers nationwide. In conclusion, Gary Bolton said he believes ADTRAN is well positioned for the future, including international expansion, based on good margins, strong financial position and reputation for delivering effective products and high levels of customer service.  |
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