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Adtran's Adding 'ProValue' Ahead of Earnings

This new initiative is interesting for a host of reasons. Let's go back to something that I've said three months ago when we last discussed Adtran's competitive position. On April 9, I ended the article with the following:

"I've always liked Adtran. But I would be more excited if the company were to be a bit more aggressive. With carrier spending expected to rebound, the companies that will prevail are the ones that are best positioned to deliver the right mix of equipment, communication services and at the right price. It's hard to not bet on Adtran."

Essentially, management's new ProServices details precisely the direction I felt Adtran needed take. The company deserves credit for having built up its capabilities at a time when it already seems that Adtran was gaining market share from rivals such as Alcatel-Lucent (ALU). The company is showing no complacency, and is yet looking for ways to differentiate itself.
[Read: <a target="blank" data-add-tracking="true" href="http://www.mainstreet.com/article/smart-spending/bargains/deals/how-haggle-now-you-can-haggle-anything-0"><em>How to Haggle Now That You Can Haggle for Anything</em></a>]

This, then, circles back to the original question: Is now the time for investors to take profits? But if management's new ProServices portfolio proves successful at demystifying the complexities of what it means to have a fully functional network enterprise, Adtran's growth prospects seems yet underrated. You also can't discount the traction that Adtran is likely to now make in markets where the company is able to meet the goals of customers challenged by minimal IT staff and/or related budgetary constraints.

If there are still any question marks about Adtran, it's with the company's future. And I mean that in a good sense. Given how well the company is performing of late, it would not surprise me to see Adtran become the subject of an acquisition. I've talked about this before. Cisco would be a good candidate. For that matter so would Oracle (ORCL), which recently entered the telecom space -- picking off Acme Packet (APKT) for $2.1 billion.

Both Cisco and Oracle have been actively pursuing growth and profits with recent deals. With Adtran's gross margin and operating margin improvements, the company will eventually be on someone's radar -- if it's not already. In the meantime, with ProServices now coming into the mix I believe these shares still have 15% upside potential on the basis of improved carrier spending and margin expansion.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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