Equipment Vendors Likely to Get Majority of Stimulus Dollars, Say Analysts
Broadband equipment makers stand to be among the largest beneficiaries of the $7.2 billion broadband stimulus, providing everything from fiber lines to wireless towers and giving the companies a much-needed boost in what was a slow last few months, say analysts.
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About $3.9 billion of the broadband stimulus funds, or between 50 and 60 percent, will go to pay equipment vendors, said analyst Catharine Trebnick of Avian Securities. The release of the notice of funds availability has also allowed projects with no hope of receiving federal funds to proceed, loosening up the “stimulus chill,” said Trebnick, “because you have definitions of what is stimulus and what isn’t.” Recently the bottom lines of major vendors, including Adtran and Ciena, took a hit as private investors tightened their wallets and many state and municipal governments delayed broadband projects, hoping to get federal funding as tax revenue spiraled down.
Major equipment makers like Adtran and Alcatel-Lucent are well aware of the potential revenue boosts and have been leveraging their positions, offering free webinars and broadband stimulus-focused Web sites to edify providers and entrepreneurs who are considering applying in the hopes they will buy their brands of equipment with the federal funds.
Adtran is one of the vendors that expects to see an uptick in revenue from the federal funds. That increase couldn’t come soon enough for the broadband equipment maker, which posted a 16 percent profit decrease in the most-recent quarter compared to the same period last year. Adtran put in a significant amount of time on Capitol Hill, partly to push for favorable regulation, but also to gather information for clients who were preparing to apply, said Adtran Vice President of Global Marketing Gary Bolton. Adtran has held six webinars for local governments and communities describing the stimulus and the application process. On Wednesday, the company hosted Alabama’s Broadband Task Force, a group started by the state to gauge broadband needs.
In particular, the company thinks the stimulus will improve sales of its TA 5000-multi service access platform, which can be used in several types of broadband networks, said Bolton. Its FTTx products will also likely be in high demand say analysts. “Last mile is really what we excel in,” said Bolton. JP Morgan predicted last month that the company could see more than $120 million new revenue from stimulus- funded projects over the next three years due to the broadband stimulus funds.
Smaller vendors are counting on equipment sales to pick up as well, particularly in the most rural areas where the larger players are less visible. Zhone, whose biggest customers are independent telephone companies, hopes to use its relatively small size to undercut bigger competitors. Those vendors are “not well equipped to tailor to individual customers,” said Steven Glapa, Zhone vice president of product management and marketing. Glapa, who at one time worked at Alcatel-Lucent, said he knows first hand that large vendors often find challenges in meeting the needs of small customers.