Summary
1. A sense of overconfidence pervaded CommScope after its merger with Andrew. 2. The supplier took it for granted that all that mattered was being number one. 3. It appears that ADC was able to increase its business with AT&T by about 30% at the RBOC around the third quarter of last year.
Analysis
Especially on the sales side, CommScope had kind of a mental lapse after combining with Andrew. The attitude was that the supplier could just sit back and take orders. However, the RBOCs expect their vendors to remain constantly attentive. With the knowledge that AT&T was going to give the company all of its connector-related business, the realization struck that there was trouble when the supplier recently got beat out at AT&T on some cabinet orders. CommScope now understands that it must always maintain a hungry sales force and not just rest on its laurels. Even a company such as Corning, which dominates the telco fiber market, needs to remain attentive to minor refinements made by competitors -- such as the ability to bend the strands in the cable.
In making its mistake, CommScope unfortunately opened the AT&T door to ADC – perhaps indefinitely. Therefore, with AT&T eventually moving to fiber to the home, the stakes become higher for CommScope successfully developing cabinets for this application.
On a side note, if it could go back in time, CommScope would undoubtedly make the same decision to merge with Andrew again. Diversification and higher volumes are critical in low-margin businesses.
