Hyperventilation Over ADC Appears Unnecessary

Implications: 1.      We are talking about a telecom incumbent that has been around for over seven decades.   2.      Some industry analysts apparently look upon what amounts to be a very small adjustment in expectations at ADC -- as a significant development. 3.      With just two large telco powerhouses in the US, it should be anticipated that subtle, unexpected shifts could occur – such as with FiOS sales.

Analysis:  The apparent trend with FiOS at Verizon is that during the warmer months in the second and third quarters, there is going to be a marked increase in installations – in particular, in the backbone, where ADC really benefits.  In the colder first and fourth quarter months, the stress is on selling and connecting FiOS customers.  In the first quarter of this year, Verizon gave away free 20-inch HDTV sets, if the subscriber signed on for a two-year commitment.  As a result, sales were especially huge during those three months.  In the second quarter, there was nothing significant offered as an incentive – but the results for FiOS additions still compared favorably to performances announced in the past.  

The situation is that the score for FiOS additions sticks out like a sore thumb – because it is all about growth.  In comparison, the net increases in business lines will not be as noticeable.  Verizon’s sales performance in the first quarter essentially blew everything out of proportion – and the RBOC could probably foresee that the latest announced numbers were bound to result in a negative reaction in the industry.  ADC appears to be indicating that the RBOC will now put somewhat more of an emphasis on selling FiOS services – with more of a tilt toward gear interfacing with the CPE – to make sure that the third quarter is hopefully even better.  In particular, with a major advertising campaign just kicking off for NYC, Verizon feels even more pressured to show a good outcome there as well.