Adtran's Growth Drivers: Wireless, Carrier Networking, VARs

Modesty is suit Adtran wears well, and sometimes to its detriment: the $606 million networking and infrastructure company is still seen as something of a lesser-known, especially in the enterprise business markets where Cisco, HP and much larger competitors dominate.

But to hear Adtran's top brass talk about investment priorities last week at Adtran Connect -- the company's annual press and analyst event at its Huntsville, Ala. headquarters -- that competitive stance is paying dividends for Adtran and its partners in a big way.

Adtran CEO Tom Stanton said it doesn't make sense for Adtran to be in markets that are "speculative," but the company would continue to take a long-term view of where networking trends are headed and make its moves based on those projections.

"We look at markets in a pragmatic way," said Stanton in a question-and-answer session with media and analysts. "If you do the right things and come out with products that make sense in the markets you know will be there, ultimately you will gain market share."

Added Stanton, "We expect to do well five years from now, not two years from now. By having that perspective, we have focus when other companies drop off."

Adtran reported $606 million in revenue for its fiscal 2010, up more than 20 percent from the $408 million in had in 2009. According to Gary Bolton, vice president of global marketing, Adtran has seen record growth in internetworking products, broadband access products and optical access products, which combine to represent 89 percent of the company's overall revenue.

Its international expansion is also bearing fruit; Adtran's international revenue is now a nearly 11 percent revenue contributor and grew 163 percent year-over-year in the most recent quarter, Bolton said.

Adtran overall has added nearly 10 percent to its community of channel partners -- about 300 new partners to its current base of about 3,400 -- and the company has a heavy focus on partner recruitment. Adtran executives told CRN last week that the company had recently split its enterprise channel sales team into two teams, one focused on service provider partners and the other on VARs, to give Adtran's base of VARs more dedicated resources.

The growth of VAR-led sales as a revenue contributor was a big topic throughout Connect. Enterprise sales, where many of Adtran's longtime VARs play, still only account for about a quarter of Adtran's overall revenue pie.

"We depended on carrier sales for too long," Stanton told media and analysts, mentioning that VAR sales with Adtran had grown for six straight quarters. "We wanted to see VAR growth turn into revenue growth."

The bets Adtran is making on technology are paying off. Unified communications, for example, is the fastest-growing piece of Adtran's enterprise portfolio, said Rick Schansman, senior vice president and general manager for Adtran's Enterprise Networks Division. It is also creating pull-through opportunities for Adtran's switches, routers and other bread-and-butter networking products.

But the big play for Adtran -- and the single subject that captured more attention at Connect than any other -- was Adtran's August 2011 acquisition of Bluesocket, a move that dramatically bolstered what Adtran can offer for wireless LAN solutions.

"It's the biggest door opener I've got today," said Schansman to CRN last week. "We plan to water that puppy and make it grow."

NEXT: The Vision For Bluesocket Wireless

Adtran will continue to invest in its principal carrier networking equipment businesses; the company just this week expanded its optical networking portfolio with what it describes as a right-sized Reconfigurable Optical Add/Drop Multiplexer system on a blade, as well as a multi-service OTN Switchponder.

But it's clear the company sees Bluesocket's technology as a profound influence on how it will attack the wireless and mobility opportunities going forward.

"As we acquired Bluesocket, it really was the first product that helps us realize this vision we have," Bolton said during Connect. "It's the only fully virtualized Wi-Fi solution in the market. It allows [customers] to scale up without having to increase hardware."

The key to Bluesocket is a completely virtualized control plane for managing wireless infrastructure, meaning less money spent by customers on hardware-based LAN controllers. A handful of wireless companies, notably Bluesocket, Aerohive and Meraki, have in recent years sought to further the market for controller-less wireless LAN with varying approaches.

Mads Lillelund, former president and CEO of Bluesocket and now general manager of Adtran's Bluesocket business unit, said it's Adtran's intent to leverage Bluesocket with all of its portfolio, from carrier network equipment to software placed on switches.

According to Lillelund, Adtran's integration of Bluesocket not only allows it to "leapfrog" in wireless -- Adtran had a basic, early-generation access point before the acquisition -- but also makes it more relevant to the channel ecosystem that's developed around virtualization and specifically VMware, with which Bluesocket was a tightly-tied partner.

"We are VMware-ready," said Lillelund to CRN, describing how Bluesocket has participated heavily in VMware solution provider and user conferences and also VMware's developer program. "Anyone carrying VMware will understand our story."

With wireless becoming the primary means of network access for many users thanks to the explosion of mobile devices, Lillelund said that will actually limit the relevance of pureplay wireless vendors over the next three to five years as customers look for more integrated solutions.

"I don't see that a pureplay wireless company exists in the longer term," Lillelund said. "It is integrated -- it has to be integrated. If wireless is the primary way to connect, it's can't be an overlay -- there have to be hooks into the rest of the network supported by policy. I always viewed that wired and wireless would converge, and it makes sense."