Cable Tech

Tellabs Earnings Drop on Access

Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA)'s announced first-quarter earnings fell 51 percent as revenues in the company's access business came in lower than expected. (See Tellabs Reports Q1.)

Tellabs earned $25.5 million, or 6 cents a share, on revenues of $451.9 million. That compares to earnings of $52.4 million, or 11 cents a share, on revenues of $514.7 million during the year-ago quarter.

Excluding one-time costs, the company earned $34 million, or 8 cents a share, down 47 percent from $65 million, or 14 cents a share, in the year-ago quarter.

Tellabs' Broadband product revenues were lower than expected, falling 16 percent to $219 million. This was driven by weakness in its Access and Managed Access segments, which saw revenues fall 26 percent and 7 percent, respectively.

Analysts hint that Tellabs may be losing some digital loop carrier and DSLAM business to Calix Inc. (NYSE: CALX) and Adtran Inc. (Nasdaq: ADTN) in accounts such as Windstream Communications Inc. (Nasdaq: WIN) and Embarq Corp. (NYSE: EQ).

Tellabs' first-quarter transport revenues also fell 11 percent, to $191 million, while services revenues were up 3 percent, to $42 million.

The company raised revenue guidance for the second quarter, expecting an increase of 10 to 15 percent to $500 million to $520 million.

The revenue increase will include $60 million to $70 million in deferred revenue that will come on sales of its 7100 reconfigurable optical add/drop multiplexer (ROADM) product, which has very low margins and will not contribute to second-quarter profit.

Tellabs' most recent financials follow a trend of weakness it has seen since the merger of AT&T Inc. (NYSE: T) and BellSouth, which has affected a number of suppliers in the access space. (See AT&T Vendors Sing Merger Blues and Wall Street Frets About BellSouth Suppliers.)

On the company's earnings call this morning, CEO Krish Prabhu cautioned, "Year-over-year comparisons are a little misleading since over the past year two of our top 10 customers have been part of a merger in North America, which has impacted our business."

However, the reduction in revenues and earnings at Tellabs comes in contrast with Adtran, one of its main competitors. Last week Adtran reported higher earnings and revenues, beating analyst estimates for the quarter. (See Adtran Surprises With Higher Revenues.)

Tellabs and Adtran both won parts of a big access request for proposal (RFP) at Qwest Communications International Inc. (NYSE: Q), but Adtran looks to see more activity there, as Qwest has more FTTN upgrades scheduled than it does GPON installations. (See Adtran, Tellabs Ring Up Qwest RFP and Qwest Floats Fiber Access RFP.)

Tellabs didn't provide much guidance on the subject. While noting that the company has had wins that it has not announced in fiber-to-the-curb (FTTC) and fiber-to-the-premises (FTTP) equipment, CEO Prabhu said that "the trendline for deep fiber solutions will be more obvious as the year goes on and more customers come on."

— Ryan Lawler, Reporter, Light Reading

metroether 12/5/2012 | 3:09:51 PM
re: Tellabs Earnings Drop on Access Since tellabs has proven they can't build new access products, the obvious strategy is acquisitions. Any insights into what start-ups might be on the radar for them?
OSXman 12/5/2012 | 3:09:50 PM
re: Tellabs Earnings Drop on Access Occam Networks would be an obvious one. They already have a joint venture and have a first office application at the likes of Embarq. I suspect if Embarq gives the go ahead, an acquisition would be very likely.

Occam has a retrofit solution for the AccessMax which is the old AFC platform so there should be a lot of synergies.

Also Fairpoint, which just bought 1.5mm lines from Verizon is a customer and large opportunity.
retroman 12/5/2012 | 3:09:46 PM
re: Tellabs Earnings Drop on Access Synergies? Just because Occam threw together a retrofit for an AFC cabinet doesn't mean that the acquisition would work. Look at these earnings and you see what Tellabs did to AFC. They focused on the Big Dogs and ignored the companies that got AFC to where they were when they purchased them. I'm sure this isn't a surprise to the ex-AFC folks.
Sign In