Tekelec Rings True at Cingular

Next-generation voice vendor Tekelec Inc. (Nasdaq: TKLC) has landed a meaty deal at Cingular Wireless -- one potentially worth tens of millions of dollars during the next few years, analysts say.

Cingular has just named the lead suppliers for its 3G mobile network buildout, including Siemens Communications Group (see Cingular Confirms 3G Trio).

Tekelec, say a number of analysts, was part of the Siemens bid, and looks set for several years of revenues from delivering its media gateway product to the U.S. wireless operator.

In a research note issued today, CE Unterberg Towbin analyst Rich Church reckons Tekelec could see revenues from Cingular "in mid-to-late 2005, possibly in the mid-single-digit millions exiting 2005. In 2006, we would expect the revenue contribution to ramp, with much of the work being completed in two-to-three years."

Church maintains a Buy rating on Tekelec's stock.

But analyst reaction has been mixed. The team at Robert W. Baird & Co. Inc. downgraded the stock from Outperform to Neutral, and set a target price of $23. But analysts at Janney Montgomery Scott LLC reiterated their Buy rating, and raised their target price to $26 from $24.

"We have not provided financial guidance on this deal and the reported numbers are analyst speculation," says a Tekelec spokeswoman, in an email to Light Reading.

The vendor's share price is down today 81 cents, more than 3 percent, at $22.60.

— Ray Le Maistre, International News Editor, Light Reading

materialgirl 12/5/2012 | 1:01:37 AM
re: Tekelec Rings True at Cingular Getting an RBOC would be a real coup for Tekelec. While their product list is interesting, their customers are Tier 3 at best. As to the media gateway product, how commoditized is that? Is this business profitable?
Negotiator 12/5/2012 | 1:00:27 AM
re: Tekelec Rings True at Cingular The MGW in the wireless arena is a next step in the evolution of the network topology. That being said, they are not commoditized yet. As complex as they are to insert into a network, they probably will never fit the classic definition of a commodity.
As for profitability I think you have to look at 2 things: who's buying it and what are the contract terms in relation to Zarbox. From what I've seen the deals being signed today will improve cash flow to the manufacturer but revenues will be accrued for years to meet Zarbox requirements. As a result, no earnings - just cash.
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