Tellabs Stock Rocks on Big Numbers

Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) provided a welcome relief after some weak earnings reports from Extreme Networks Inc. (Nasdaq: EXTR) and Juniper Networks Inc. (NYSE: JNPR), reporting strong revenue and profit growth in the fourth quarter of 2005 and handily beating analyst estimates. (See Tellabs Q4 Revenue Rises, Juniper Disappoints in Q4, and Extreme Miss.)

In early morning trading, Tellabs rocketed more than 20 percent, or $2.17, to trade at $12.68.

Tellabs reported fourth-quarter 2005 revenues of $521 million, up 37 percent from $379 million in the fourth quarter of 2004. For the year 2005, Tellabs revenues totaled $1.9 billion, up 53 percent from $1.2 billion in 2004.

Excluding special charges, the Naperville, Ill.-based company reported non-GAAP earnings of $100 million or 22 cents per share (diluted) in the quarter. Analysts' consensus estimate was 17 cents, according to Thomson Reuters .

For all of 2005, Tellabs earned $176 million, or 39 cents per share, on a GAAP basis, and $252 million, or 55 cents per share, on a non-GAAP basis, up 38 percent from $182 million in 2004.

Tellabs also boosted guidance above estimates for the first quarter of 2006, although due to seasonal weakness, the company expects that quarter's revenues to be lower than the fourth quarter of 2005. Chief financial officer Timothy Wiggins said on the company conference call that he expects first-quarter revenue in the "mid-$490" millions, higher than most analysts' expectations.

Tellabs CEO Krish Prabhu attributed the quarter's strength to demand for new wireless data and fiber access systems. "Fiber has reached time to volume," he said, speaking of Tellabs business in connection with FTTH projects at Verizon Communications Inc. (NYSE: VZ).

On guidance for the first quarter of 2006, Prabhu said Tellabs was factoring in a 4 to 6 percent decline between the fourth quarter of each year and the first quarter of next year, as seen historically in its access product lines. But Prabhu also appeared to leave some room for an upside surprise.

"For individual product lines, access -- there may be different access seasonality," he said. "Access is driven by hurricane relief as well as the fiber activity. I think the historical comparison with the fourth quarter and the first quarter is a little distorted. We also have a new data product in wireless -- we'll have to see how it ramps up."

Tellabs broke revenues down as follows:

  • Transport -- $170 million, up 8 percent from $157 million in the fourth quarter of 2004

  • Access-- $180 million, up from $53 million in the fourth quarter of 2004
  • Managed Access -- $91 million, down 19 percent from $112 million in the fourth quarter of 2004
  • Broadband Data --$31 million, compared with $3 million in the fourth quarter of 2004
  • Voice-Quality Enhancement -- $6 million, versus $13 million in the fourth quarter of 2004
  • Services and Solutions -- $44 million, up 8 percent from $40 million in the fourth quarter of 2004
Tellabs reported cash and cash equivalents and marketable securities totaling $1.2 billion at the end of the quarter. The company said its board of directors has approved a repurchase of up to $100 million worth of the company's shares.

— R. Scott Raynovich, Editor in Chief, Light Reading

straight shooter 12/5/2012 | 4:08:02 AM
re: Tellabs Stock Rocks on Big Numbers Fruits of their well-timed purchase of AFC. I have 15Mb Verizon fiber service at my home, and know many others that do here in Texas. The service is provisioned off the Tellabs/AFC equipment. Performance is rock solid!
nongneer 12/5/2012 | 4:07:56 AM
re: Tellabs Stock Rocks on Big Numbers I've never posted on LR before, but wanted to take the time to acknowledge the group that originally developed the access product that VZ rolled out, the Miramar, FL (since closed and shuttered) engineering group that designed the product that got AFC into VZ and has therefore significantly improved Tellabs' access numbers. It is too bad business sometimes runs the way it does in that this group is no longer together and the office closed, but let there be no mistake, they deserve a huge round of post-closure kudos, (even though most are not around to hear it) from Tellabs management and shareholders.
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