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Tellabs Cuts Continue

Despite beating analyst estimates for its fourth-quarter earnings, Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) announced further cuts meant to reduce costs by $100 million by the end of 2008.

The company says the cost cuts will include $75 million from annual operating expenses and $25 million from overhead costs of products and services.

The cost-cutting plan will also include the reduction of 225 jobs, in addition to 125 that were slashed during a September restructuring. (See Tellabs Trims in Access and Tellabs Cuts Run Deep(er).)

As part of the plan, Tellabs says it will take charges of $12 million to $14 million during 2008, including approximately $8 million in the first quarter of 2008.

Tellabs' restructuring plan comes after a difficult year in 2007. During last year, the company was hounded by multiple acquisition rumors and weakness in some key accounts. (See Tellabs: Not for Sale, Nortel Takes a Look at Tellabs, Is Nokia Siemens Tailing Tellabs?, Tellabs Trips Over Wireless, and Analysts See Bumps in Tellabs Fiber Biz .)

On the earnings front, Tellabs reported net income for the fourth quarter 2007 of $6 million, or 1 cent per share, on revenues of $469 million. That compares with earnings of $29 million, or 7 cents a share, on sales of $455 million in the year-ago quarter.

The company saw continued weakness in its transport business. Fourth-quarter revenue from transport was down 14 percent to $136 million, from $159 million in the year-ago quarter. Broadband revenues in the quarter were up 10 percent to $274 million, from $249 million in the previous year's quarter.

On the company's earnings call, Tellabs CEO Krish Prabhu says the company's weakness in transport stemmed from the company's 5500 crossconnect.

Full-year earnings were $65 million, or 15 cents a share, on sales of $1.9 billion. That compares with 2006 earnings of $194 million, or 43 cents a share, on sales of $2.0 billion.

Tellabs beat analyst expectations for the quarter. Wall Street expected fourth-quarter sales of $459.6 million and non-GAAP earnings of 1 cent per share, according to Thomson Financial . The company earned $17 million, or 4 cents per share, on a non-GAAP basis, in the fourth quarter.

Tellabs reported first-quarter guidance of sales in the mid-$450 million range, and non-GAAP gross margins of 37 percent.

The company also gave an update on its search for a new CEO, after Prabhu announced last year that he would be stepping down on March 1. (See Prabhu Quits as Tellabs CEO and Tellabs CEO Quits.)

Prabhu says, "The search committee has been working actively and is in a position to announce a transition and announce a CEO by that time."

— Ryan Lawler, Reporter, Light Reading

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