Tellabs Feels the Pinch

A tough, but anticipated, end to 2008 saw Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) record fourth-quarter revenues down 13 per cent year-on-year to $408.3 million, as demand for the vendor's access and transport products fell away. (See Tellabs Reports Q4.)

In October last year the company's management predicted that the usual fourth-quarter sales hike wouldn't materialize, and they were right, as sales were down compared with the third quarter, too. (See Tellabs Sinks on $1B Loss.)

CEO Rob Pullen and his team also predicted better margins, though, and they were right about that as well, as fourth-quarter gross margin was 41.6 percent, way up from 33.4 percent a year earlier.

The company's GAAP net income was $12.8 million, or 3 cents per share, though $12.6 million of that came from income tax benefits.

Its non-GAAP net income, which excludes one-time charges, was $35 million, or 9 cents per share, better than the 5 cents analysts had, on average, been expecting.

Unsurprisingly, Tellabs, which "expects current market conditions to continue," doesn't expect a revival during the first quarter of 2009.

The vendor expects revenues to be in the $345 million to $375 million range, while the gross margin is expected to be around the same as the fourth quarter's, "plus or minus a point or two." Financial analysts had, on average, been expecting revenues of $384.7 million.

Tellabs reported revenues of $464 million in the first quarter of 2008. (See Tellabs Issues Profit Warning.)

Tellabs' share price edged down slightly, by 3 cents, to $4.00 in pre-market trading Tuesday morning.

Product sales in decline in 2008
For the full year, Tellabs reported revenues of $1.73 billion, down nearly 10 percent from 2007's $1.91 billion. The vendor recorded a full-year loss of $930.1 million, though this did include the non-cash goodwill charge of $988 million announced in October.

While revenues from services increased for the full year by 3 percent to $229 million, product sales fell by $191.3 million, more than 11 percent, to exactly $1.5 billion.

In the company's Broadband division, which generated revenues of $920 million in 2008 (down 10 percent), increased demand for the well regarded 8600 platform, which is being increasingly used in backhaul deployments, wasn't enough to counteract the decrease in demand for fiber access and managed access products. (See Tellabs Joins 21CN Ranks and Vodafone's Backhaul Overhaul.)

Mobile backhaul is one of the sectors Pullen sees as key for Tellabs in the coming years, but the outlook appears grim for the company's fiber access portfolio: Tellabs notes that sales of access products are likely to "continue to decrease as several key customers are transitioning to alternative network architectures." (See Rob Pullen, CEO, Tellabs.)

In the Transport division, which generated $580 million in revenues last year (down 14 percent), Tellabs saw sales from its digital 5500 and other crossconnect platforms decline through 2008, though demand for the 7100 reconfigurable optical add/drop multiplexer (ROADM) and the 3000 VQE (voice-quality enhancement) system (an echo cancelling platform) was up.

Revenues from North American customers accounted for about $1.17 billion, nearly 68 percent of all sales, while the remaining $560 million, or 32 percent, came from overseas. Pullen is keen to bolster international sales and rely less on Tellabs' big North American customers. (See Tellabs Guns for Global Growth.)

— Ray Le Maistre, International News Editor, Light Reading

digits 12/5/2012 | 4:13:15 PM
re: Tellabs Feels the Pinch With the conference call over, the Tellabs stock is up $0.16, or 4 percent, to $4.19.

It has cash and no debt -- will Tellabs be one of the few mid-range vendors to come out the other side of the recession intact?
bollocks187 12/5/2012 | 4:13:00 PM
re: Tellabs Feels the Pinch Too much control in Chicago and we know what kind of town that is. Seroulsoy tho Tellabs management really, really lacks talent and an understanding of the market trends in optical, access etc.

Forget the DACS man that was yesteryear.

For the CEO of Tellabs stop messing around fire most of your first line and gets some folks in that are more dynamic and looking to grow Tellabs. Nobody is going to buy you(no one in the right frame of mind that is) so stop looking for the silver lining. Get busy - reinvet yourself or die on the vine.

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