Tellabs Chops Q1 Estimates (Again)
While the continued warnings pummel Tellabs' stock -- and add to a raft of negative preannouncements in the networking business -- there's still a slightly silverish lining: Tellabs isn't yet predicting a disastrous loss, as several equipment vendors have this week (see Extreme Warns of Loss, Sycamore Drops a Bomb, and Redback Hits the Wall).
Tellabs shares were down 7.37 (18%) to 33.38 just before noon today. Though this is in the neighborhood of the stock's 52-week low, the company's market capitalization has surpassed that of Juniper Networks Inc. (Nasdaq: JNPR), Ciena Corp. (Nasdaq: CIEN), Sycamore Networks Inc. (Nasdaq: SCMR), and Redback Networks Inc. (Nasdaq: RBAK), all former Wall Street stars that, in the past year, had grown at a much faster clip and attained market valuations larger than Tellabs.
After closing its books just last night, Tellabs said it now expects to earn 29 cents a share this quarter. But even that adjustment is 12 percent better than last year's first quarter earnings of 26 cents per share.
On March 7, Tellabs cut its earnings range from 39 cents a share to between 35 and 38 cents a share. At that time it expected first quarter sales to be between $830 and $865 million, rather than a previously stated range of $865 to $890 million (see Tellabs Warns; Shares Recoup Losses).
Now the company is expecting first-quarter sales to be $772 million, which is still 21 percent better than the year-ago sales total of $639,490,000.
The last time Tellabs issued an earnings warning the culprit was slower-than-expected revenue recognition on sales of the Titan 6500, its multiservice switch. This time it was last-minute order delays for the Titan 5500, its digital crossconnect.
The good news is that the orders weren't cancelled, says Tellabs CEO Richard C. Notebaert. The bad news: Some $83 million in Titan 5500 sales were put off by large carriers until next quarter.
The company's optical networking revenues for the first quarter will increase to $482 million from year-ago sales of $376 million, a 22 percent climb. Tellabs' broadband access business, however, will be flat, again pulling in $153 million in sales for the quarter.
Interestingly, the Tellabs conference call sounded very much the same as all the other equipment vendor earnings warnings this week, including the mention of last-minute order cancellations by big customers. The tone of the call seemed to be, "We knew it would be bad, but this is a mess."
Times like these put the business euphemism machine in overdrive. At one point, rather than point out that Tellabs will slow down hiring, CFO Joan Ryan stammered that Tellabs would be "aggressively managing headcount additions." And Notebaert spoke of "a more controlled order flow from [Tellabs] larger customers."
Well, we all know what that means.
- Phil Harvey, Senior Editor, Light Reading http://www.lightreading.com