Tellabs Edges Expectations after Rough Year

Tellabs, Inc. the maker of optical networking, broadband and switching systems, beat analyst expectations for earnings this quarter, on revenue and income that showed a marked decline from one year earlier.

The Naperville, Ill. company on Wednesday reported fourth quarter 2001 earnings of 3 cents per share, on revenue of $470 million. Net income was $13.6 million. These are based on the exclusion of certain one-time charges touching on plant closings, layoffs and review of inventory totaling $137 million that would usually be considered part of normal business expenses.

Including these charges, Tellabs recorded a fourth-quarter loss of $80 million or 20 cents per share.

Analysts surveyed by Thomson Financial/First Call expected pro forma results of 2 cents per share.

Revenue for the quarter ended one year ago was $1.16 billion. Net income one year ago was $231 million. Tellabs, like most other telecommunications equipment suppliers, has witnessed a precipitous drop in sales over the year.

The most positive aspect of Tellabs sales were in optical networking systems, which saw a 15 percent increase from the previous quarter, to $267 million. This was driven by strong spending among incumbent local exchange carriers.

“We are encouraged to see signs of stability in the United States, driven by customer demand for Tellabs metro optical networking products,” said Tellabs President and CEO Richard C. Notebaert in a written statement.

However, in a conference call with analysts on Wednesday, Notebaert offered a general prediction of “lower sequential revenue in the first quarter” but did not have “comfort in quantifying the magnitude, nor projecting out beyond Q1.”

“While I would like to tell you different, we all read the same newspapers, the same reports, and there is a lot of question out there,” said Notebaert.

Joan Ryan, Tellabs Chief Financial Executive did note that on the efficiency side she expected to see improvements ahead. “As we enter our second quarter, we will start to see the full impact of the benefits that our restructuring initiatives have had on our customer service and manufacturing costs,” she said.

Tellabs most recently announced in November that it would close two facilities in the U.S. and layoff 1,000 people worldwide. That followed on another round of layoffs of 950 in August.

Also in November, Tellabs announced its acquisition of Ocular Networks, Inc. for approximately $355 million in cash and options. Notebaert on Wednesday described the acquisition as adding “a growth engine to Tellabs product portfolio as customers optimize their efficiency all the way to the edge of their networks.”

Tellabs shares were down less than one percent in trading Wednesday morning.