(TLAB) Tellabs Reports Mixed Earnings Results

October 27th, 2009

Tellabs Inc. (TLAB) declared its third quarter results today. Total revenues of $389.3 million were down 8.2% year over year but marked an improvement of 1% sequentially. Revenues were also below the Zacks Consensus Estimate of $393 million. The decline in year-over-year revenues is the result of lower sales for the Broadband segment products partially offset by growth in the Transport and Services segment revenues.

On a GAAP basis, net income in the third quarter was $29.3 million or 7 cents per share compared to a net loss of $998.5 million or 2.51 cents per share in the prior-year quarter, and a net income of $15.7 million or 4 cents per share in the previous quarter. However, adjusted net income (excluding special items) in the reported quarter was $28.2 million or 7 cents per share, beating the Zacks Consensus Estimate of 6 cents per share.

Gross margin was 41.7% compared to 38.2% in the year-ago quarter and 43.7% in the previous quarter. This reflects the aggressive cost cutting measures taken by management during the past one year. Operating expenses, in the same quarter, were $137.2 million compared to $155.9 million in the prior-year quarter and $133.3 million in the previous quarter. Management has streamlined the operating cost structure to improve productive efficiency.

At the end of the third quarter, Tellabs had $1,254.7 million of cash & marketable securities on its balance sheet compared to $1,152.1 million at the end of the prior-year quarter and $1,242.7 million at the end of the previous quarter. Balance sheet of Tellabs had no outstanding debt. During the same quarter, the company repurchased approximately 9.5 million of its outstanding common shares for a total consideration of $62 million.

Tellabs generated $66 million cash from operation during the reported quarter compared to $43 million in the prior-year quarter and $63.9 million in the previous quarter. Fee cash flow was $55.2 million compared to $32 million in the year-ago quarter and $57.4 million in the previous quarter.

Broadband Segment

Total revenues of the Broadband segment were $205.9 million, down 20.6% year over year. Within this segment, Access revenues were $86.1 million, down 24% over the prior-year quarter. Data Product revenues were $81.9 million, up 21.2% over the year-ago quarter. Managed Access revenue was $37.9 million, down 51.7% year over year. Broadband segment profit was $49.6 million, up 2.3% year over year.

Transport Segment

Total revenues stood at $127.9 million, up 16.8% year over year. This segment generated a profit of $28.8 million, up 32.7% year over year.

Services Segment

Total revenues amounted to $55.5 million, up 0.4% year over year. This segment generated a profit of $20 million, down 3.8% year over year.

Outlook

Management expects fourth-quarter revenues to remain flat compared to the third quarter. However, revenues might fluctuate in the +/- 3% range. Non-GAAP gross margin is expected to be around 43% and non-GAAP operating expenses might be down slightly on a sequential basis. Stock-based compensation expenses will be approximately $5 million.

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(TLAB) Tellabs Reports Mixed Earnings Results

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