Tellabs, Inc. Earnings Cheat Sheet: Margins Shrink as Revenue Falls

Wall St. Cheat Sheet

S&P 500 component Tellabs, Inc. reported its results for the second quarter. Tellabs, Inc. designs and markets equipment to telecommunications service providers worldwide.

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Tellabs Earnings Cheat Sheet for the Second Quarter

Results: Swung to a loss of $20.1 million (6 cents per diluted share) in the quarter. The communication equipment company had net income of $64.1 million or 16 cents per share in the year earlier quarter.

Revenue: Fell 20.9% to $334.2 million from the year earlier quarter.

Actual vs. Wall St. Expectations: TLAB reported an adjusted net loss of 2 cents per share. By that measure, the company beat the mean analyst estimate of a loss of 3 cents per share. Analysts were expecting revenue of $336.9 million.

Quoting Management: “While we’re never satisfied with a loss, we’re making progress in improving Tellabs’ performance. In the second quarter, international revenue grew 70% year-over-year, growth products generated a record 61% of revenue, and the Tellabs 7100 system had its best quarter ever. Compared with the first quarter, we reduced operating expenses and improved cash flow from operations,” said Rob Pullen, Tellabs president and chief executive officer. “Going forward, we will cut $50 million from expenses and costs over the next year, better aligning our expenses with revenue expectations. The restructuring unfortunately will affect about 330 or 10% of our employees. We are investing aggressively in research and development, devoting one-fourth of our revenue to growth products, as we focus on next-generation platforms to help customers succeed in the mobile Internet.”

Key Stats:

Gross margins fell 16.1 percentage points to 37.4%. The contraction appeared to be driven by falling revenue, as the figure fell 20.9% from the year earlier while costs rose 6.4%.

The company beat estimates last quarter after falling short in the previous two quarters. In the first quarter, it missed the mark by 2 cents, and in the fourth quarter of the last fiscal year, it fell short by 6 cents.

Revenue has fallen in the past two quarters. In the first quarter, revenue declined 15.1% to $322.4 million from the year earlier quarter.

Competitors to Watch: ADTRAN, Inc. , Ciena Corporation , Sycamore Networks, Inc. , Ditech Networks Inc. , Calix, Inc. , Telefonaktiebolaget LM Ericsson , Juniper Networks, Inc. , Cisco Systems, Inc. , Sonus Networks, Inc. , and Alcatel-Lucent .

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(Source: Xignite Financials)

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