TLAB ($16-$15) Excluding one-time charges, earns 2 cents per share, analysts expected a break even quarter. No guidance given. "I don't think anybody has great visibility in the environment we're in."- TLAB President.
Wednesday July 18, 6:25 pm Eastern Time
Tellabs second-quarter earnings fall
(UPDATE: Adds closing stock price in paragraph 6)
By Ben Klayman
CHICAGO, July 18 (Reuters) - Telecommunications equipment maker Tellabs Inc. (NasdaqNM:TLAB - news) on Wednesday said second-quarter operating earnings fell dramatically as the economic slowdown continued to leave its mark, and the company said it saw challenging conditions continuing over the upcoming quarters.
But the company failed to provide any specific outlook for the near future, citing the uncertain market.
Including a $262 million restructuring charge, the Lisle, Illinois-based company said it lost $174 million, or 43 cents a share, compared with a profit of $157.1 million, or 38 cents a diluted share, last year.
``It's safe to say that Tellabs, like just about every other supplier of telecom equipment, has just finished two challenging quarters,'' Tellabs President and Chief Executive Richard Notebaert said on a conference call with analysts.
``The first half of 2001 will be remembered by all of us as the beginning of a fundamental rationalization of the entire telecom industry and all indications are we have several more challenging quarters ahead,'' he added.
Tellab's shares closed off 14 cents, or less than 1 percent, at $16.10 on Nasdaq. Over the past year they have outperformed the Standard & Poor's Communications Equipment (^SPCOMM - news) index by around 14 percent.
Tellabs said earnings for the quarter, excluding the charge, declined to $10 million, or 2 cents a share, from $163 million or 39 cents a share in the same period last year.
After the company revised its forecast last month, analysts had expected a break-even quarter, according to Thomson Financial/First Call.
NO GUIDANCE
However, Tellabs did not provide guidance for the third quarter or full year, something analysts had wanted.
Before Wednesday's earnings release, analysts had expected Tellabs to earn 3 cents a share in the third quarter and 42 cents a share for the entire year, according to First Call.
``The second quarter was pretty much a washout quarter,'' Merrill Lynch analyst Michael Ching said. ``They did a little bit better than they suggested a couple of weeks ago, but what's more important is the outlook going forward.''
Notebaert said it was simply a matter of not knowing what will happen in the near future.
``We could put a number out there and then we might have to come back in 60 days and put a new number out there,'' he told Reuters in a telephone interview. ``I don't think anybody has great visibility in the environment we're in.''
Chief Financial officer Joan Ryan said the industry slowdown in North America has been somewhat balanced by the relatively stable performance overseas. Business outside North America represented about 32 percent of revenues in the second quarter, up from 22 percent the previous quarter.
The company is counting on new products to help it weather the slowdown. Tellabs booked its first revenues -- $13 million in the second quarter -- for its Titan 6000 series optical switches, which help connect voice and data traffic to the proper destination.
TELLABS VULNERABLE
Nevertheless, Shawn Campbell, analyst with Northern Trust Corp.'s asset management arm, remains concerned about the new products' late entry in the market and declining sales of Tellabs' current Titan 5000 series switches.
``That's where a big chunk of the shortfall is,'' he said of the Titan 5000 series. ``(Tellabs) remains vulnerable as carriers migrate to next-generation optical products.''
Tellabs last month slashed its second-quarter outlook because of reduced customer spending on telecommunications equipment. It said it expected to break even before the restructuring charge and report sales of about $500 million, down from previous guidance of $780 million to $820 million.
Net sales actually fell 35 percent to $509.4 million from $785.5 million last year.
The slowdown has hurt almost all telecommunications equipment makers, leading them to forecast reductions and job cuts. Industry giant Nortel Networks Corp. (Toronto:NT.TO - news)(NYSE:NT - news) in June predicted a massive $19.2 billion second-quarter loss and said it would cut another 10,000 jobs.
Tellabs said in May it expected to take restructuring charges of $262 million, larger than previously anticipated. In mid-April it estimated restructuring charges at $150 million to $225 million, related to exiting its SALIX switching business, plant consolidation, and employee-related, fixed-asset and inventory-related charges.
Tellabs said cash on hand at the end of June rose slightly from the end of March to just over $1 billion, while accounts receivables and inventories dropped both fell.
Sales in Tellabs' optical networking business declined 58 percent from last year's second quarter to $221 million, while broadband access product sales fell 6 percent to $148 million. |
