UPDATE 3-Tellabs profit jumps on wireless business
Wed Apr 26, 2006 12:59 PM ET
(Adds forecasts, analyst and company comments, shares)
By Jim Finkle
FACT BOX
TLAB.O (Tellabs Inc)
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UPDATE 3-Tellabs profit jumps on wireless business
CIBC analyst Steve Kamman takes job with Fidelity
UPDATE 2-Tellabs profit jumps on wireless business
BOSTON, April 26 (Reuters) - Telecommunications equipment provider Tellabs Inc. (TLAB.O: Quote, Profile, Research) on Wednesday reported stronger-than-expected quarterly revenues, buoyed by sales of products used in third-generation wireless networks.
Tellabs said first-quarter revenue rose 18 percent to $515 million, beating Wall Street's average forecast of $493 million as compiled by Reuters Estimates. Net income jumped to $52.4 million, or 11 cents per share, from a year-earlier $700,000, or nil per share, in line with analysts' estimates.
The company's shares rose nearly 8 percent in early afternoon Nasdaq trading.
Sales were boosted by better-than-expected growth in one of Tellabs' oldest product lines: cross-connect systems, or switches used to direct traffic on wireless networks.
Demand for cross-connect systems has picked up over the past year as wireless carriers invested heavily in building out 3G networks, which can transmit voice, high-speed Internet access, audio programming and multiple video channels to mobile devices.
Carriers are using that technology to deliver programming such as 'Sopranos' clips from HBO that are available on Cingular Wireless, one of Tellabs' clients.
"The cross-connect business is seeing ... a new leg of growth driven by the build-out of 3G," said UBS analyst Nikos Theodosopoulos. "That business experienced a strong uptick last year from wireless. This quarter it was even stronger."
First-quarter sales of cross-connect products and other equipment that helps run wireless networks climbed $41.4 million from a year earlier to $214.4 million. Revenue from equipment used in broadband cable networks rose 14 percent to $260 million.
Tellabs said it expects overall second-quarter revenue to rise 16 percent to 18 percent to between $535 million and $545 million.
Chief Executive Krish Prabhu declined to provide revenue estimates for next year but said the outlook is bright.
"The deployment of 3G in the U.S. is very much in its infancy," he said in an interview.
Carriers are at the early stages of efforts to market audio-video programming and other services that can be delivered over high-speed wireless networks. It's still unclear just how much consumers will embrace those products.
"But once they get the dog eating the dog food, they will come back and buy more" equipment, Prabhu said.
Tellabs also said it expects second-quarter non-GAAP operating expenses to be flat at about $155 million, and forecast gross margins of 46 percent to 47 percent.
The company said it expects about $11 million in stock-option expenses during the quarter and an effective tax rate of 35.5 percent.
Excluding $11 million in stock-option expenses, $9 million in acquisition-related costs, and $7 million in tax effects, the company earned $65 million, or 14 cents per share. Before such items a year earlier, it earned $26 million, or 6 cents a share.
The Naperville, Illinois, company's shares rose $1.22, or 7.7 percent, to $17.03 in heavy midday Nasdaq trading. |
