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To: Softechie who wrote (1127)	4/19/2001 12:01:56 AM
From: Softechie	Read Replies (1) \| Respond to of 2155

UPDATE 5-Tellabs cutting work force, outlook for year (Adds closing stock price in paragraphs 4) By Ben Klayman CHICAGO, April 18 (Reuters) - Telecommunications equipment maker Tellabs Inc. on Wednesday posted first-quarter earnings in line with reduced expectations, and said it was cutting 6 percent of its work force and its financial outlook for the year as consumer spending remained sluggish. The Chicago-area company said its net income for the quarter ended March 31 rose to $123 million, or 29 cents a diluted share, from pro forma results of $108 million, or 22 cents a share, in the year-ago period. Following Tellabs second warning earlier this month, analysts had cut their estimates to a consensus of 29 cents a share from 36 cents, according to Thomson Financial/First Call. First-quarter revenues rose 21 percent to $772 million from $639 million last year. Tellabs' stock closed off 94 cents, or 2.68 percent, at $34.15 on Nasdaq. It hit a two-year low of $31.25 earlier this month after an earnings warning, but over the past year has outperformed the Nasdaq Telecommunications Index by about 67 percent. A DIFFERENT ENVIRONMENT "The quarter clearly did not live up to our expectations," Tellabs President and Chief Executive Richard Notebaert told analysts on a conference call. "We're operating in a different environment than we were just a few short months ago, a very different market than it was just a few weeks ago." A slide in customer spending amid the economic downturn has plagued communications equipment makers the last several months. Others that recently cut earnings outlooks include leaders Nortel Networks Corp. and Lucent Technologies Inc. as well as ADC Telecommunications Inc. . In light of the reduced customer spending, Tellabs said it will cut 550 people from its work force of 9,200, instead of adding 1,100 jobs as planned. It will close one research and development center, eliminate salary increases this year, cut executive pay, reduce plant output, and cut its SALIX next-generation switching product program. It also eliminated another 450 temporary or contract jobs in the quarter. The company said it will take a $150 million to $225 million charge in the second quarter for the actions, which should cut annual costs by about 5 to 6 percent. The savings will first be felt in the second quarter, the company said. Tellabs also cut its outlook for 2001 earnings to a range of $1.55 to $1.65 a share, excluding 4 cents per share in goodwill from the Future Networks acquisition. It last gave guidance on March 7 of $2.13 to $2.17 per share. Analysts had expected full-year earnings of $1.72, First Call said. The company also cut its expectation of revenues for the year to $3.6 billion to $3.7 billion, down from a previous $4.35 billion to $4.4 billion. Tellabs is in better shape than many other telecom equipment makers because it derives the bulk of its revenues from large telecommunications companies as opposed to the struggling smaller carriers, analysts and portfolio managers said. "They're not like a Nortel or a Lucent, who have hitched their wagons to a major spending up-cycle in all the bleeding edge (optical) stuff," said Jerome Castellini, president of Chicago investment advisor CastleArk Management. OPTICAL NETWORKING TO DRIVE REVENUES Full-year revenues should be driven by a 10 to 15 percent gain in optical networking, including $175 million for the new Titan 6000 series optical switches, Tellabs said. Broadband services are expected to be flat to slightly down. Optical switches help connect voice and data traffic to the proper destination. For the second quarter, the company is targeting earnings of 29 to 32 cents a share on revenues of $780 million to $820 million. Analysts had expected 39 cents, First Call said. Notebaert told Reuters the capital-spending budgets at large service providers may be flat to down slightly this year, but they are still very large; it will just take time for conditions to rebound. "What really bothers people is uncertainty," he said in a telephone interview. "That is what keeps every CEO and manager awake at night." The company said first-quarter sales of optical networking equipment rose 22 percent from last year to $482 million, while broadband access product sales at $153 million were about the same. Sales in the voice quality enhancement market fell 39 percent to $33 million, and services and solutions revenues rose 160 percent to $104 million. REUTERS Rtr 22:14 04-18-01