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To: jghutchison who wrote (11761)	2/1/2002 9:35:40 AM
From: jghutchison	Read Replies (3) \| Respond to of 12623

JANUARY 31, 2002 PREVIOUS NEWS ANALYSIS Tellium Reports Pro Forma Profit -------------------------------------------------------------------------------- Core optical switch maker Tellium Inc. (Nasdaq: TELM - message board) didn't announce any new customers on Thursday, as some on Wall Street had hoped, but it did offer a pleasant surprise by reporting rising revenues and a pro forma profit during its fourth-quarter 2001 earnings conference call. Excluding one-time charges, Tellium reported a fourth-quarter profit of $1.7 million, or a penny a share, compared to a pro forma net loss of $7.4 million, or six cents a share, for the previous quarter. Analysts were expecting Tellium to report a loss of 4 cents a share for the quarter, so the pro forma profit raised some eyebrows. "The bottom line number is definitely a surprise," says Rick Schafer, an analyst at CIBC World Markets. "For these guys to turn a profit two quarters [after going public] shows that they've been willing to make some of the tough decisions that their competitors haven't." Shafer cites Tellium's gross margin improvements and tight management of operating expenses as the keys to its positive results. With one-time charges added in, Tellium's net loss for the quarter was $61.5 million. That included a one-time non-cash charge of $19.2 million because of the cancellation of warrants for 1.375 million shares in connection with its amended contract with Qwest Communications International Inc. (NYSE: Q - message board) (see Qwest and Tellium Revise Contract ). Its gross margins rose to $23.1 million, or 46 percent of revenues, in the fourth quarter, compared to $17.7 million, or 44 percent of revenues, in the third quarter of 2001. Tellium's revenues rose to $50.2 million during the quarter, an increase of 25 percent over the company's third-quarter 2001 revenues of $40.1 million. For the year, Tellium's revenues totaled $136.4 million, versus $15.6 million in 2000. During the conference call, CEO Harry Carr said the company would not give guidance as to when it plans to announce new customers. This comes after rumors of a new customer in Deutsche Telekom AG (NYSE: DT - message board) and past promises by Carr that Tellium would announce a new customer by the end of 2001 (see Tellium Looks to Make Its Marks ). "We do not discuss where we are with potential customers, nor do we think it is wise to announce customer test activity," he says. "In the meantime, I intend to stay out of the prediction business of the specific timing of those opportunities." Carr says that during the fourth quarter, Qwest and Dynegy Inc. (NYSE: DYN - message board) each made up more than 10 percent of Tellium's revenues. For 2002, Carr says he expects about two-thirds of Tellium's revenues to come from those carriers, with the remainder coming from new customers. The company said it expects revenues to be in the range of $52 million to $55 million for the first quarter of 2002. In addition, the company continues to believe revenues in 2002 will be approximately $288 million. Tellium's managers can sell their shares beginning in February, ending an extended lockup period that followed the company's May 2001 initial public offering (see Tellium Execs Lengthen Their Locks ). The management team holds roughly 14.7 million shares of Tellium stock. "I am confident that we will not see much activity [in management stock sales] and certainly nothing significant," says Carr. — Phil Harvey, Senior Editor, Light Reading lightreading.com