To: Jay Rommel who wrote (3727 ) 9/14/1998 1:48:00 PM From: jim shiau Respond to
TELLABS INC. (TLAB) 38 3/16 -6 13/16. Well, the jubilation from the cancellation of the merger between this designer and manufacturer of voice and data transport and network access systems and CIENA (CIEN 13 3/4 -2 3/16) was short-lived. Just as shares of Tellabs began to bounce back from the beating they had taken in the past month, Tellabs splashed investors with cold water as they issued a less than robust report about its upcoming results at the conference call meant to discuss the CIENA merger cancellation. Given that many had already assumed that the deal would not go through in its present form, investors were blind-sided by Tellabs own performance news. The company revealed that it now expects flat revenue and earnings in Q3. While earnings projection for Q3 of $0.47 a share is not too different from Q2 net of $0.46 a share, business appears to be slowing as the company's two main products, the SONET-based TITAN 5500 and MartisDXX products are expected to show flat growth in Q3. The slowdown in growth of these two products is important because they reflect the performance for its domestic and international markets. In Q2, Tellabs enjoyed growth of 51% in its TITAN 5500 system, while the MartisDXX product line increased by 21% from a year-ago. The fact that Tellabs is not having such a robust quarter suggests that, the near-term, the outlook is going to be a bit more choppy than had been anticipated, particularly as the economic woes overseas continue. It will also make it that much more difficult for the stock to regain its past luster pre-CIENA merger. After all, Tellabs had traded as high as $93 1/8 before the CIENA merger began to be questioned as not being prudent. With its revenue and earnings visibility being also questioned, smooth sailing post the cancellation of the merger will be tough to achieve as well.
