Frank, I totally agree, and Mike Birck's INCREASE of 4th qtr estimates by 10 cents and rosy picture of 1999 WITHOUT Ciena confirm your detailed explaination (thank you).
Tellabs Shares Rise on Forecast for 4th Quarter, 1999 Earnings
Lisle, Illinois, Oct. 16 (Bloomberg) -- Tellabs Inc. shares climbed as much as 19 percent after Chief Executive Michael Birck said he expects fourth-quarter and 1999 revenue and earnings to rise, boosted by strong demand from new and existing customers.
Tellabs, which makes equipment that directs traffic on phone networks, gained 6 1/4 to 45 in midmorning trading of 5.45 million, after touching 46 1/4. Birck told analysts and investors on a conference call he's ''quite comfortable'' with earnings estimates of 58 cents a share for the fourth quarter and expects sales of $490 million to $500 million, up from $354.3 million in the year-earlier period.
The upbeat forecast comes a month after Tellabs scrapped plans to buy Ciena Corp. after Ciena lost some contracts and issued a profit warning. Without Ciena, investors worried that Tellabs would lack the technology to fuel new product growth. Now the Lisle, Illinois-based company says it will earn a record $2.40 a share in 1999 on sales of $2.1 billion to $2.2 billion.
''People walked away comfortable that the sky isn't falling at Tellabs,'' said John Butler, an analyst at Prudential Securities Inc., who rates Tellabs ''accumulate.''
Tellabs expects sales to the Baby Bells to rise 10 percent to 15 percent next year and sales to other local and long- distance phone companies to rise 30 percent to 40 percent.
Birck said the company expects gross margins to narrow next year because of higher expenses for customer service and support, though profitability won't be hurt because of rising sales.
''Our expectations for next year are pretty good,'' Birck said.
New Products
Birck said the company plans to unveil new products next year, though he doesn't expect them to have a ''meaningful'' impact on sales in 1999.
Tellabs, which has strong relationships with the Baby Bell local companies, needs new technology to give its products more features, analysts said. Phone companies are looking for suppliers like Lucent Technologies Inc. that can offer a full range of services.
The company also told investors it wants to initiate a stock buyback, though accounting restrictions from its $860.3 million acquisitions of Coherent Communications Systems Corp. in August prevent it from repurchasing shares now.
Yesterday, Tellabs reported third-quarter profit rose 51 percent, beating expectations, on record sales of its equipment used to direct traffic on phone networks.
In the third quarter, profit before charges rose to about $97 million, or 49 cents a share, from $64.3 million, or 34 cents, a year earlier.
That beat the diminished 46-cent average estimate of analysts polled by First Call Corp. Tellabs last month warned profit for the third quarter would be little changed from the previous quarter, below expectations of 47 cents a share, because it was too slow in meeting customer demand for its products.
Sales rose 37 percent to a record $423.5 million from $309.4 million in the year-earlier period.
Tellabs offered to buy Ciena, the top maker of equipment that boosts capacity on phone networks, for $7.1 billion, or $65.88 a share, in June before Ciena warned of lower earnings and failed to get two contracts, sending its stock down 70 percent.
10:31:21 10/16/1998
Any redistribution of Bloomberg content, including by framing or similar means, is expressly prohibited without the prior written consent of Bloomberg L.P. Any reference to the material must be properly attributed to Bloomberg News.
The information herein was obtained from sources which Bloomberg L.P. and its suppliers believe reliable, but they do not guarantee its accuracy. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale of any securities or commodities.(C) Copyright 1998 Bloomberg L.P. BLOOMBERG, Bloomberg News, Bloomberg Financial Markets, Bloomberg Television, Bloomberg News Radio are trademarks, tradenames and service marks of Bloomberg L.P. |
