Tellabs Inc. (Nasdaq: TLAB) rode its digital cross-connects to better-than-anticipated earnings in the second quarter.
In fiscal second quarter results released after market close Monday, the communications equipment maker posted net income of almost $127.8 million, or 32 cents a share. First Call's survey of 32 analysts predicted a per-share profit of 30 cents for the quarter ended July 2.
Second quarter sales rose to $540.4 million, up 39.4 percent from $387.7 million in the year-ago period, when Tellabs earned 23 cents a share, not including unusual events. Sales growth was driven by Tellabs' line of Titan digital cross-connects, which let communications carriers transfer voice and data between lines with different capacities. Titan product sales increased 28.6 percent from a strong second quarter last year, said Michael J. Birck, Tellabs' president and CEO.
Tellabs also reported strong sales of echo cancellers, used to improve the quality of telephone calls, and "significantly" increased revenue from systems for integrating broadband services. Network systems did not meet expectations, but the company still expects strong sequential growth from that product line, Birck said.
The company also said the previously announced acquisitions of NetCore Systems Inc. and DSC Communications would allow it to speed complementary products to market. Tellabs sees both deals closing in the third quarter.
Shares of Tellabs slid 3 1/8 to 69 3/4 in Monday's trading prior to the earnings report. Of 36 analysts surveyed by Zack's Investment Research, 18 have the equivalent of "moderate buy" ratings on Tellabs, 15 recommend the stock as a "strong buy", and three maintain "hold" ratings.>