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Tellabs shares hold value despite warning, downgrade

Tellabs shares slipped only 44 cents to $45.25 Thursday despite warning that its first-quarter and fiscal 2001 sales and earnings will fall short of analysts' estimates.

After dropping to $40.13 in after-hours trading Wednesday, the stock managed to recover Thursday even though several analysts cut their first-quarter and fiscal 2001 estimates.

The maker of voice, data and video network equipment said it now expects to record sales of between $830 million and $865 million in the quarter, and earnings of between 35 cents and 38 cents a share.

First Call consensus pegged Tellabs for a profit of 38 cents a share on sales of $876 million.

Tellabs executives blamed the shortfall on slow sales in of its Cablespan product--which enables voice and data services to be transmitted over cable television networks--as well as its inability to recognize sales from shipments of its Titan 6500 systems.

It expects fiscal 2001 sales of between $4.35 billion to $4.4 billion and earnings of between $2.12 and $2.17 a share, slightly below previous estimates of $4.4 billion and $2.17 a share, respectively.

On Thursday, USB Warburg analyst Nikos Theodosopoulos cut the stock's 12-month price target to $50 a share from $58 a share.

WR Hambrecht adjusted its sales and earnings estimates to match the guidance provided by Tellabs while maintaining its "neutral" rating.

Salomon Smith Barney cut the stock from a "buy" rating to an "outperform."

"We are increasingly concerned about the underlying slowdown in carrier spending activity and a current lack of visibility in the telecom environment," Deutsche Banc Alex Brown analyst George Notter said in a research report. He maintained his "buy" rating on the stock.

Separately, Tellabs said it closed the acquisition of Future Networks, a voice and cable modem technology company. Goodwill related to the purchase will dilute earnings by 4 cents a share in 2001 and 5 cents a share in 2002.

Last quarter, Tellabs met analysts' estimates when it posted a profit of $232 million, or 56 cents a share, on sales of $1 billion.

The stock moved as high as $76.94 in July before falling to a low of $37.63 in October.

Twenty-three of the 27 analysts following the stock rate it either a "buy" or "strong buy."