Tellabs falls on warning

2 min read

Tellabs slashed its first-quarter targets for the second time, adding yet another warning to the long list from telecom equipment makers.

The company now expects revenue to be over $100 million less than it originally projected. This is yet another bad sign for the troubled telecom equipment sector. Companies including Cisco Systems (Nasdaq: CSCO), Nortel Networks (NYSE: NT) and, most recently, Sycamore Networks (Nasdaq: SCMR) and Extreme Networks (Nasdaq: EXTR) have warned that revenue will be lower than expectations. Tellabs, like its competitors, makes equipment to transmit data, video and voice signals, and sells mostly to phone companies, cable operators and government agencies.

Shares held their value after Tellabs' first warning in March, but were off 4.75, or 12 percent, to 36 on the Island ECN before Friday's opening bell.

Tellabs now projects first-quarter revenue of about $772 million, compared with prior expectations for revenue of $830 million to $865 million. Earnings are expected to be 29 cents a share, compared with prior estimates of 35 cents to 38 cents.

First Call had been expecting revenue of $844 million and earnings of 36 cents a share. Those projections were already revised down after the company's first warning. Original estimates had been for revenue of $876 million and earnings of 38 cents.

The company blamed its second revision on reduced and deferred spending by major communications carriers late in the quarter.

"The good news is, orders weren't cancelled," they were pushed out into the next quarter, said CEO Richard C. Notebaert in a Friday morning conference call with analysts.

Analysts were anxious to know whether the latest first-quarter troubles would affect the second quarter. CFO Joan Ryan said the company was evaluating that and will give projections for the next full year and quarter when it reports its official first-quarter results on April 18.