Fewer Orders Drag Down Tellabs Profits

On the whole, most of Tellabs’ growth will come from broadband, transport and professional services as carriers expand their networks to accommodate skyrocketing bandwidth demands, Pullen said. That growth is happening in certain areas. Tellabs’ broadband segment, for instance, jumped to an $8.7 million profit from a first-quarter 2007 loss of $14.8 million. The company said the improvement came from lower product costs and fewer expenses due to layoffs, regardless of the 7.6 percent drop in sales.

The services division, too, recorded a sharp spike in profit, from $9.9 million in the first quarter of 2007 to $13.7 million in the first quarter of 2008. Tellabs sold more professional and support services, which reap higher margins, executives noted.

Still, the company will keep tightening the purse strings. There will be more layoffs as Pullen, the long-time insider who replaced Krish Prabhu in February, tries to slash costs by the millions. Tellabs also will see more fallout from the end of its GPON deal with Verizon Communications Inc. Tellabs had been manufacturing an optical line terminal just for Verizon, but earlier this month ended the partnership because it wasn’t profitable.

Some analysts speculated the move meant Tellabs would abandon the PON space altogether. Pullen on Tuesday was adamant that won’t happen.

“We are not exiting the access business,” he told analysts. In fact, he said, Tellabs remains a BPON supplier to Verizon and will expand its focus to include new international, local exchange and independent operating carriers.

Share this article: Email, Slashdot, Digg, Del.icio.us, Yahoo!MyWeb, Windows Live Favorites, Furl
Add this article feed to: RSS, My Yahoo, Newsgator, Bloglines