By Mike Trigg
The Motley Fool
June 20, 2001
(Nasdaq: TLAB) lowered its second-quarter financial guidance
yesterday as difficult economic conditions force customers to
cut back spending on telecommunications equipment. Rather than
purchasing new equipment, the company's customers have met
demand for bandwidth by reallocating existing network capacity.
That's meant poor sales for Tellabs, and the company's
management indicated last night that several challenging
quarters lay ahead.
"While we continue to see caution from our customers in the pace
of equipment deployment, our market position remains intact, and
we are focused on ensuring the most profitable path through the
current environment,'' said CEO Richard Notebaert. "I remain
confident Tellabs has the right people, products, and strategies
to meet the needs of our customers and deliver future growth.''
The company now expects sales of $500 million, down from earlier
guidance of $780 million to $820 million. On the bottom line,
it expects to break even on a per-share basis, versus $0.39 per
share in the year-ago period and below Wall Street's expectation
of $0.29 per share. Tellabs said earlier it would take a charge
of $262 million related to jobs cuts and office closings.
Including that charge and a loss from buying a cable equipment
firm, it will lose $0.45 per share.
Tellabs' problems will most likely continue as sales of its
TITAN 5500 system struggle. The TITAN digital cross-connect
systems, which made up 56% of sales, direct different protocols,
such as Internet protocol and asynchronous transfer mode. The
TITAN system receives the signals, separates them based on their
destination, and determines the best route. The company's new
optical products haven't made up for the sales slowdown. Until
that happens, things could get worse.
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