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Tellabs Beats Q2 Earnings and Rev

JNPR SONS

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Tellabs Inc. reported better-than-expected financial results for the second quarter of 2013, beating the Zacks Consensus Estimate. GAAP net loss in the reported quarter was $7.8 million or a loss of 2 cents per share compared with a net loss of $4.7 million or 1 cent per share in the prior-year quarter. Quarterly adjusted (excluding special items) net loss per share of 1 cent was better than the Zacks Consensus Estimate of a loss of 2 cents per share.

Second-quarter 2013 total revenue of $212.1 million was down 26.4% year over year but slightly higher than the Zacks Consensus Estimate of $210 million. 

Quarterly gross margin was 37.8% compared with 39.6% in the year-ago quarter. Operating expenses, in the reported quarter, were $84.3 million compared with $112.6 million in the prior-year quarter. During the second quarter of 2013, the company repurchased 2.3 million shares for a total consideration of $4.6 million.

During the first half of 2013, Tellabs consumed $22.2 million of cash for operations compared with $5.6 million in the prior-year period. Free cash flow, during the reported period was negative $29 million compared with negative $15.5 million in the year-ago period.

Tellabs exited second-quarter 2013 with $541.7 million of cash and marketable securities on its balance sheet compared with $604.4 million at the end of 2012. Further, there was no outstanding debt on its balance sheet.

Optical Segment

The Optical segment revenues were $112.7 million, down 7.9% year over year. The decline was primarily driven by significantly lower sales of the Tellabs 5000 digital cross-connects systems and Tellabs 6300 managed transport systems. The segment profit was $25.4 million compared with $29 million in the year-ago quarter.

Data Segment

Total revenue generated by the Data segment was $35.8 million, down 53.9% year over year, hamstrung by lower sales of the Tellabs 8100 managed edge systems and the Tellabs 8800 and 8600 multiservice router series. The segment generated a loss of $2.5 million compared with an operating income of $5.4 million in the prior-year quarter.

Access Segment

Total revenue of the Access segment was $19.4 million, down 48.6% year over year.  The significant fall in revenues were attributed to lower sales of Tellabs1600 single-family optical network terminals. The segment’s profit dropped to $1.3 million from $6 million in the prior-year quarter.

Services Segment

Total revenue of the Service segment was $44.2 million, down 12.8% year over year, hurt by lower revenues generated from the deployment services and support systems. The segment profit fell to $14.8 million from $17.2 million in the prior-year quarter.

Geographic Distribution

In the second quarter of 2013, the North American region generated $123.4 million (58% of the total revenue) in revenues compared with $137.9 million in the prior-year quarter. The rest of the world generated the remaining $88.7 million (42% of total revenue) compared with $150.2 million recorded in the year-ago quarter.

Guidance

Management expects the company’s third-quarter 2013 revenues of $200 million to $220 million. Non-GAAP gross margin is expected to be 37%, plus or minus 1 or 2 percentage points, based on product mix. Non-GAAP operating expenses are expected to be mid-$70 million. Non-GAAP tax rate is expected to be around 32%.

Other Stock to Consider

Tellabs currently has a Zacks Rank #3 (Hold). Other stocks in this segment, which are worth considering, include Juniper Networks Inc. (JNPR - Analyst Report), Mitel Networks Corp. and Sonus Networks Inc. (SONS - Snapshot Report). Sonus currently has a Zacks Rank #1 (Strong Buy) while both Juniper and Mitel have a Zacks Rank #2 (Buy).

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