For the second quarter in a row, wireless backhaul demand has propelled Tellabs Inc. earnings to new heights.
But analysts continue to fear top Tellabs customer AT&T Inc. soon will defect to a rival such as Cisco Systems Inc. Tellabs CEO Rob Pullen decided to “address this issue head-on" in a Tuesday morning investor conference call.
“We do know AT&T is trialing a third vendor in its mobile networks," Pullen said. “At the same time, Tellabs sees good demand from AT&T."
That’s because AT&T, along with its chief competitor Verizon Communications Inc., is pumping millions of dollars into wireless infrastructure as smartphones – think the iPhone and the Droid – gobble precious data capacity. Both operators cut such investment during the recession; but as economic woes have eased and as more Americans use smartphones, AT&T and Verizon have had to ramp up network spending.
And they’ve done so to the benefit of companies such as Tellabs. To that point, the Illinois-based company reported a leap in net profit, from $16 million a year ago to $64 million. Revenue jumped as well, by 10 percent, to $423 million. Broadband technologies accounted for $229 million, or 9 percent more, of Tellabs’ sales; transport made up $133 million, or 12 percent more, revenue; and services brought in $61 million, an 8 percent increase.
Tellabs also issued a stronger-than-expected third-quarter outlook: Revenue should fall between $425 million and $435 million. Wall Street has been projecting $416 million in sales.
All of the positive results prompted investment bank UBS to maintain its “buy" rating on Tellabs and set an $11 price target. But investors disagreed. Concerns over the potential loss of AT&T as a Tellabs customer pushed Tellabs share prices down almost 7 percent, to $7.27, by noon Eastern.
