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Tellabs announces more layoffs as revenue drops to $264M

About 200 employees affected in cost-cutting process
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Tellabs (Nasdaq: TLAB) continued to struggle in Q3 2012, reporting on Thursday that revenue in Q3 2012 was $264 million, down sequentially from $288 million in Q2 2012 and year-over-year from $330 million in the same period a year ago.

The Naperville, Ill.-based vendor reported that on a GAAP basis, it recorded a net loss of $4 million, or 1 cent per share, in Q3 2012, compared with a net loss of $130 million, or 36 cents per share, in Q3 2011.

Here's a breakdown of the company's key segment metrics:

  • Optical: Optical segment revenue was $108 million, down sequentially from $122.4 million in the second quarter. The vendor saw lower revenue from three of its key product lines: the 6300 managed transport systems, the 5000 digital cross-connect system and the 7100 optical transport system. Despite the lower revenue level, optical segment profit grew 14.1 percent to $23.5 million.  

  • Data: Tellabs' data segment revenue was $66.2 million, compared with $109.1 million in Q3 2011, due to lower revenue from its 8100 managed access system and the 8600 and 8800 smart router platforms. Meanwhile, data segment profit, driven primarily by the lower revenue level, was $1.4 million, compared with $8 million in the same period a year ago.

  • Access: The vendor's access segment revenue was $42.3, down 2 percent from $43.2 million in Q3 2011. Within this segment, increased revenue from the Tellabs 1000 access systems was offset by essentially flat revenue from the Tellabs 1600 single-family Optical Network Terminals (ONTs) and lower revenue from the Tellabs 1100 access systems. Access segment profit, driven primarily by improved product gross margins and lower research and development expenses, grew to $11.1 million, up 54.2 percent from $7.2 million.

  • Services: Services segment revenue was $48 million, compared with $57.1 million in the same period a year ago. Tellabs attributes the decline in the services segment revenue to lower revenue from professional services and support agreements. Likewise, services segment profit, driven primarily by the lower level of revenue, was $15.6 million, down from $22.8 million in Q3 2011.

As it sees softer demand for its products due to service providers being more conservative about spending, Tellabs announced that beginning in Q4 it will lay off about 200 employees, a measure it says will enable it to cut about $20 million in annual costs. The company said it will incur an $11 million restructuring charge in Q4 2012 related to severance and related costs.

Looking towards Q4 2012, Tellabs expects revenue to be in the range between $240 million to $260 million due to the challenging economic carrier environment and economy. Depending on the product mix, Tellabs also expects non-GAAP gross margin to be 40 percent.

"As we transform Tellabs' business model and create a path to sustained future growth and profitability, we must continue to lower costs and expenses," said Dan Kelly, Tellabs acting CEO and president, in the earnings release. "At the same time, we are increasing R&D investments in our next-generation products to help our customers succeed with Tellabs optical, data and access solutions."

Tellabs was listed at $2.96 in morning trading on Friday on the Nasdaq stock exchange.

For more:
- see the earnings release

Special report: Wireline telecom earnings in the third quarter

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