Competition eats into Tellabs (Nasdaq: TLAB) Q4 earnings

Tellabs (Nasdaq: TLAB) confirmed fears that Q4 2010 would be a tough financial period. While revenue rose 5 percent to $410 million, Tellabs missed Wall Street's forecast of $418.4 million.

One of the culprits related to Tellabs' Q4 decline is ongoing rumors that Tellabs may be losing ground as large carrier customers such as AT&T (NYSE: T) and Verizon (NYSE: VZ) are increasingly using more equipment from competitors such as Cisco (Nasdaq: CSCO) and Alcatel-Lucent (NYSE: ALU) for their network upgrades. Since AT&T and Verizon make up half of its revenue, the switch presents a major challenge for Tellabs.

"The numbers were quite a bit lower than we expected," Simon Leopold, an analyst with Morgan, Keegan & Co told Reuters. "If we look back at the course of the middle of 2010, they lost significant business at AT&T. They are suffering. That chunk of business is not recovering."

For the year 2010, Tellabs' revenue was $1.64 billion, an 8 percent increase from $1.53 billion in 2009

From a segment perspective, Tellabs saw its shares of hits and misses with broadband and data products recording revenue growth in the fourth quarter, while services and transport revenue declined.

Tellabs' Q4 broadband revenue increased 18.6 percent from $1914 million in Q4 2009 to $227 million in Q4 2010. Overall 2010 broadband segment revenue rose 7.7 percent from $785.8 million in 2009 to $846.0 million. At the same time, data product revenue rose 32.5 percent from $90.5 million to $119.9 million in Q4 2010.

Transport and Services revenue were also a mixed bag in Q4. Transport segment revenue was $123.3 million in Q4, down from $133.2 million in Q4 09, while for the year 2010 it was up 8.7 percent from $509.6 million in 2009.

Similarly, Q4 service revenues were down from $64.7 million in Q4 09 to $60.2 million in Q4 2010, while for the year 2010, services segment grew to $242.3 million, up 5.2 percent from $230.3 million in 2009.

"Tellabs' fourth quarter brought revenue growth but a setback in profitability," said Rob Pullen, Tellabs president and chief executive officer in a release. "Looking ahead, customers continue to validate Tellabs' focus on the smart mobile Internet, and we remain focused on investing our way forward to pursue this growth opportunity."

For more:
- see the release
- Reuters has this article

Related articles:
Tellabs acquires Zeugma to enhance its mobile core capabilities
Tellabs: Q3 revenue was up, but Q4 outlook disappoints analysts
Tellabs maintains status at AT&T
Tellabs' stock down on fear AT&T is switching to Cisco

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