Tellabs Q2 earnings up, but potential AT&T loss drives down shares

Tellabs (Nasdaq: TLAB) came out fighting in Q2 as profit rose to $64 million over the $16 million it reported in Q2 2009.

During the quarter, Tellabs saw continued growth in its broadband, transport and services segments of $229 million, $133 million and $61 million.

Here's a breakdown of the performance of the vendor's key segments:

  • Broadband: Tellabs' reported $228.6 million broadband revenue in the second quarter of 2010, up eight percent from $210.2 million in Q2 2009, while profits were $86 million in the second quarter of 2010, up 49.8% from $57.4 million in the second quarter of 2009.
  • Transport: Transport revenue was $133.2 million in Q2 2010, a 12.1 percent increase from $118.8 million in Q2 09, while segment profit was $51.8 million in the second quarter of 2010, up from $26.3 million in Q2 2009. Tellabs reported that higher sales of digital cross connect systems offset lower sales of optical network systems in the second quarter.
  • Services: Similar to rivals Alcatel-Lucent and Ericsson, Tellabs' services division continued to fare well in Q2 2010. Tellabs reported $60.9 million in Q2 2010 revenues, an eight percent increase from $56.4 million in the second quarter of 2009. Tellabs attributes services revenue growth to an uptick in new service deals with North American service providers. Meanwhile, Tellabs reported that the services segment generated $206 million in profit, up from $20.2 million in the second quarter of 2009.

Despite surpassing financial analyst expectations for Q2 and a positive Q3 outlook, Tellabs continues to be plagued by rumors that it's going to lose some of the wireless backhaul business it has with AT&T (NYSE: T) to competitors such as Cisco (Nasdaq: CSCO). Whether or not these rumors are true, Wall Street reacted by sending the vendor's shares down 7 percent.

While Tellabs' CEO Rob Pullen is aware AT&T is looking at another vendor source for wireless backhaul, he said its relationship with AT&T continues to be strong.

"I want to address this issue head-on ... We do know AT&T is trialing a third vendor in its mobile networks. At the same time, Tellabs sees good demand from AT&T," Pullen told analysts on a conference call.

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

Related articles:
Tellabs maintains status at AT&T
Tellabs' stock down on fear AT&T is switching to Cisco
Tellabs' Q1 revenue boosted by wireless backhaul, professional services

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