Tellabs thriving on fiber access, crossconnects

Tellabs reported $464 million in revenue for the third quarter, a 63% increase from the year-earlier quarter (or a 15% increase, compared to combined results of Tellabs and Advanced Fibre Communications, which it acquired last year), buoyed mainly by shipments of fiber access and traditional transport gear.

The largest part (36%, or $166 million) of Tellabs’ quarterly revenue came from broadband access products, which chief executive officer Krish Prabhu called a clear validation of the company’s acquisition of AFC. More than half of the company’s access revenue in the quarter came from fiber-to-the-premises (FTTP) and fiber-to-the-curb equipment.

During this morning’s earnings conference call, Prabhu also claimed that Tellabs has a “major GPON initiative” in place that gives carriers migration paths from its existing BPON gear to the technology’s gigabit-speed successor. Unlike competitors such as Alcatel, Tellabs has yet to unveil new GPON products but has announced plans to include GPON modules in its 8800 edge router. But in other comments today, Prabhu described the onset of GPON with a lack of immediacy.

“The need to go to GPON is driven largely by IPTV, and the timing of IPTV has been somewhat unclear, especially given some of the delays [in the market],” Prabhu said, adding that current GPON deployments call for a maximum bandwidth of 25 Mb/s, “which BPON fully supports today.”

Asked about the GPON request for proposals (RFP) expected to be issued next month by three Bell companies, Prabhu predicted tough price competition, alluding to the low prices AFC used to win its contract supplying Verizon Communications with FTTP gear—prices that have weighed on Tellabs margins since. “Pricing on the [2003 BPON] RFP was driven by a desire to win the business, and I think there’ll be an element of that in the [GPON] RFP, too,” Prabhu said, adding, “We’ll put up a good fight.”

Behind its access business, Tellabs’ maturing transport business was the second largest revenue-producer in the quarter, contributing about a third of the quarter’s revenue (more than $151 million), a point of concern to analysts waiting for the vendor’s broadband data products to become a larger part of the company’s overall business. Revenue from broadband data products was $14 million, or 3% Tellabs’ third-quarter revenue.

“We continue to look for more traction in broadband data to offset potential decline in revenues from maturing transport and voice quality enhancement segments,” research analysis firm UBS said in a statement issued today.

Slightly more than half of that transport revenue came from North American wireless carriers, who represented slightly less than half of transport revenue a year ago.