Tellabs seeks ‘pockets of optimism’ overseas

Tellabs vowed to push harder into overseas markets Tuesday as weakness in North America weighed on its second-quarter results.

The equipment vendor reported $432.5 million in second quarter revenue -- down nearly 7% sequentially and down 19% from a year earlier. It also predicted revenue would be sequentially flat or down in the third quarter, which is typically a weak one for the company.

“We continue to see, like the rest of the world, some tough macroeconomic situations and industry sector problems,” said Rob Pullen, Tellabs’ chief executive officer.“But we also see pockets of optimism.”

The company aims to drive harder in markets outside North America, where 66% of its second-quarter revenue came from (in the first quarter, that number was 75%). The company has emphasized that strategy repeatedly since Pullen was named CEO in February.

“We’re too leveraged in North America,” Pullen said on a conference call today. “We’ll continue to focus on North America, don’t get me wrong. But we’ll spend a lot of our time addressing products and services for the global segment, North America included.”

The company’s second-quarter results were aided by two new customers for its 7100 reconfigurable optical add/drop multiplexer (ROADM): one in South Africa and the other in Puerto Rico. And a drop in spending among North American wireless carriers on Tellabs’ legacy 5500 transport gear weighed on the vendor’s top line, bringing transport segment revenue down by $65 million (or 31% of the segment) sequentially in the quarter.

“The North American macroeconomic [environment] is tough,” Pullen said. “Spending in wireless has been slightly down.”

However, the international market is also mixed, Pullen said when asked to gauge the sentiment of his carrier customers related to spending.

“As we talk to customers, they’re uncertain [about spending] themselves,” he said. “They [indicate spending growth to be] flat to single digits. That’s, by the way, over wireless and wireline. They’re suffering from the macroeconomic [environment], the real estate market and so on. Housing starts affect the consumer broadband access business, as an example. We’re seeing tightening of the belt on business customers. In Europe we see a little softness. But on the other hand, we see up tics in the world. In Eastern Europe, India and Malaysia, to name a few, there’s some positive side. We’re trying to take an educated forecast of those up and down vectors in the industry and around the world.”