Tellabs seeks ‘pockets of optimism’ overseas

“The subtle silver lining may be that the forecast provided normal seasonality, which suggests carriers will not make extensive capex cuts,” Morgan Keegan analyst Simon Leopold wrote in a note following the call.

Meanwhile, Tellabs is searching for an executive vice president of sales to help strengthen its international operations and a chief technology officer.

“In the past couple years, we made a mistake being too customer-focused and not enough market-focused,” Pullen said. “So you’ll see us spend a lot more time, energy and money on a market-focused approach…Don’t be surprised if you see us be more aggressive in both direct and indirect channels [in international markets] as well as leveraging some partners in alliance with the big system integrators like Ericsson, like a Nokia Siemens, like a Harris Stratex, to name a few.”

Despite the softer sales, Tellabs was able to more than double its net income sequentially to $39 million in the quarter, thanks mostly to a one-time tax benefit. The vendor also announced record sales for three of its newer products: its 6300 multiservice provisioning platform (for integrating Ethernet with optical networks), its 8600 data networking product (often used in mobile backhaul) and its 7100 ROADM.

As one analyst on the call pointed out, Tellabs’ previous CEO, Krish Prabhu, had said that sales of the 6300 in Europe and emerging markets were impeded by fierce competition from Huawei Technologies. While Huawei hasn’t gone away, Pullen said he plans to try new ways of besting its Chinese rival. “We’re going to be more aggressive with cost reductions in this platform and developing them in lower cost geographies,” Pullen said. “There’s a different way to pursue this segment than we’ve heretofore been pursuing. You’re going to see us be more aggressive in that space.”

“Tellabs’ balance sheet remains healthy,” UBS Investment Research analyst Nikos Theodosopoulos wrote in a note issued before today’s conference call. “The company [is] exiting [the second quarter] with $1.45 billion in cash and equivalents and no long-term debt.”