Still-struggling Tellabs sees rare sequential revenue gain

Tellabs reported a 5% sequential rise in revenue for the second quarter, the first time the company has seen a second-quarter sequential revenue gain in three years. But executives cautioned on their quarterly conference call this morning that a long, rough road lies ahead of it, and that an upturn is not clearly in sight.

Most of Tellabs’ quarterly revenue gains came from international sales, which grew 14% from the first quarter to comprise 40% of the company’s overall revenue. The transport equipment vendor, well-known for its digital cross-connects, attributed the increase to sales in the Asia/Pacific region. Sales of optical networking systems to North American customers were flat for the quarter at $93 million.

Services accounted for $39 million, nearly 17% of the $234 million in total revenue the company earned in the second quarter. But when prodded by analysts, company executives would not reveal the gross margin of its services business, calling it “not our highest margin business.”

Though optimistic that the vendor’s worst days were behind it, Tellabs CEO Michael Birck stopped short of predicting a recovery for the company or the industry any time soon.

“My dad used to tell me one suit doesn’t make a clothing store, and one data point doesn’t make a trend,” said Birck, adding that the sequential revenue gain was “an important and encouraging sign that maybe we’ve at last reached the bottom of this treacherous chasm.”

The company predicts revenue for the third quarter to be “flat to slightly up,” and plans to consider more cost-cutting measures including, potentially, outsourcing manufacturing, consolidating facilities, curtailing some research and development initiatives and shrinking its workforce. After the first quarter, Tellabs announced it would cut 665 employees, or 14% of its workforce.

“There’s no question we’re still part of a sick industry,” said Birck. “It’s gotten down to the point where it can’t get a hell of a lot lower.”