Tellabs posts modest pro forma Q3 profit

Tellabs today announced a pro forma profit of $2.4 million--or one cent per diluted share--for third quarter 2001 on sales of $448 million. Taking into account one-time items, including a $50 million restructuring charge announced in August, the company posted a net loss of $49.5 million for the quarter, or 12 cents per diluted share.

The results were considerably lower compared to the year previous, when Tellabs posted a pro forma profit of $196.3 million--or 47 cents per diluted share--and a net profit of $187.3 million, or 45 cents per diluted share.

President and CEO Richard C. Notebaert attributed the second-quarter performance to the overall economic slowdown and uncertainty in the telecommunications sector. This has resulted in a continued decline in service provider spending--particularly a “softness” in European orders--and a “modest sequential weakness” across the company’s existing product lines.

Also taking a hit in the third quarter was Tellabs’ professional-services sector, which posted revenues of $57 million in the three-month period, compared to revenues of $105 million and $102 million in the first and second quarters, respectively. This was not entirely unexpected, as Tellabs experienced lower equipment sales in the previous quarter, and the performance services sector’s revenue generally is reflective of preceding activity in the equipment sector, Notebaert said.

He added the company achieved “truly remarkable” performance in the quarter by cutting its operating expenses by 13%. Since the end of the first quarter, Tellabs has cut its work force by 17%--about 1000 jobs--and reduced its total facilities by more than a third.

“We’re doing the right things to maximize profitability in the current environment,” Notebaert said. “These were very difficult decisions, but they are in the best interests of our long-term health.”

Notebaert said Tellabs is not finished cutting costs.

“We’ve made progress, but we have not completely executed the plan,” he said. “We’re trying to match our cost structure to revenue and order demand from our customers.”

Though current economic conditions and a lack of visibility are preventing Tellabs from providing guidance for the fourth quarter, Chief Financial Officer Joan Ryan said the company is targeting 15% growth in both earnings and revenue by the end of 2003, “depending on market conditions.”