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Tellabs Predicts Sales Shortfall

Shares are losing more than 9%.

Tellabs

(TLAB)

posted solid first-quarter results, but a weak outlook sank its shares in early trading.

The Naperville, Ill., phone-system equipment shop posted an adjusted profit of $32 million, or 8 cents a share, which excludes a pretax charge of $22.6 million. That compares with pro forma earnings of $34 million, or 8 cents a share, a year ago and beat the 4-cents-a-share target analysts were looking for, according to Thomson Financial.

Total sales for the quarter were $464 million, 3% better than the year-ago level of $452 million and more than the $453.7 million analysts expected.

However, Tellabs CEO Rob Pullen called the industry environment "challenging" in an accompanying statement. "Going forward, our top priority is to free up resources to innovate for customers," he said.

Looking ahead, Tellabs says it expects sales in the second quarter to be in a range of $425 million to $445 million, with gross margins shrinking to 31% from the 39% level in the first quarter. Analysts had been looking for sales of $474.9 million and a gross margin in the 36% to 37% range.

The news comes as Tellabs battles with rivals such as

Nortel

(NT)

,

Ericsson

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(ERIC) - Get Telefonaktiebolaget LM Ericsson Report

and

Alcatel-Lucent

(ALU)

in a market for telecom gear that has cooled off considerably amid a weakening global economy.

Shares of Tellabs fell 58 cents, or 9.6%, to $5.44 Tuesday. Ericsson and Alcatel-Lucent rose, but Nortel was weaker by 3%.

Elsewhere in the networking space,

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

was down 1%, and

Juniper

(JNPR) - Get Juniper Networks, Inc. Report

was losing 1.8%.