Tellabs ( TLAB) dropped 4% in early trading after the telecom equipment company posted a 93% drop in third-quarter earnings.Profit at the Naperville, Ill., telecom gear shop dropped to $4 million, or a penny a share, from the year-ago $59 million, or 13 cents a share. Excluding certain costs, latest-quarter earnings were 3 cents a share, a penny ahead of the Thomson Financial analyst consensus estimate. Revenue fell to $458 million from $523 million a year earlier. Analysts were looking for revenue of $462 million. "Third-quarter results were adversely affected by a weak North American wireless market for the Tellabs® 5500 digital cross-connect," said CEO Krish A. Prabhu. "Yet, we saw strong sequential revenue growth for our data and fiber access products, which enable service providers to deliver triple-play and mobile video services." Tellabs gross profit margins were 31.5% in the third quarter of 2007, compared with 48.6% in the year-ago quarter. The change stemmed from a shift in product mix, which included more lower-margin new products and fewer mature products. The company said it expects revenue and gross margin to be about the same in the fourth quarter as in the third, excluding certain costs. Analysts were looking for earnings to rise to 6 cents a share and revenue to rise to $488 million in the period.
The news comes as Tellabs battles with rivals such as Nortel ( NT), Ericsson ( ERIC) and Alcatel Lucent ( ALU) in a market for telecom gear that has grown less robust this fall. Ericsson last week shed a quarter of its value in a single day after posting weak numbers. Tellabs shares fell 35 cents to $8.50.