Tellabs (TLAB) Q4 2010 Earnings Call January 25, 2011 8:30 am ET Executives Tom Scottino - Robert Pullen - Chief Executive Officer, President and Director Timothy Wiggins - Chief Financial Officer and Executive Vice President Analysts Nikos Theodosopoulos - UBS Investment Bank Blair King - Avondale Partners, LLC Thomas Lee - Goldman Sachs Joseph Longobardi Rod Hall - JP Morgan Chase & Co Jeffrey Kvaal - Barclays Capital Ehud Gelblum - Morgan Stanley Simon Leopold - Morgan Keegan & Company, Inc. Alex Henderson - Miller Tabak & Co., LLC Michael Genovese - Citigroup Presentation Operator
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» Tellabs CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Tellabs, Inc. Q2 2010 Earnings Call Transcript
» Tellabs Inc. Q1 2010 Earnings Call Transcript
Robert PullenThanks, Tom, and good morning, everyone. The fourth quarter brought revenue growth, but a setback in profitability. Our fourth quarter of 2010 revenue was $410 million, up 5% compared with the fourth quarter of 2009. Our revenue for growth products was strong at 56% for this quarter and compared with 48% in the fourth quarter of 2009. Our fourth quarter 2010 data of revenue rose 8% by comparison with the third quarter of 2010 and 33% compared with the fourth quarter of 2009. Data revenue for multiple international carriers more than offset weaknesses in North America. In fact, our international mobile data reached an all-time high in the fourth quarter of 2010. On a GAAP basis, we lost $11 million or $0.03 per share in the fourth quarter. On a non-GAAP basis, we earned $0.02 per share. Fourth quarter, in the revenue, was within our guidance range. But we wanted to share with you also some modifications we've had. We have early adopted two required revenue recognition rules to better reflect the economics of our multiyear deals that we already entered into. And that increased the revenue of about $9 million. Our fourth quarter revenue also reflected our agreement with the North American customers to add our data products to other products already sold to the customer through distributor. This chain decreased our revenue by about $21 million. The fourth quarter international revenue was 41% of our overall revenue. That was up from 31% in the third quarter. This is a positive trend as we diversify our global customer base. Our fourth quarter GAAP gross margin was 38%. This includes a pretax charge of $16.5 million related to a canceled tender in India. Excluding this charge, our gross margin would have been 42%, within the guidance range that we gave you. Tim will give you more detail on this chart in a moment.
Looking to our guidance for the third quarter, we expect revenue to be in the range of $315 million to $335 million. We expect non-GAAP gross margin to be 40%, plus or minus two points, again depending on product mix.We expect non-GAAP operating expenses to be slightly down and probably in the high 140s. Obviously, we're disappointed in our fourth quarter results and our guidance for the first quarter. After three quarters of strong performance in 2010, we certainly do not want to end the year this way. During the first three quarters of last year, our revenue and profits were driven by growth in Digital Cross-Connect and our data products, dominantly for Mobile Backhaul and primarily in North America. In the fourth quarter, our Digital Cross-Connect and data revenue in North America declined. As a result, our revenue declined sequentially in the fourth quarter and will decline again in the first quarter. That's the outlook as we see it today, and we'll certainly work hard to improve it. Despite lower revenue in North America, our fourth quarter data revenue grew, both sequentially and on a year-over-year basis. We won 21 new customers for our data products and generated higher revenue from our SmartCore platform. It was all positive signs in the fourth quarter. This increase investment we've made in sales and services resources outside of North America since 2008 is delivering new customers. Last year in 2010, we won 87 new customers for our growth products. Customers continue to embrace Tellabs growth products during the fourth quarter. The Tellabs 8600 and 8800 systems gained 15 new customers during the fourth quarter, two in North America and 13 in the international markets. The Tellabs 9100 SmartCore platform gained six new customers in the fourth quarter, two in North America and four in international markets. The Tellabs 7100 Optical Transport System gained four new international customers during the fourth quarter. Read the rest of this transcript for free on seekingalpha.com