Cost Cuts Lead Way for Tellabs - TheStreet

Reaping the benefits of sharp cost cutbacks,



posted a solid third quarter and boosted fourth-quarter guidance.

For the third quarter ended Sept. 26, the Naperville, Ill., maker of phone switches posted a loss of $65 million, or 16 cents a share. The latest period included restructuring and other charges of $48 million. A year ago, Tellabs lost $91 million, or 22 cents a share. Revenue slipped to $244 million from $288 million a year earlier, though the top line showed a 5% sequential rise.

Excluding restructuring and other charges, Tellabs lost $18 million, or 4 cents a share. The results were slightly better than Wall Street analysts had forecast; the Multex consensus called for a loss of 6 cents on revenue of $239.5 million.

On a conference call with analysts, executives said they were optimistic about "stabilizing revenue" and that the company was "on the path to profits."

Though Tellabs declined to offer any specific financial projections, executives on the call said they expect typical seasonal sales strength in the fourth quarter. If the seasonal uptick is similar to the past two years', Tellabs should have about an 8% sequential improvement, or sales of $263 million. Analysts had been looking for a 7% sequential increase according to a Multex tally.

The company said it exceeded its goal of reducing quarterly operating expenses, excluding charges, to $125 million. "Stabilizing sales and reaching our operating expense target early represent major milestones along our path to profitable growth," said CEO Michael J. Birck. "To help drive Tellabs' future growth, we will continue to strengthen our core product portfolio and have launched a global carrier-class data solution that helps telecom service providers smoothly migrate to new IP/MPLS networks of the future."

Tellabs expects the benefits of its dramatic cost cutting efforts to show up early next year. The company, which announced its

eighth round of layoffs in three years earlier this month, expects to trim staff to 3,500 by year end. That's down from the current headcount of 4,073.

In early trading, Tellabs shares added 28 cents to $8.06.