Tellabs

(TLAB)

is having a

Nortel

(NT)

moment.

The Lisle, Ill.-based telephone network equipment maker warned investors Tuesday that it expects to break even on an operating basis, on sales of $500 million, for its second quarter. The company cited falling demand for new equipment from cash-stingy phone companies.

The gearmaker was expected to earn 29 cents a share on revenue of about $800 million, according to analysts surveyed by

Thomson Financial/First Call

.

Like a miniature Nortel, which

last week projected a whopping $19.2 billion second-quarter loss after charges for restructuring and acquisition writedowns, Tellabs said it will take a $262 million charge for restructuring and goodwill. Including those charges, its loss for the second quarter will come to 45 cents a share, according to CFO Joan Ryan, who spoke on a conference call with analysts Tuesday afternoon.

Tellabs shares fell $1.10, or 5%, to $21.20 during regular trading Tuesday. In after-hours trading on

Island

, the stock fell an additional 15%, dropping below $18 at one point.

The company declined to give any projections beyond the second quarter, citing continued uncertainty.

Customer buying patterns were "somewhat erratic," said CFO Ryan. Customers were "being very judicious about their spending and only spending when they absolutely have to," said Ryan.

Some investors sensed some bloody pricing at work on the company's gross margins, which fell to the low-40% range from the mid-50% range. "The buyers are in a strong position and Tellabs must have made some concessions. How else do you explain zero earnings?" said Joel Fishbein, a money manger with

Gardner Lewis Asset Management

who has no position in Tellabs.

While it was not a total surprise to many on Wall Street that Tellabs was having a bad quarter, the size of its shortfall came as a big shock. "Mind-numbing," as one New York hedge fund manager put it.

So it seems Nortel has set the tone for this pre-earnings season.