Tellabs profit falls, will cut 225 workers
Tellabs Inc. said Tuesday it plans to lay off 225 workers by 2009 to help reduce expenses after the telecommunications equipment maker said it lost about 35 percent in profits during the first quarter.
About 80 workers already have been let go, including 50 from the company's Naperville headquarters.
The layoffs and other cutbacks are part of a $100 million plan to reduce expenses, Tellabs President and Chief Executive Officer Rob Pullen said during an interview. In late February, Pullen replaced Krish Prabhu, who had resigned amid falling revenues.
Tellabs saw revenues drop because of stagnation in the telecommunications sector and the slowdown of new housing starts. With fewer homes being built, fewer people are getting broadband. That means fewer companies have been ordering equipment, Pullen said.
"Broadband is closely tied to the economy," Pullen said during an interview.
So Tellabs discontinued some products and will focus on others to help rejuvenate the bottom line.
The revenue drop was part of the company's first-quarter earnings released Tuesday. Net income was about $17 million, or 4 cents per share, compared with $25 million, or 6 cents per share, in the year-ago quarter.
Revenue totaled $464 million, up 3 percent, from $452 million in the first quarter of 2007.
The cutbacks are necessary, said Jordan Zounis, telecom analyst with Morningstar Inc. in Chicago.
"We see these cuts putting Tellabs into a better competitive position and in a better position to be acquired down the road," said Zounis. "From our perspective, we think the ultimate buyout of Tellabs would be in its best interest."
Pullen said he wants to see Tellabs regain profit and expand further in the mobile services area.
New customers likely would come from government sales in North America and from creating relationships in Eastern Europe and Brazil.
"In these tough times, I'm pleased with our performance in the first quarter," Pullen said. "Sure, there was some weakness in broadband, but we were running into some headwinds there."
Still the second-quarter forecast wasn't better. Tellabs expects lower second-quarter revenue in the range of $425 million to $445 million. Operating expenses are expected to be flat to slightly down from the first quarter.
Wall Street reacted negatively to the news, sending the stock down about 14 percent. Shares closed at $5.19, down 83 cents.