Tellabs Financials

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Tellabs Financials

I usually stray away from financial analysis on my blog (yesterday's AT&T 2nd quarter earning blog entry not withstanding), so I was a bit surprised myself when my interest was piqued to read Tellabs financial earnings from this quarter and also blog about it.

Tellabs today reported second-quarter 2005 revenue of $463 million, up 52% from $304 million in the second quarter of 2004.

Tellabs earned $41 million or 9 cents per share in the second quarter of 2005 on a GAAP basis. On a non-GAAP basis, Tellabs had net income of $58 million or 13 cents per share, up from $26 million or 6 cents a share in the first quarter of 2005.

"Strong customer demand across multiple product lines fueled Tellabs' best revenue quarter since 2001," said Krish A. Prabhu, Tellabs president and chief executive officer. "Our solid progress with the AFC and Vinci integrations is reflected in our improved margins and lower operating expenses."

Now here's the "meat" followed by a quick observation of mine:
Transport -- Revenue from transport systems totaled $159 million, down 4% from $165 million in the second quarter of 2004 and in line with $158 million in the first quarter of 2005.
Access -- Revenue from access products totaled $144 million, up 23% from AFC's $117 million in the second quarter of 2004. [Note: The access revenue category includes all products acquired through the acquisition of AFC, which closed on Nov. 30, 2004.]
Managed Access -- Revenue from managed access systems was $96 million, up 26% from $76 million in the second quarter of 2004.
Broadband Data -- Revenue from broadband data products was $9 million, up fourfold from $2 million in the second quarter of 2004.
Voice Quality Enhancement -- Revenue from voice-quality enhancement and other systems totaled $11 million, down 48% from $21 million in the second quarter of 2004.
Services -- Services revenue was $44 million, up 9% from $41 million in the second quarter of 2004.

This last one (Voice Quality Enhancement) kind of surprised me. It sounded like a voice over IP quality enhancement product, which I would have figured would be "growing" not declining nearly 50%. So I checked out Tellabs website to find out more about their Quality Enhancement products and lo and behold it's not VoIP-related at all. I found out that it's echo cancellation but it's not for IP - it's for TDM. The 3300 for example is a "high-density DS3 or STS-1E echo control and voice-quality enhancement system that improves voice quality and enhances network performance for digital wireless and long-distance service provider."

Well that explains it. Most carriers are moving to transporting voice over IP. Actually, I just read a bit further, and it looks like this product eliminates acoustic echo generating from digital mobile handsets and hands-free kits, enabling full-duplex speech and it reduces the background noise on mobile calls, enhancing overall voice quality. You mean to tell me the cellular/mobile companies care about providing good voice quality? Gee, I would have never known from my terrible sounding Sprint PCS service. Just kidding Sprint!

Serously though, I'm surprised I don't see Tellabs providing any VoIP-related products, although they do provide some great echo cancellation products used in VoIP applications. Still, I'd like to see more from them - they've got some great carrier core expertise.



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