Tellabs Drops on Lowered Outlook

Tellabs (Nasdaq: TLAB) dropped US$1.63 to $44.06 in morning trading Thursday, after the company joined others in thetelecom equipment sector in lowering expectations for the first quarterending March 31st.

Salomon Smith Barney reportedly downgraded Tellabs shares to outperform frombuy following the company’s announcement.

Tellabs, based in Lisle, Illinois, said it now expects sales for the quarterto total $830 million to $865 million, rather than the $865 million to $890million originally expected.

The company cut its forecast for earnings pershare to 35 to 38 cents from 39 cents.

Tellabs said the revisions reflect “continuing below-trend growth” in itsCablespan business, as well as the inability to recognize revenue fromshipments of the new Titan 6500 system in the current quarter. The companysaid growth in its core, optical networking business “remains strong.”

For the year as a whole, Tellabs said it expects earnings of $2.12 to $2.17per share, rather than the initially expected $2.17. Revenue will likelytotal $4.35 billion to $4.4 billion, below the originally forecast $4.4billion.

“Given the strong acceptance of the new Titan 6500, we continue to target 30percent growth in revenue and earnings for the year,” said president andchief executive officer Richard Notebaert.

“Demand for our new products isstrong,” Notebaert added.

Also Thursday, Tellabs said that it has completed the acquisition of Future Networks,a modem technology company, for about $133 million in cash.

Some $35 millionof the purchase price is tied to Future Networks’ performance. Goodwillrelated to the acquisition will dilute earnings by 4 cents per share in 2001and 5 cents in 2002, Tellabs said.

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