Market downturn roughs up Tellabs

Tellabs Chief Executive Krish Prabhu said Tuesday the Naperville company still could be bought out, despite its third-quarter profit that plunged about 90 percent.

"There's a lot of consolidation in the industry and our board is always interested in that," Prabhu said in an interview.

Wall Street was buzzing in June and July that Tellabs was in merger talks with Nortel Networks and with Ericsson. Tellabs officials declined to address any of the speculation.

"Krish had a handshake deal with Ericsson," said Robert W. Baird & Co. analyst Ken Muth. "But now with Ericsson missing their own numbers, and Nokia having problems, a buyout isn't impossible but it's unlikely."

Tellabs had a rough third quarter. Net earnings posted on Tuesday were $3.6 million, or 1 cent per share, compared with $59.1 million, or 13 cents per share, in the same period last year. Revenue was $457.9 million, down 12.4 percent from $522.5 million in the third quarter of 2006.

The drop was primarily due to slower sales to the major phone carriers, such as Verizon Communications and AT&T. The entire industry has been suffering, said Prabhu. He said this year doesn't indicate the same nuclear winter the tech industry suffered in 2002-03, but it will still be tough.

"There's just a pause in their spending," Prabhu said.

He said many of the communications companies are facing stiffer competition worldwide and are concerned about a return on their own investments.

"The networks shouldn't pause too long because the technology is changing," said Prabhu. "There's not much more we can do about it. As a supplier, we just are showing them more and more of what our technology is capable of doing for them and providing more efficiencies."

Tellabs also has been looking to do more marketing in Latin America, Europe and Asia to help boost profits.

"We're looking more to the advancing economies and where there is a lot of use with their networks," Prabhu said.

Prabhu also said he sees Tellabs' headquarters remaining in Naperville, which has about 1,300 workers. The company has about 3,800 employees worldwide. Prabhu has been primarily working from Tellabs' Dallas office for more than a year. He has homes in both Dallas and in DuPage County.

"We will continue to look for ways to optimize our resource," Prabhu said.