Copyright 2006 Chicago Sun-Times, Inc.
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Chicago Sun Times
April 27, 2006 Thursday
Final Edition
Howard Wolinsky, The Chicago Sun-Times
From Lexis Nexis

An 11-fold growth in profits and a nearly 20 percent increase in revenue during the first quarter at Tellabs boosted the Naperville telecommunications equipment maker's shares more than 8 percent Wednesday.

Krish Prabhu, Tellabs president and chief executive, said Tellabs made gains as its phone-company customers have grown their broadband, video and wireless services.
"We continued our momentum from the fourth quarter of last year into the first quarter, which traditionally is our weakest quarter. Broad customer demand drove double-digit revenue growth," he said.

Tellabs shares closed Wednesday at $17.09, up $1.28.
The company earned $52 million, or 11 cents per share, compared with $1 million, or less than one cent per share, in the first quarter a year ago. Revenue rose 18 percent to $515 million.

Revenue for Tellabs' products to carry wireless phone traffic sold to Cingular, Verizon and Sprint increased 24 percent to hit $214 million, and the company sold $164 million worth of products for broadband access to the home to Verizon, BellSouth and other customers, a 28 percent increase over the previous year.

Revenue from products to provide broadband data services for Verizon and international carriers tripled to $22 million.

Is the telecom recession over?

Prabhu said, "I think the worst times are behind us. Our customers are spending money, but they are cautious. The spending is subdued."

David Weissman, senior analyst for telecom for Zacks Investment Research, a Chicago-based independent equity analysis firm, said, "Tellabs had a solid quarter. The company has been a strong performer over the past year."

Noting that Tellabs stock has doubled in the last year, he said, "The question now is whether the Tellabs' share price already reflects the improvements the company made and whether the growth rate can be sustained."

Tellabs has made major acquisitions in recent years to broaden its product line. And the company currently has more than $1.1 billion in cash. Weissman said this represents buying power for Tellabs, but it also makes the company an acquisition target to companies seeking an influx of cash for their own operations.

Prabhu said purchases of other companies are possible: "We're always on the lookout for acquisitions that will catalyze growth. We had good results with the last couple of acquisitions." He declined comment on the possibility that Tellabs itself might be purchased.