Tellabs to restructure, cut 530 jobs

Tellabs Inc. (NASDAQ: TLAB) has initiated a restructuring that will see the company concentrate its efforts on mobile backhaul and packet optical transport systems.

"In a climate of economic uncertainty, Tellabs needs to align expenses with revenue," said Rob Pullen, Tellabs CEO and president. "So we’re working to reduce our operating expenses and costs by $100 million."

What this means is that Tellabs will stop new development work on the Tellabs SmartCore 9100 LTE product, although it will continue to support its SmartCore 9100 WiMax customers. The slimmed-down company will focus instead on what it called a "portfolio for the smart mobile Internet," which includes the Tellabs Mobile Backhaul Solution, Tellabs Packet Optical Solution, and professional services such as Insight Analytics.

The restructuring will affect about 530 people out of the total workforce of around 3,250, says Pullen. Tellabs will be consolidating its R&D facilities into fewer locations to gain efficiencies, and plans to close facilities in Petaluma, CA; Vancouver, Canada; Bangalore, India; and Karachi, Pakistan.

Tellabs fourth quarter results were better than its previous guidance, but still represented the fifth consecutive quarterly loss. The company generated fourth quarter 2011 revenue of $317 million, compared with $410 million in the year-ago quarter, and a net loss of $5 million, compared with a net loss of $11 million in the fourth quarter of 2010.

Looking at the annual results for 2011, Tellabs reported that revenue was $1.29 billion, compared with $1.64 billion in 2010. Overall in 2011 Tellabs lost $188 million, down from net earnings of $156 million in 2010.

Tellabs had entered 2011 "in a difficult position driven by a dramatic change in business with one North American customer," Tom Minichiello, interim chief financial officer, told analysts on a conference call.

In spite of this, the company made some real improvements, he said, expanding its customer base outside of North America to nearly half of the total. Its gross profit margin was also the highest in five quarters at 42.5%, compared with 38.0% in the year-ago quarter.

Tellabs is not the first optical vendor to retrench in the face of economic pressure. In November 2011, Nokia Siemens Networks announced that it would reorganize to focus on mobile broadband (see "Nokia Siemens Networks refocus could cost 17,000 their jobs").

The present round of cuts comes on top of the 125 job losses that Tellabs announced last July. In the conference call with analysts, Pullen said that he couldn’t promise that this restructuring would be the last.

For more information on packet-optical systems and suppliers, visit the Lightwave Buyer’s Guide.